Landlord profits from rental properties

marathonic

I'm seeing a general feeling of scorn towards landlords by various tenants on this forum and others.

The majority of tenants appear to be under the misconception that the BTL business is the road to an easy life and extraordinary wealth.

Let's ignore those who bought during the boom-times (who will be in a dire situation altogether) and consider only those looking for a profitable investment today. Here's some realistic, sample figures for a recent opportunity I analyzed (I had this table in another post but split it out because it was off-topic):

Purchase Price 80000
Legal Expenses 900
Surveying prior to initial purchase 200
Furnishing 3000
Total Purchasing Costs 84100

Rent 500
Months 11
5500

Interest on 75% Mortgage @ 5.47% 3282
Letting Agents fee 550
LPT 90
PRTB 90
Insurance Premiums 350
Maintenance 800
Accountant 150
Total Expenses 5312

Expenses to be offset against tax 4491.5 (1)

Gross Profit 188
Taxable Amount 1008.50


Tax @ 40% 403.40
USC @ 7% 70.60
PRSI @ 4% 40.34


Loss after Tax 326.34


Notes:
(1) Although mortgage interest is a genuine expense, you can only write 75% of it off as an expense in calculating tax. For this reason, the above example is a loss maker after tax is paid.


So I tie up my €24,100 (25% deposit + purchase costs), expose myself to the risk of property prices falling further - and all for a loss €326.34 per year. Meanwhile, someone who doesn't get into BTL deposits the money, earns interest and doesn't get a phone call from drunk tenants at 3am complaining about how much they're paying you in rent or that the tv has broken.

If I happen to be lucky enough to get a rent increase in a couple of years of €50 per month, I'll profit by an extra €600 - or €288 after tax, USC and PRSI and still not a profitable investment.

At the same time, my tenant would think I'm living the high-life with his €550 monthly rent.

Are other landlords around the country noticing a similar situation? The above figures are in Donegal.

Cuddlesworth

Your not investing to make a profit from your money, your investing the banks money to get a house at the end of a period of time after paying back the loan. Do you want me to start a thread about how my personal loans interest is stopping making a profit on my stocks?

Had you actually invested 80k would that not be a solid 4% interest per year? You know, roughly the amount that banks seem to be making money off of loans?

djimi

marathonic wrote: »

The majority of tenants appear to be under the misconception that the BTL business is the road to an easy life and extraordinary wealth..

Im going to be honest, the majority of tenants (at least any that I know) do not think that this is the case at all.

Thomas D

It's a game for losers. The sort that went all in on eircom shares.

marathonic

Cuddlesworth wrote: »

Your not investing to make a profit from your money, your investing the banks money to get a house at the end of a period of time after paying back the loan. Do you want me to start a thread about how my personal loans interest is stopping making a profit on my stocks?

Had you actually invested 80k would that not be a solid 4% interest per year? You know, roughly the amount that banks seem to be making money off of loans?

Investing is all about risk. I am investing my 25% deposit, together with my purchasing costs, in anticipation of a profit. In lending the further 75% of the house cost, I'm increasing my risk and, therefore, profit expectations significantly.

The figures in my original post do not involve paying back any of the capital so, using these figures, I never own the house. To own the house, I'd have to pay more via a capital repayment mortgage and would, therefore, have to subsidise the investment further.

Of course, you would not have a personal loan for investing in stocks but let's say the bank agreed to loan you the money to invest in stocks at 4%. Would you not perform similar analysis to the above to determine whether it would be worth your while? In the case of rental properties, the investment does not seem to be a profitable one.

I'm always hearing people complain about landlords being given preferential treatment when purchasing properties. Going by the above figures, I'm finding it difficult to understand this.

An owner occupier could buy the same property with a residential mortgage. They would be paying interest at a rate of about 1.2% below the rate payable by the landlord. They can remove the void period that a landlord has to build into their calculations completely. They have no letting agent fees, accountant fees, PRTB requirements or income tax to pay nor do they pay capital gains tax when they sell. They also pay less for insurance.

