Buy a one bed house aged 24? Madness or genius?

Walt Jr

Hi there long time lurker

So Im soon turning 24 and starting a graduate job on a 3 year contract in Dublin City; I have saved pretty much every penny Ive ever earned since I started working at the age of 14, and my savings will amount to 20 thousand euro soon. I am just curious is it madness to even think about a one bed flat in the city as I could never get a mortgage? or what are peoples thoughts about this? My reasoning is better paying for something I own rather than rent, I look forward to your input, many thanks

Wils110

Do not buy a 1 bed..you would regret it in years to come at the price u can get. 3 bed less then 200000 an your set up for whatever life throws at you in the future I would of thaught like that a few years ago but decided to go for the bigger option and best decision I made as now have a kid on the way even though it was party central with all the lads it be a family place soon

Walt Jr

Wils110 wrote: »

Do not buy a 1 bed..you would regret it in years to come at the price u can get. 3 bed less then 200000 an your set up for whatever life throws at you in the future

Thank you for your input, what about even a two bed? I dont think id get much of a mortgage with 20,000 of savings however?

Wils110

Mind me asking your job status

Walt Jr

Wils110 wrote: »

Mind me asking your job status

With a Big 4, trainee accountancy, expecting to stay with the firm after 3 years

Wils110

You get made permanent even not u would get 200 fairly handy another 5 to 10 grand saving to do it up the place just depends we're you want to live really

Walt Jr

Wils110 wrote: »

Do not buy a 1 bed..you would regret it in years to come at the price u can get. 3 bed less then 200000 an your set up for whatever life throws at you in the future I would of thaught like that a few years ago but decided to go for the bigger option and best decision I made as now have a kid on the way even though it was party central with all the lads it be a family place soon

Congrats on the kid


Anywhere in the city at all really, my parents think im crazy but i think its a wise idea, rather pay for my own place i can do as I please with rather than simply paying rent

Wils110

Your right in buying but I would agree with your folks unless you think to buy another property in a few years when or if you settle down ...cheers for the congrats

areyawell

Id buy a two/three bed-roomed house/apartment and then get housemates who are also professionals to pay half or more of the mortgage for you. When you wages go up in the future and can afford the mortgage payments on your own (not saying you cant at minute, maybe you can) then you can decide to live on your own. Best way to do it in my opinion! Also never tell the people you are the landlord, only a tenant and get someone else to collect the rent off them!

Wils110

areyawell wrote: »

Id buy a three bed-roomed house/apartment and then get housemates who are also professionals to pay half or more of the mortgage for you. When you wages go up in the future and can afford the mortgage payments on your own (not saying you cant at minute, maybe you can) then you can decide to live on your own. Best way to do it in my opinion! Also never tell the people you are the landlord, only a tenant and get someone else to collect the rent off them!

Exactly what I did

Walt Jr

This would only be a temporary residence (10 years or so) until I find somone insane enough to marry me


Re: mortgage etc; wheres a good starting point as I know very little about how the system works; any (understandably very rough) idea of what I could get with a squeaky clean credit record (never had loans or credit cards) 20k savings, and a 22k salary for approx 3 years?

Wils110

Ring your bank ask for a quote they can tell you within minutes it's rough quote

ted1

Your mad buying a one bed.as a place you want to live.

Well priced 1 bed have been known to give a good rental yield.

Walt Jr

Wils110 wrote: »

Ring your bank ask for a quote they can tell you within minutes it's rough quote

Ty, great advice here, lets hope they are feeling generous on monday morning!

Thanks guys, I will be sure to update progress here if I decide to go ahead

the_syco

Walt Jr wrote: »

20k savings, and a 22k salary for approx 3 years?

Mortgages aren't only for christmas 3 year contract, thy're for life. At the current rate, you'll sell it at a loss or no gain in 3 years time.

/edit
Rent in the place for at least a year, unless you know for certain that the place isn't full of scum with no facilities, etc.

Walt Jr

the_syco wrote: »

Mortgages aren't only for christmas 3 year contract, thy're for life. At the current rate, you'll sell it at a loss or no gain in 3 years time.

