Investment Apt...

rodneytrotter15

Hi, I'm considering of invensting in a 2 bedroom apartment and aiming to purchase one in a nice low density development in Limerick although not tied to this location. I reckon I can purchase one for somewhere between €80-€90 and rent this for between €650 to €750 per month. I already have approval from my mortgage company for this invenstent property. If it were to remain occuiped for a few months I could still cover the repayments fairly easily, my idea is to take out the mortgage over a max of 12 years and aim to have it payed off earlier using work bonuses. I guess the great unknown is what will happen it the Euro crashes and this where I am looking for advice ? Would there be major implications for property prices ? Any other thoughts/comments/advice would be much appreciated also...

soddy1979

A Euro crash on world currency markets should have little effect on you, apart from demand for your property diminishing further due to any economic contraction.

If you mean, what happens if Ireland leaves the Euro, and the Irish currency crashes, you could expect the following:

Your apartment price will rise, due to inflation associated with the devaluation of the Irish currency.

Your rent received should also rise due to inflation again.

Your mortgage payments will rise if you are on a variable rate, or will stay the same if you are on a fixed rate.

Actually, mortgaged property is a good investment in the case of a currency devaluation and associated inflation. Your equity will increase quickly.

soddy1979

Just to confirm, I don't see Ireland leaving the Euro zone, and therefore I wouldn't touch property at the moment.

fkeeling

Virgin to this but the logic behind "wouldn't touch property at the moment" ?

Is this based on putting euro abroad somewhere in a country which will leave the euro (e.g Germany/Netherlands)? Or are there just better things in which to invest the readies?

But you said that you don't think Ireland will leave the euro.

As I said, a bit of a virgin on this.

Atlantic Dawn

Taking a mortgage for an investment property is insane at the moment, prices have dropped by 15% or more since last year. If you must invest do it in Dublin and not with an apartment, buy a house in for around the same money in Dublin and rent it out, far better rental market.

soddy1979

fkeeling wrote: »

Virgin to this but the logic behind "wouldn't touch property at the moment" ?

Is this based on putting euro abroad somewhere in a country which will leave the euro (e.g Germany/Netherlands)? Or are there just better things in which to invest the readies?

But you said that you don't think Ireland will leave the euro.

As I said, a bit of a virgin on this.

I don't believe that Ireland will leave the Euro. I also don't believe we will see hyperinflation. Therefore, in my eyes, the fundamentals driving property investment remain the same. If property prices have not bottomed, and you purchase a property with a mortgage, your losses will be significant.

I don't know much about Limerick property, but I am inclined to agree with Atlantic dawns comments.

If you are insistent on buying a property, you should definitely model your cash flows over the life of the investment. You need to incorporate possible shocks relating to 1) You losing your job 2) Rental market collapses 3) Deflation 4) Inflation 5) Interest Rate Shocks 4) Property Price Collapse, and I am sure there are more! Just have a long hard think about it.

fkeeling

Tx Soddy and Atlantic Dawn,

Okay, so the investment is buy-to-rent without a mortgage and is an alternatve to other investment types. Therefore, I believe the yield and the property price inflation/deflation are my only parameters outside of the euro debacle.

Scenario: Take €200k and put it in a deposit account in Germany/Netherlands and wait for property prices to keep going down.

If Germany leaves euro and new mark goes up in relation to the (smaller) euro, happy days (assuming all non-resident accounts go to new mark, should be so).
If Ireland 'leaves the euro' and new punt goes down, happy days as euro worth more in which to invest in property in Ireland.

From an earlier post (by Soddy1979, I think), if the new punt goes down, it is assumed that Irish property prices will go up in the new denomination. Is this a given or is the point of devaluation not to have all goods/assets in the jurisdiction be devalued too?


On a separate note, surely the rental prices must go down at some stage as property prices decrease. That is, as new buy-to-let investors come onto the market, they will drive the rental price down. Perhaps I am ignoring the size (possibly growing) of the rental market, those who want (or need) to rent.

Tx.

soddy1979

fkeeling wrote: »

From an earlier post (by Soddy1979, I think), if the new punt goes down, it is assumed that Irish property prices will go up in the new denomination. Is this a given or is the point of devaluation not to have all goods/assets in the jurisdiction be devalued too?

It is unlikely that property prices will move lock step in the opposite direction of the currency, but it should provide an excellent inflation hedge.