With the above in mind, if being a landlord is a profitable business, then it surely makes sense that living in a house as a owner occupier makes significantly more sense through the implied savings in rent. Instead, people complain about this supposed preferential treatment being given to landlords and think that it's the primary factor that is keeping them from affording a place of their own.

kennyb3

I think this thread is worth a read - particularly Rimbaud's post. I agree with it - i'd use 12 months rent in the current climate.

€500 rent pm rent on an €80k property?

Only an asking rent - what they got could be different but

http://www.daft.ie/searchrental.daft?id=1390134

http://www.myhome.ie/residential/brochure/9-premier-square-finglas-dublin-11/2732426


http://www.daft.ie/searchrental.daft?id=1229256

http://www.myhome.ie/residential/brochure/77-hampton-wood-avenue-finglas-dublin-11/2732536

Need I add more?

marathonic

Thomas D wrote: »

It's a game for losers. The sort that went all in on eircom shares.

I wouldn't exactly call it a game for losers. The figures change significantly if you're a cash buyer. The return is much higher than what one would earn on deposit (especially with current DIRT rates).

However, if you were a cash buyer, you may still be better avoiding property and getting into the stockmarket instead. I haven't crunched those numbers yet but I'm pretty sure that stocks are likely to be the winner.

Thomas D

marathonic wrote: »

I wouldn't exactly call it a game for losers. The figures change significantly if you're a cash buyer. The return is much higher than what one would earn on deposit (especially with current DIRT rates).

However, if you were a cash buyer, you may still be better avoiding property and getting into the stockmarket instead. I haven't crunched those numbers yet but I'm pretty sure that stocks are likely to be the winner.

It's high risk and high work.

kennyb3

marathonic wrote: »

However, if you were a cash buyer, you may still be better avoiding property and getting into the stockmarket instead. I haven't crunched those numbers yet but I'm pretty sure that stocks are likely to be the winner.

Like everything timing is crucial and I wouldn't be going near an equity market (at this time) that's rose rapidly since 2009 with QE being paired back.

marathonic

kennyb3 wrote: »

I think this thread is worth a read - particularly Rimbaud's post. I agree with it - i'd use 12 months rent in the current climate.

€500 rent pm rent on an €80k property?

Only an asking rent - what they got could be different but

http://www.daft.ie/searchrental.daft?id=1390134

http://www.myhome.ie/residential/brochure/9-premier-square-finglas-dublin-11/2732426


http://www.daft.ie/searchrental.daft?id=1229256

http://www.myhome.ie/residential/brochure/77-hampton-wood-avenue-finglas-dublin-11/2732536

Need I add more?

Interesting post. My figures are for Donegal but it looks like there's better value to be had in Dublin.

Of course, you'd be adding a significant expense for your samples in the form of service charges but, even at €100 per month, you'd be left with €900 monthly rent on a €100k property - much better than €500 on €80k.

Cuddlesworth

marathonic wrote: »

The figures in my original post do not involve paying back any of the capital so, using these figures, I never own the house. To own the house, I'd have to pay more via a capital repayment mortgage and would, therefore, have to subsidise the investment further.

Then its not viable. But if you invested 100%, not 25%, would it be viable?

I can't see how you could expect to make money off a 100% interest load on a property. The argument could simply be made that the cost of renting is close if not higher than the cost of buying, people will stop renting and start buying.

NIMAN

Used to be an accidental landlord, but sold up about 1yr ago, never as happy to get rid of it, and that was even having a very good tenant, plus only 10yrs left on the mortgage.

Thomas D

I was close to securing an 85K two bed with 1100 solid rent in 2012. Mortgage would have been paid off in a few years and it would have been a solid investment but it was hardly going to make me rich. The work and hassle involved for 4-5K a year of profit might have just about been worth it.

marathonic

NIMAN wrote: »

Used to be an accidental landlord, but sold up about 1yr ago, never as happy to get rid of it, and that was even having a very good tenant, plus only 10yrs left on the mortgage.