I meant, my salary will be 22k for three years, cant say for sure what my salary will be after the three years

MagicMarker

Why would you buy a house now only to get rid of it in 10 years, when it very well may be worth less than what you paid for it?

You're 24, there's no rush, buying a temporary home now makes absolutely no sense. Keep saving, another 10 years of saving and you'll be in a far better position and you won't be tied down to a purchase you make now. You haven't even started your new job, what if you don't stay on after 3 years? What if after 2 years you absolutely hate your job and want to move back home, or abroad but you can't because you have this massive debt hanging over you?

Walt Jr

MagicMarker wrote: »

Why would you buy a house now only to get rid of it in 10 years, when it very well may be worth less than what you paid for it?

You're 24, there's no rush, buying a temporary home now makes absolutely no sense. Keep saving, another 10 years of saving and you'll be in a far better position and you won't be tied down to a purchase you make now. You haven't even started your new job, what if you don't stay on after 3 years? What if after 2 years you absolutely hate your job and want to move back home, or abroad but you can't because you have this massive debt hanging over you?

I can see myself staying in Dublin for the extended future, so in that regard its not so temporary as I made it out to be, I would hold onto the place for life; but you do point out good concerns Im going to have to think about

Victor

It does seem like madness.

The banks are unlikely to lend for a 1-bed - it's hard enough for them to lend for anything. If they do, you would be looking at an amount well under €100,000.

daft.ie lists 14 such properties for Dublin City Centre - what are the bets about what the neighbours are like?

What happens if you don't like Dublin, the property, the neighbours or your wife after a few years? You can't even move into the spare bedroom. What if you have children?

orchidsrpretty

As you have never had loans or a cc you will have no credit history. Even with savings this might turn banks off so I would advise you to take out a couple of short term loans and stick to repayments. This may cost you a couple of hundred in intrest but its a good way to build a positive credit record.
As a side note I purchased my house when i was 22 and its the biggest regret I have. Houses cost a lot more than just a mortgage, you have no one to call when the boiler breaks, washing machine machine etc.. on top of the fact you are commiting yourself to 20+ years of debt. You are 24, there is lots of time to wait and find the perfect home. I wish I was a renter:(

Milk & Honey

the_syco wrote: »

Mortgages aren't only for christmas 3 year contract, thy're for life.

Mortgages are for life? Funny, I got a 20 year mortgage. It was 19 years ago, so if I survive another year will I have escaped a life sentence, or is someone going to come along and kill me?

Marcusm

Walt Jr wrote: »

With a Big 4, trainee accountancy, expecting to stay with the firm after 3 years

Personally, in your position I'd probably hold off. The number of trainees kept on in a recession will be quite low; if you're highly successful, your income may increase very significantly but an existing mortgage might tie you to a property you want to move on from. Equally, you may want to travel or move abroad to exploit your qualification - that happened a lot in mid 90s before the economy took off for newly qualifieds. It's also harder to manage lettings from overseas.

phormium

A bad plan! Tying yourself down at this stage to a mortgage and a property is not a good idea, rent is no more dead money than interest is, it's not as though you can be sure of selling at a profit after the 10 yrs, in fact the opposite could happen. However I feel it highly unlikely the banks would even entertain a mortgage application based on salary and job that would buy you anything and certainly nothing in the 200k bracket.

Rent for at least the first year and see how things are going then, I don't believe we have seen the worst yet, you are too young to remember the last recession and it is the 'rent is dead money' theory during the tiger years that has a lot of people in trouble now. The plan to buy apartments and trade up when they needed to had sadly backfired hugely now so don't head down the same route.

seamus

Walt Jr wrote: »

This would only be a temporary residence (10 years or so) until I find somone insane enough to marry me

Then don't bother. A mortgage is a tie you don't need right now. Rent with a couple of other trainee accountants, party and keep saving your cash. At the end of your three years half of your colleagues will talk of spending a year in Oz and you'll be kicking yourself that you have to stay in Ireland and keep working to pay the bills.

The housing market isn't going anywhere, you won't lose out by holding off until you're 30. At that stage you will have the funds and the lifestyle to purchase a home that will suit you for the rest of your life (if needs be)

NIMAN

Madness.

djimi

Id say a mortgage at 24 would be ridiculous regardless, but on a one bedroom apartment that you are viewing as some kind of a stepping stone is just pure lunacy. Rent, continue saving, buy only when you are doing so as a long term committment.

Elvis_Presley

Hey Walt sounds like you have your whole life planned out. Hate to break it to you, but s*it happens, good things happen, things you can't plan for. It never works out like you planned. Making a commitment based on these plans at 24, when you have little life experience, little clue as to what the future holds or to what you want in the future is lunacy. Rent. Sign a short lease, live a much more relaxed and carefree existence and be better prepared for the little bumps you will encounter along the way.

johnnyskeleton

Walt Jr wrote: »

Re: mortgage etc; wheres a good starting point as I know very little about how the system works; any (understandably very rough) idea of what I could get with a squeaky clean credit record (never had loans or credit cards) 20k savings, and a 22k salary for approx 3 years?

Most likely, and I'm not saying this to dampen your idea, the bank will be unwilling to give you a mortgage unless your parents will guarantee it or be joint tenants. Some of the reasons are:

Your job is not permanent. Some banks will not lend to people on fixed term contracts, even if they are in a fairly solid job.

Most banks will require that you have been working for a while (as low as 3 months, as much as a year or two) before you can get a mortgage with them.

Some banks have minimum amounts that they can lend on a mortgage e.g. 50k. Otherwise, its not worth their while and you would have to get a personal loan.

Generally, banks will offer 4-5x your income at the maximum so the most you could concieveably borrow is 110k.

Banks don't want to lend on one beds so often will only give a maximum LTV of 75%. Thus, your deposit will need to be 25% of the purchase price. On a basic calculation this would be an apartment worth no more than 80k with 20k down and a 60k mortgage.

In reality, about 3-5k of those savings will be used for solicitors fees, stamp duty and other purchasing costs. So your actual deposit shrinks again to about 17-15k. This in turn drops the maximum purchase price of 60-68k.

This would however be subjected to stress testing and I think most banks require a minimum after mortgage income e.g. €1,500, but even those who don't asses your net disposable income after mortgage with a maximum percentage of your disposable income going on a mortgage.

Although you see never having loans or a credit card as being a squeaky clean credit rating, it is not. Far from it, you might have difficulty getting a term loan of a few grand. Credit rating doesn't mean you have never borrowed, it means that you have borrowed and have proved that you can pay it back. People have been refused mortgages in the past because they haven't been able to show that they can pay back a basic term loan or manage a credit card without defaulting.

For all of those reasons, I would imagine that a bank might not be willing to lend that much to you.

___________

Next, consider your personal circumstances. You are a young person who, although you think you know, doesn't really know what they will be doing for the next ten years. You think you will be permanent but you may not be. You may not like your job, you may not like dublin, you may get a better offer in a year's time etc. What do you do with the apartment then?

Even if the job suits, the area you have selected - Dublin City Centre - may not be for you. You might decide after a few months that you would prefer to live in a close suburb e.g. drumcondra, ranelagh etc.

Even if you like the city centre, the apartment you buy could be an unpleasant one with noisey neighbours etc.

____________

Also to be considered is that at the level you are talking about, a one bedroom apartment will probably be small, old and not particularly pleasant.

You will have to pay managment fees of maybe 1200-1500 per year or 100/150 extra per month. You will have to get home and life insurance which could could be a couple of hundred extra per year. You will have to pay the household charge of again a couple of hundred. You will have to pay for repairs and maintenance of the internal part of the apartment out of your own pocket.