Thomas D wrote: »

I was close to securing an 85K two bed with 1100 solid rent in 2012. Mortgage would have been paid off in a few years and it would have been a solid investment but it was hardly going to make me rich. The work and hassle involved for 4-5K a year of profit might have just about been worth it.

That seems to be the case in talking to some local landlords - one property isn't worth the hassle. You need to have 5+ to make the fact that you're 24-hour on-call worth the effort.

Ray Palmer

djimi wrote: »

Im going to be honest, the majority of tenants (at least any that I know) do not think that this is the case at all.

It's true that many don't understand that. What lots of people also don't get is it can be a really efficient pension plan giving much higher yields than another pension.

take the example as a 25 year mortgage it works out that the property cost €97902. Yes more than the purchase price but bought with a mortgage so damn good.

So compare that to how much you would get out of your pension for that. We'll round it to 100k what will your dividend from this money? DI your shares go up or down? You would have been lucky to have your €100k from the last 25 years. Now there is also the tax benefit so you do get an extra 21k so it is €121k versus 100k property. So I guess you could sell and buy a house and be 21k richer.

But here is the big change in 25 years you can be pretty sure that house prices will rise. So it is likely the house will at least give you a property worth the same as the pension and likely more with a revenue source that will most likely out strip any thing you would get from your pension while not diminishing and you can still sell the asset.

A house can also take extra investment to increase it's value such as an extension, insulation etc... which you can't really do with a pension portfolio. Add an extra room and the revenue goes up for example. The extension can also be a tax right off.

Many tenants have no real idea how a geared investment into property works or how the tax is paid. It is very annoying to hear LL not paying their taxes when you do this correctly and are paying so much tax.

wonski

Cuddlesworth wrote: »

Then its not viable. But if you invested 100%, not 25%, would it be viable?

I can't see how you could expect to make money off a 100% interest load on a property. The argument could simply be made that the cost of renting is close if not higher than the cost of buying, people will stop renting and start buying.

That is what people do at the moment. The prices are still at acceptable level, no brainer if you are safe with your job.

To the OP: I am a tenant - one of the good ones who don't call at 3am etc anyway - and i do like a peace of mind when it comes to repairs/damages etc.

You have to take into account the gas/ oil boiler services, gate / fence repairs and everything else really. Always keep at least 1k ready for the sudden death of a washing machine and fridge. It doesn't happen all the time, but it can at any time really. My idea is that if you have one house already owned, and plan to get another one that could be used as a second family house when your kids grow up that is fine.

Hoping to get a profit from getting a 75% mortgage and paying all the costs could prove unsuccesful. This is - however - long term investment, and being that 1 year figures make no sense. You have to take into account all the cost associated with owning a rental property over longer time frame. There are plenty of additional costs that do add up over the years.

Being a landlord isn't easy, speaking from the tennant experience... 2 tiles off the roof gone missing after recent storms - he has to turn up this evening to fix this. He might not - no leaks yet - but this is his property after all.

Potatoeman

Thomas D wrote: »

I was close to securing an 85K two bed with 1100 solid rent in 2012. Mortgage would have been paid off in a few years and it would have been a solid investment but it was hardly going to make me rich. The work and hassle involved for 4-5K a year of profit might have just about been worth it.

Why not use a management company?

Properties that need constant attention are usually old and in need of upgrade.

Claw Hammer

Why should tenants be interested in a landlord's profits or losses? It is none of their business. Does anyone work out how much profit a taxi driver makes, or their milkman makes?
This thread is about begrudgery!

Thomas D

Claw Hammer wrote: »

Why should tenants be interested in a landlord's profits or losses? It is none of their business. Does anyone work out how much profit a taxi driver makes, or their milkman makes?
This thread is about begrudgery!

I quite enjoyed living in a few places that I know pretty much bankrupted the owners. I was paying €1300 a month for an apartment that the landlord spent €570K on in Donnybrook for a while!

wonski

Thomas D wrote: »

I quite enjoyed living in a few places that I know pretty much bankrupted the owners. I was paying €1300 a month for an apartment that the landlord spent €570K on in Donnybrook for a while!