So you could easily end up paying 700-800 per month in accomodation expenses in a fairly mediocre apartment e.g.:

http://www.daft.ie/searchsale.daft?id=664713

That would leave you with approximately 800-900 per month to pay for all your food, bills, clothes, entertainment etc. Bills will could be 80-100 quid every two months, rising more if the apartment is poorly insultated in the winter months. Then phone, broadband, tv licence, cable tv (if needed) etc. So you will have a relatively modest amount of money left over to spend on discretionary items. For a young person starting out in life you might not like this. I'm sure it will be fine for the first year when you can say with some satisfaction you are doing it to own your own apartment. But after a few years it might start to get you down.

By contrast, you could rend a much nicer room for a lot less:

http://www.daft.ie/searchsharing.daft?id=696915

Realistically, you will probably have to rent for a few months anyway as you build up a few months' income. You will also have to show the bank that you can save while also paying rent.

So listen to your parents, they are talking from experience. If you still go ahead with it, more power to you, but just be aware of all the factors involved.

JuliusCaesar

johnnyskeleton wrote: »

You will have to pay the household charge of again a couple of hundred.

Great post johnnyskeleton. I tend to believe that the household charge won't stay at its present rate for long - it'll be going up again soon...and again after that, and again after that.

NIMAN

The household charge is being replaced by the property tax, so it definitely won't be staying at €100, thats one thing you can put money on.

desertcircus

It's a terrible idea. I hate to be so negative, but buying a one-bed at the age of 24 without even a permanent contract is seriously inadvisable.

For this to avoid being a bad idea, you'd need to know the price won't fall, your job is completely secure, and you'll be able to sell for well over the outstanding mortgage if you decide it's not for you. In reality, the price will almost certainly fall further, your contract is for three years, and offloading a one-bed at all is seriously difficult. There are dozens of variables, and any one of them going wrong will either wipe out your savings or leave you stuck in a place you don't want to live. Rent for now, save, and if in three years you get a permanent contract, then talk to the bank about the kind of place you can afford. It'll be a hell of a lot better than what you can afford now.

not even wrong

Walt Jr wrote: »

My reasoning is better paying for something I own rather than rent,

You're an accountant and you haven't realised that mortgage interest is rent you pay on money?

gosuckonalemon

There is no way anybody on 22K will get a mortgage.

20K isn't enough of savings.

To get a 200K mortgage realistically you would need around 40K savings and be earning around 60K plus with about 6-8 years of decent credit history behind you.

You're only a kid about to join the real world. Rent a place and enjoy your youth.

NIMAN

The OP has enough advice now, if they still try to buy a 1 bed apt after this then they must be mad, end of.

StillWaters

First place I bought was a one bedroom, at age 24. Wouldn't say I'm mad or a genius, but it worked out. Meant I'm mortgage free early.

Cuddlesworth

Walt Jr wrote: »

With a Big 4, trainee accountancy, expecting to stay with the firm after 3 years

Hi OP, if your starting in audit or advisory your going to have no extra income over the next three years. You will most likely need to get a loan or two to tide you over.

Your going to be expected to look and wear the best at all times(regardless of your wages). New suits, shoes and shirts. A good haircut is a must. There is going to be loads of socializing, so constant drinking in Dublin and the associated costs.

And if you want to be kept on after your contract, you have to do all of the above plus the 60 hour weeks. Its a hard life.

House share for three years instead and see where it takes you.

Marcusm wrote: »

Personally, in your position I'd probably hold off. The number of trainees kept on in a recession will be quite low; if you're highly successful, your income may increase very significantly but an existing mortgage might tie you to a property you want to move on from. Equally, you may want to travel or move abroad to exploit your qualification - that happened a lot in mid 90s before the economy took off for newly qualifieds. It's also harder to manage lettings from overseas.

It was about 25% last year. I'm out of the loop now. They are also pretty harsh now with exam failures, there was a amazing amount of mid year drop-outs.

ABajaninCork

NIMAN wrote: »

The household charge is being replaced by the property tax, so it definitely won't be staying at €100, thats one thing you can put money on.

Oh yes indeedy! I guarantee than within 5 years the property tax will reach UK levels. i.e. 1k+ per year.

NIMAN

ABajaninCork wrote: »

Oh yes indeedy! I guarantee than within 5 years the property tax will reach UK levels. i.e. 1k+ per year.

Its already that in NI, and my widowed pensioner mum has to pay that.

I wonder why she doesn't moan about it though?

The Big Red Button

Walt Jr wrote: »

With a Big 4, trainee accountancy, expecting to stay with the firm after 3 years

Is it audit/advisory? Most trainees get offered a contract if they last the 3/3.5 years; very very few accept it. And, if they do, it tends to be only until something better comes along. Bear this in mind!

Many Big 4 audit trainees (like myself!) choose to leave the firm mid-contract. For me, it made perfect sense for my career, and I have no regrets about my decision. If I had a mortgage to cover, it would have really limited my career options (as regards flexibility, location, etc.) I couldn't really have run the risk of pursuing new job opportunities - no matter how much I wanted to.

How on earth could you decide that the Big 4 career path is the one for you, before you've even started working there? It's a big world out there, don't limit yourself when you're still so young!

ABajaninCork

NIMAN wrote: »

Its already that in NI, and my widowed pensioner mum has to pay that.

I wonder why she doesn't moan about it though?

So does my mother. But - you get more bang for your buck at home, so's to speak. The bins are taken, police and Fire Brigade are paid for, and you get reasonable LA services.

The reason why people are so angry about the charge, is that you WON'T get any services included in that. You'll still have to pay for the bins, roads will still be neglected, LA services will be run down and the money will be used to pay off the debts the bankers and politicians have run up whilst their noses were in the trough.

Terry Ryaner

Walt Jr wrote: »

Hi there long time lurker

So Im soon turning 24 and starting a graduate job on a 3 year contract in Dublin City; I have saved pretty much every penny Ive ever earned since I started working at the age of 14, and my savings will amount to 20 thousand euro soon. I am just curious is it madness to even think about a one bed flat in the city as I could never get a mortgage? or what are peoples thoughts about this? My reasoning is better paying for something I own rather than rent, I look forward to your input, many thanks

Walt Snr in 40 years time will be screaming at you saying why did you waste your youth saving every single penny of yours. Live a little.

NIMAN

ABajaninCork wrote: »

So does my mother. But - you get more bang for your buck at home, so's to speak. The bins are taken, police and Fire Brigade are paid for, and you get reasonable LA services.

The reason why people are so angry about the charge, is that you WON'T get any services included in that. You'll still have to pay for the bins, roads will still be neglected, LA services will be run down and the money will be used to pay off the debts the bankers and politicians have run up whilst their noses were in the trough.

Going slightly off-topic here, but to be honest for £1000 my mother gets very little. She gets her bin emptied and her street cleaned every couple of months.

But she doesn't make use of the leisure facilities, or used the Police or Fire Brigade, ever.

To be honest, a lot of what the rates in the North are used for, many don't use. Its just something that people accept. And pay.

Dublin21

I personally think you have the right idea buying as early as possible.
Im 26 now, i've been renting since i was 18 and i am raging i've 'wasted' so much money..

However like the rest of the posters have mentioned you need at least 25% deposit for a 1 bed And a permanent job (and usually you need to be in that position for 2-3 years!)

My partner is on contract and the banks won't even consider his earnings when we were looking into it recently - only mine as i am permanent.

Also friends of a work colleague (A couple) went for a mortgage, both permanent with clean records but had never lived away from home.
The banks told them to rent for 6-12 months so they can show you can afford the repayments/lifestyle - unfortunately a savings record just isn't enough.

If i were you i would continue to save as much as i could but try rent for at least 6-12 months. Believe me i know how hard it is to hand money over to a landlord instead of paying it off your own home but honestly 12 months is not long, it will fly in and at least you will be in a better position with your job, know if thats what you want to do etc. And the more money you put off a deposit the less of a mortgage you will need to get.

Good luck!

Terry Ryaner

Dublin21 wrote: »

I personally think you have the right idea buying as early as possible.
Im 26 now, i've been renting since i was 18 and i am raging i've 'wasted' so much money..