Good friends of mine are now living in Osprey development (Naas) for 700/month.
If the developers installed the heaters in the bathrooms that would be perfect place to live. Needless to say the prices are going up - they are now buying into Portlaoise - some offers out there. There are few developments in Naas that failed - nothing to be happy about tbh, but the prices years back were out of order really.

marathonic

Claw Hammer wrote: »

Why should tenants be interested in a landlord's profits or losses? It is none of their business. Does anyone work out how much profit a taxi driver makes, or their milkman makes?
This thread is about begrudgery!

They shouldn't but they do. Obviously they are going to question an expense that makes up the largest proportion of their monthly expenditure before they look at the profit their milkman makes for delivering them a litre of milk.

Claw Hammer

marathonic wrote: »

They shouldn't but they do. Obviously they are going to question an expense that makes up the largest proportion of their monthly expenditure before they look at the profit their milkman makes for delivering them a litre of milk.

The landlords profit or loss has nothing to do with their rent. Their rent is governed by the market!

marathonic

Claw Hammer wrote: »

The landlords profit or loss has nothing to do with their rent. Their rent is governed by the market!

And do you think that tenants who feel their rent is too high, for the most part, blame the market or their landlord? Based upon the comments on various threads, I imagine that landlords get the blame. Tenants generally don't consider the maintenance, taxes and other expenses and seem to simply compare their rent to a mortgage on the equivalent house - similar to how a lot of people think that the only costs in car ownership are tax, insurance and fuel (until they get their first car).

marathonic

In other words, do you get the impression from posts related to landlords requesting increases in rent that the posters, in general, are blaming the market or the landlord?

Claw Hammer

marathonic wrote: »

And do you think that tenants who feel their rent is too high, for the most part, blame the market or their landlord? Based upon the comments on various threads, I imagine that landlords get the blame. Tenants generally don't consider the maintenance, taxes and other expenses and seem to simply compare their rent to a mortgage on the equivalent house - similar to how a lot of people think that the only costs in car ownership are tax, insurance and fuel (until they get their first car).

Who cares who they blame? If they blamed the politicians who have the means to influence supply and demand they might have more chance of having something done. Are you saying that if the news is bad, shoot the messenger?

marathonic

Claw Hammer wrote: »

Who cares who they blame? If they blamed the politicians who have the means to influence supply and demand they might have more chance of having something done. Are you saying that if the news is bad, shoot the messenger?

Okay, this argument could go on and on and is derailing the main topic which is 'do the numbers stack up for BTL in today's market?'

Claw Hammer

marathonic wrote: »

Okay, this argument could go on and on and is derailing the main topic which is 'do the numbers stack up for BTL in today's market?'

The o/p in the second sentence is talking about tenants views. At least it is now accepted that they are irrelevant.

BTLs are all about capital gain. The most important issue is to work out if prices are going to rise or fall in the short to medium term. Taking a snapshot of prices and rents at a particular point is of no value. far too many variables are being ignored, such as interest rate movements, currency movements, demographics tax break, tax impositions etc.

marathonic

Claw Hammer wrote: »

The o/p in the second sentence is talking about tenants views. At least it is now accepted that they are irrelevant..

Would a landlord who considers their tenant views as irrelevant not make for a very poor landlord?

Regarding capital gains, waiting for them is all well and good but profit is necessary if you want to build a portfolio of 5+ properties. You wouldn't get very far if each was taking money out of your pocket every month in the short-medium term unless you have a very high salary.

Santa Cruz

Being a landlord is like any other business.
If you know what you are doing you will make a profit. If you are one of these people who bought investments properties in the last ten thinking it was easy money you will make a loss.l

Villa05

Claw Hammer wrote: »

BTLs are all about capital gain.

I thought that business model was dead and buried.

Seperately serious shi%t storm on the way for rental supply. Taxes far too high on rental income and state want to privatise social housing. Who is going to fill the void when rewards are taxed so heavily?

Claw Hammer

Would a landlord who considers their tenant views as irrelevant not make for a very poor landlord?
[/QUOTE]
Much more likely to make them a rich landlord.

marathonic wrote: »

Regarding capital gains, waiting for them is all well and good but profit is necessary if you want to build a portfolio of 5+ properties. You wouldn't get very far if each was taking money out of your pocket every month in the short-medium term unless you have a very high salary.

If you have 5+ properties and the market falls you will be destroyed. Properties must be acquired towards the bottom of the cycle with reasonable rental returns.
It is the timing rather than the rental return which is critical.

marathonic

Claw Hammer wrote: »

If you have 5+ properties and the market falls you will be destroyed. Properties must be acquired towards the bottom of the cycle with reasonable rental returns.
It is the timing rather than the rental return which is critical.

Therein lies the problem.

If you want to buy at the bottom, which would be very difficult to time, you'd need to buy the properties all at the same time - a 25% deposit each would mean you'd need 1.25 times the value of the average purchase (+ purchasing costs) available in cash.

If you rely on the old capital gains model, you might be able to make your first purchase at the bottom but would then need a rising market to gain enough equity in your current investment to remortgage for a deposit for subsequent purchases.

I don't think the capital gains approach is going to be very successful unless you're severely lucky with your timing and house prices continue to rise, or flatline, after your final purchase.

It would be much better if the properties could provide a profit from day 1 and house prices remained stagnant. That way, you're purchasing at a lower price and, with the profit from each subsequent purchase, saving for the deposit for the next is going to be much easier.

In my area, I haven't yet come across a property where the numbers make sense.

riclad

THE present tax system makes no sense, for landlords, ie you could have 1000 per month, loan on a house, rent is 700, AND be taxed on the so called profit of 300, as you only get tax credits of, 75 per cent of interest on the loan.

TENANTS dont think of mortgage, tax credits etc, or maybe think landlord bought house for 50k, when in fact he paid 150k in the boom.

THERES probably 1000's of landlords making a few per cent profit, after tax, and they have the hassle of finding tenants, maintenance, filling out forms tax returns, with No way of leaving the business as loan is in negative equity.

I know 2 landlords bought 10 years, ago, have not made 1 cent profit on rental income.

Victor

The question has to be asked, is the property actually worth what was being sought for it. Remember, we are dealing with a situation that didn't go ahead.

marathonic

I wouldn't even consider landlords who bought during the boom. The fact is, they bought using the capital appreciation model. Had they done their due diligence, they'd have realised that the numbers made no sense.

What I'm finding hard to believe is that the numbers still don't make sense for this €80,000 property - a property that cost €210,000 as a new build at the peak of the boom.

Since then, rents on such a property in my area have dropped 25% but the property price has dropped over 60%.

Icepick

You ignored the 80k asset part, OP.

The rent to price ratio is much better than in other countries. Look at property prices and rents in France or Australia, for example.
But, of course, you have to know what you are doing.

murphaph

Thomas D wrote: »

I quite enjoyed living in a few places that I know pretty much bankrupted the owners. I was paying €1300 a month for an apartment that the landlord spent €570K on in Donnybrook for a while!

The owners of all these places you stayed in filed for bankruptcy?

Bigcheeze

Icepick wrote: »

You ignored the 80k asset part, OP.

he didn't. He calculated costs based on an interest-only mortgage.

MouseTail

Villa05 wrote: »

Seperately serious shi%t storm on the way for rental supply. Taxes far too high on rental income and state want to privatise social housing. Who is going to fill the void when rewards are taxed so heavily?

Social housing has been privatised for years, both in terms of voluntary housing bodies, Section 38 and Rent Allowance. Nothing new.

dinnyirwin

I think the OPs numbers are off the wall.

First off the yield is **** for what is out there today. It must be the wrong house, wrong area, wrong price, wrong rent or a combination of all to have figures that bad. Just realized its Donegal. That explains it. I personally wouldnt be touching anything outside Dublin for investment at the moment.