Good luck!

Be careful taking advice from some 26 year old who is raging that he didn't buy in 2004 when he was 18.

ABajaninCork

I bought my first property when I was 22, many moons ago. It was a 1-bed flat in London. One beds in London are pretty easy to shift, even now because people like them as starter homes/pensioners downsizing/single people like I was who wanted somewhere stable to live.

But fast forward 25 years. This is Ireland. Ireland is in the worst slump in living memory. There is a glut of houses/apartments due to over-building. Prices have fallen like a stone, and will continue to do so. The problem will be (IMO) exacerbated by the NAMA houses yet to come on stream and the fact that mortgage relief will be ending soon. Nobody knows what the future property and water taxes will be like five years from now. You don't even know if you'll still be in employment. There's no such thing as a 'safe' job now or a 'job for life', no matter who you work for.

OP. FWIW, I would hold on to my money and continue to save as much as you can. I wouldn't buy now and I certainly wouldn't buy a flat. I would look to buy a house, and I would make sure it wasn't a Celtic Tiger lash-up, which may bring its own problems.

Dublin21

Yeah cause i would have got a mortgage at 18 in 2004 with the way prices were.....

I am very glad i didn't buy THAT young and when the prices were that high, but at the same time i am not happy that i haven't bought YET - Ive been renting for 8 years now, thats at least 80k that could have gone towards a house/apt!! Not to mention all the headaches dealing with landlords and not even being able to paint the flipping walls without permission. Its absolutely soul destroying.
If i had 20k now (bearing in mind that i have been working since i was 18 and currently in a permanent job for 4 years) there would be no stopping me going for mortgage.

I know getting and having a mortgage isn't easy but id take it any day over having to rent for another 8 years!

KindOfIrish

50k - genius, 200k - idiot. doesn't need to be big 4 to understand it

LLU

On the difference between renting and buying, someone else on boards described it very well recently:

You are either paying money to rent a place, or paying money to rent the money to buy a place. Both involve a fair bit of 'dead money'.

A one bed apartment is a narrow enough market, not a lot of people will want to buy one if you want to sell it. Do you really want to be married to it for the next 20+ years with no guarantee that its price will have gone up at the time of you selling it?

Dublin21

''You are either paying money to rent a place, or paying money to rent the money to buy a place. Both involve a fair bit of 'dead money''

This doesn't nearly sum up the differences in my opinion!

You are paying towards owning the property - yes it will take years but you are living with the knowledge that it will be yours and you can do practically whatever you want to it.
As said ive paid more than 80k renting so far and i would gladly have paid that to a bank in interest for giving me the money for a house!

You don't have to move yearly (Or worry that the landlord can end the lease at anytime).
You can buy your own furniture etc for the property (Again without having to worry about having to move it/store it/find a partially furnished apt or a landlord sound enough to move some of it out).

I think everyone should experience renting before they buy to see what suits them obviously but for me personally the two do not compare at all..

After renting, to have a place of my 'own' would be absolute luxury!

gosuckonalemon

Dublin21 wrote: »

Yeah cause i would have got a mortgage at 18 in 2004 with the way prices were.....

I am very glad i didn't buy THAT young and when the prices were that high, but at the same time i am not happy that i haven't bought YET - Ive been renting for 8 years now, thats at least 80k that could have gone towards a house/apt!! Not to mention all the headaches dealing with landlords and not even being able to paint the flipping walls without permission. Its absolutely soul destroying.
If i had 20k now (bearing in mind that i have been working since i was 18 and currently in a permanent job for 4 years) there would be no stopping me going for mortgage.

I know getting and having a mortgage isn't easy but id take it any day over having to rent for another 8 years!

80k that would've gone towards an apartment for 350K now worth 150K.

Dublin21

Dublin21 wrote: »

As said ive paid more than 80k renting so far and i would gladly have paid that to a bank in interest for giving me the money for a house!

And live where?


As for the OP, I find it amazing that someone starting for a Big 4 accounting company wouldn't know that having a blank credit history isn't a good thing.