Why is he even considering interest only? The best thing about investing in property for me is that you outlay a small amount eg €20,000 and in 25 years, if you can manage to just break even each year (you should be able to do much more than break even over the next 25 years) you 100% own your property. Interest only is not the way to go.
You can get a normal 25 year BTL mortgage at a better rate than the one in the OP. Talk to your broker. The headline rate is not all thats available.

If he is giving 25% up front then he needs a mortgage of €60,000.
At 4,5% over 25 years thats about 360 per month or €4320 per year. And its not interest only.
Of that about €2700 is interest of which about €2000 is allowable.
Even at 5,5% you're not talking a huge difference.

Thats just a back of the envelope job for me, with very rough numbers, but for me the OPs numbers dont add up at all. And even if they did there has to be something off about that kind of yield these days. Should be doing better.



There is a thread here which i found very interesting

http://www.boards.ie/vbulletin/showthread.php?p=79604340

His crunching is not a million miles from my own experience and he explains it far better than I ever could so just gonna post the link.

marathonic

dinnyirwin wrote: »

Why is he even considering interest only? The best thing about investing in property for me is that you outlay a small amount eg €20,000 and in 25 years, if you can manage to just break even each year (you should be able to do much more than break even over the next 25 years) you 100% own your property. Interest only is not the way to go.

If each property is profitable, why would you want to use the profits to pay down the capital of your mortgage whilst profitable investments are still available - you're better using the profit to fund the deposits for additional properties.

Regarding breaking even, it does appear to be possible in the likes of the Dublin properties linked to on this thread but not in Donegal - yet.

I'm keeping an eye on the Donegal market because I know the good and bad areas and know the good and bad tradesmen in the area. For me, it'd be much easier managed if I decide not to go down the 'property management' route.

dinnyirwin wrote: »

Thats just a back of the envelope job for me, with very rough numbers, but for me the OPs numbers dont add up at all. And even if they did there has to be something off about that kind of yield these days. Should be doing better.

The gross yield based on full occupancy would be 7.5%. The only thing wrong with my figures is that the property price is based on asking price. In looking at the discounts between asking prices and the prices houses appear on the Property Price Register for, I'd imagine that the property could be secured for €73,000.

This purchase price would give a gross yield of 8.2% which, whilst it doesn't match what's available in some parts of Dublin, is respectable enough. Even the poster you linked to refers to ceasing to purchase properties when the yield goes below 6%.

My personal plan would be to purchase, manage myself and file my own tax return. This would make it a reasonably profitable investment. However, I wanted to gear the numbers towards a hands-off approach to make it more comparable to the alternatives such as investing in the stockmarket.

To me, the numbers aren't good enough yet but it may be worthwhile, at this point, starting to put in a few cheeky offers on places at 15% below asking price.

marathonic

Here are the numbers based on purchasing at 15% below asking price with a mortgage rate of 4.8% and an occupancy of 11.5 months per year. There are three towns close to me and the one I'd be buying in is the one with the highest rental demand. A local landlord has told me that most of his tenants stay multiple years and, when they do move, it's rare for the property to lie empty longer than a week.

Donegal hasn't had the surge in rental prices experienced in Dublin but I do expect them to start to creep up over the next 1-2 years. This is the primary reason I'd consider an investment using the numbers below.

It'd require a €21,100 investment for the deposit and purchasing costs and would provide a 3.1% return after tax on that investment.

Again, the numbers are a little close for comfort and it's primarily due to tax. With 51% of profits going to the government, it'd take a €170 rise in monthly rents to add €1,000 to the annual profit :eek:

Purchase Price 68000
Legal Expenses 900
Surveying prior to initial purchase 200
Furnishing 3000
Total Purchasing Costs 72100

Rent 500
Months 11.5
5750

Interest on 75% Mortgage @ 4.8% 2448
Letting Agents fee 0
LPT 90
PRTB 90
Insurance Premiums 350
Maintenance 800
Accountant 0
Total Expenses 3778

Expenses to be offset against tax 3166

Gross Profit 1972
Taxable Amount 2584

Tax @ 40% 1033.6
USC @ 7% 180.88
PRSI @ 4% 103.36


Profit after Tax 654.16

riclad

YOU could pay an accountant , to do your tax returns,
and claim tax credits for the expense.
MANY landlords outside dublin ,find it take 2 weeks ,plus to find a good tenant,
PUT 68k into a long term bank account ,i,d think you,d get more than 600 euros.
IS 1 PER cent stamp duty included in the 68k, purchase price.

dinnyirwin

marathonic wrote: »

If each property is profitable, why would you want to use the profits to pay down the capital of your mortgage whilst profitable investments are still available - you're better using the profit to fund the deposits for additional properties.

Regarding breaking even, it does appear to be possible in the likes of the Dublin properties linked to on this thread but not in Donegal - yet.

I'm keeping an eye on the Donegal market because I know the good and bad areas and know the good and bad tradesmen in the area. For me, it'd be much easier managed if I decide not to go down the 'property management' route.




The gross yield based on full occupancy would be 7.5%. The only thing wrong with my figures is that the property price is based on asking price. In looking at the discounts between asking prices and the prices houses appear on the Property Price Register for, I'd imagine that the property could be secured for €73,000.

This purchase price would give a gross yield of 8.2% which, whilst it doesn't match what's available in some parts of Dublin, is respectable enough. Even the poster you linked to refers to ceasing to purchase properties when the yield goes below 6%.

My personal plan would be to purchase, manage myself and file my own tax return. This would make it a reasonably profitable investment. However, I wanted to gear the numbers towards a hands-off approach to make it more comparable to the alternatives such as investing in the stockmarket.

To me, the numbers aren't good enough yet but it may be worthwhile, at this point, starting to put in a few cheeky offers on places at 15% below asking price.

Yeah i have to say that that property would be a non runner for me.
I feel Dublin is the only place where its worthwhile and reasonably shock proof, or should I say shock resilient, for the foreseeable future.
I think Donegal is a very dangerous bet, especially at those numbers.

Whatever you decide definitely stay clear of interest only. Thats just a trap.
Unless you have other investment classes on the go at the same time earning more than the interest you are saving.
Property would be down the list of investments for me. It is to provide diversification to my investments. Though I did start off in property.

marathonic

Icepick wrote: »

that's grossly inaccurate

On the contrary, it's the only way you should calculate your profits. Using a repayment-style mortgage repayment as an expense entry for the calculations would be 'grossly inaccurate' because the capital repayments form part of your profit.

Icepick

As already mentioned, avoid Donegal and other relatively poor (rural) areas. The huge subsidies such areas receive are far from secure in the future.

marathonic

Icepick wrote: »

As already mentioned, avoid Donegal and other relatively poor (rural) areas. The huge subsidies such areas receive are far from secure in the future.

The numbers don't lie. If I feel that my local market has sufficient demand and the numbers stack up, then there's absolutely no reason to avoid the area.

I do agree that the vast majority of Donegal properties don't represent good investments - I'm talking about some of the smaller villages and even Letterkenny where there is a huge oversupply. Just because this is true doesn't mean that the entire county should be wrote off in considering where to invest.

Just like you write off Donegal, I would write off the likes of Sligo. The reason for this isn't that I feel that there's nowhere in Sligo that represents good value - it's that I don't know the local area so wouldn't be making as informed a decision as I would be by buying locally.

There is a shortage of rental properties in the area I'd be investing in and they rarely stay on the market long. Therefore, as soon as the numbers stack up, I'd be investing.

Regarding 'huge subsidies', I'm not aware of much that's happening in this area lately. Do you have any references to such subsidies?

MouseTail

marathonic, you seem to know the location and sphere very well, the first rule of investment. Whilst I myself would steer clear of Donegal, that's purely because i don't know that market. Im sure its like anywhere, there are pockets of opportunity. Good luck with the investment when/if you dive in.

TheDoc

If I just PURE spitball figures.

I applied for a 200k mortgage out of interest, and the monthly repayment was €820.

It stands to reason that you could easily in the current market fetch between €1000-1200 for 2 bed property. That's what I'm encountering in North Dublin anyway.

That is the base, ballpark figure. Making a few hundred quid a month profit ontop of having the mortage paid for and covered. Should that property value rise, which it probably will, then it can be sold off for a heavy profit. And the property, was essentially covering it's own costs from the tenants rent.

There is differences between property investors, and landlords imo. My landlord bought a new house for his family when the current apartment became unsuitable. He was in a position where he bought the new house, and was able to rent out the apartment. WAs up front with me saying that he doesn't mind when I get the rent to him, as long as its before X date, when he needs to pay the mortgage. That's fine by me.

He made a shrewd move, at a good time, and was able to capitalise. I don't have any ill feeling or problem with it. I know he probably makes profit of me, but hes providing a service and he's entitled to it.

I at the same time know guys through sport and other social circles, who own multiple properties. We are talking 5+ apartments or townhouses that they rent. They are getting in 5k a month in rent, all of which is a pretty nice bonus on top of their normal salaries. I swiftly tell them to suck a fat one, when they make a moan about tax, money problems, or the price of something.

I totally get there are landlords out there not making money hand over first, but don't come to me crying looking for sympathy. Your operating in a highly unregulated( I dispute claims there is regulation and strict governance) market, where demand typically always outstrips supply. You're never "running out of business". Your an investor, looking for a return on their investment.

Sorry but find it hard to find sympathy or any sort of compassion for the financial woes of landlord. I've 100% no issues, qualms or problems with how they earn their income, or what they do, but I'm not buying for a second its a struggle, and as it's an investment, it's the risk involved.

I think OP the issue tenants have overall ( if you can even be safe in making a sweeping statement) is the poor regulation, the wild west nature of the renting market, and the poor professionalism that sometimes presents itself in what is at its base, a service providing market.

Lantus

based on my involvement in our management company I would note that only 20% of all the rented units in our estate are PRTB listed based on the PRTB's own official database. That's a lot of people that have not registered.

A lot of rentals fall below par with landlords making savings and cutting corners and taking a slice off the deposit pie for all sorts of nefarious things.

There is a small cohort of BTL owners in our estate who all reflect a pattern of behaviour in that they own multiple properties, have never paid a service fee from day one, often have judgement mortgages against them, are experts at avoiding all contact (none have any social media presence and they hide their tracks with skill.) All hold one or more positions as directors of companies which all seem to operate for several years before ceasing and a new one opening up. (these are not companies that have web addresses or even telephone numbers) Even on CRO forms they distort the address they live at to make it so general it could be attributed to one of 30 streets making detection impossible. Invariably they have not declared any of these properties to revenue or the income they derive from them.

No doubt the banks will eventually write off most their loans!

dinnyirwin

Lantus wrote: »

based on my involvement in our management company I would note that only 20% of all the rented units in our estate are PRTB listed based on the PRTB's own official database. That's a lot of people that have not registered.

A lot of rentals fall below par with landlords making savings and cutting corners and taking a slice off the deposit pie for all sorts of nefarious things.

There is a small cohort of BTL owners in our estate who all reflect a pattern of behaviour in that they own multiple properties, have never paid a service fee from day one, often have judgement mortgages against them, are experts at avoiding all contact (none have any social media presence and they hide their tracks with skill.) All hold one or more positions as directors of companies which all seem to operate for several years before ceasing and a new one opening up. (these are not companies that have web addresses or even telephone numbers) Even on CRO forms they distort the address they live at to make it so general it could be attributed to one of 30 streets making detection impossible. Invariably they have not declared any of these properties to revenue or the income they derive from them.

No doubt the banks will eventually write off most their loans!

I have all my tenants registered with the PRTB. HArdly any registrations actually show up.

Its a bit stupid for a landlord not to pay their service fees. Theyll soon find out when it comes to selling.

How can you tell what someones dealings are with renevue? Have you an inside man in the revenue? I know I certainly dont let anyone but myself, wife and accountant know mine.

And how do you know their dealings with their banks?