Buy to Let advice

buytolet89

Hi

I'm new to boards(made this account for advice)i am in much need of some guidance before i purchase a property to let.Long story short i earn 24k pa and have been granted 110k mortgage(50k savings) so i will be spending roughly 160k altogether.

I will be buying in Dublin and i am just looking for advice on how to get it started do i let an estate agent do all the paper work or is that all up to me?Also i will be buying a 2 bed apartment and hopefully rent it out asap.

Just need some tips on how to get the ball rolling, any replies will be much appreciated

_Kaiser_

My advice (likely unpopular) would be to forget about it.. This isn't 2006

Landlording isn't (in theory anyway!) the free-for-all handy money it was in the "good old days". You'll need to be registered, pay tax on the income, maintain the place in decent condition, cover the property tax etc etc

All that on a salary of €24k??

Eldarion

Please, for your own sake, explore other investment opportunities rather than real estate. You are bringing a world of hassle down on yourself for what works out to be quite low ROI in most cases after tax, maintenance and other fees are taken into account.

Look at real estate later if you wish to diversify an already padded portfolio, don't sink your nest egg entirely into Irish property.

buytolet89

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

buytolet89

Eldarion wrote: »

Please, for your own sake, explore other investment opportunities rather than real estate. You are bringing a world of hassle down on yourself for what works out to be quite low ROI in most cases after tax, maintenance and other fees are taken into account.

Look at real estate later if you wish to diversify an already padded portfolio, don't sink your nest egg entirely into Irish property.

Also what other investment opportunities you have in my mind that would profit me 400e per month?

Eldarion

buytolet89 wrote: »

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

While I'm sure you've crunched the numbers extensively I hope you're not thinking you're looking at a ~10% ROI from the 160k earning 15k per year.

Some really quick napkin figures just for example, taking 11 months rent as rule of thumb is to allow 1 month per calendar year of vacancy:

Gross Rent received (1250 * 11) €13,750

Repayments -€7,440
Maintenance Fees -€1,200
Property Tax -€315
Insurance -€300
Life Assurance -€300
Advertising -€XX
Repair & Maintenance -€XXX

And you still haven't paid income tax on the €13,750. Much less any capital expenditure to furnish the place. And you should really be considering the possibility of leasing to a trouble tenant who doesn't pay or trashes the place and how that could effect you.

There's a lot more to consider than just Rental Income vs Mortgage repayments here...

Eldarion

buytolet89 wrote: »

Also what other investment opportunities you have in my mind that would profit me 400e per month?

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

buytolet89

Eldarion wrote: »

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

hindsight is a beautiful thing, other option is to possibly invest in gold

The_Conductor

Eldarion wrote: »

Past performance does not necessarily predict future results.

Too damn right- 2013 was a most unusual year for equities.

The_Conductor

buytolet89 wrote: »

hindsight is a beautiful thing, other option is to possibly invest in gold

As a store of value- you'd have lost almost 30% over the past 24 months- had you your wealth invested in gold.

buytolet89

So no advice?

TJ Mackie

buytolet89 wrote: »

any replies will be much appreciated

buytolet89 wrote: »

So no advice?

Any replies will be much appreciated, but only if they're what you want to hear, right?

IlmoNT4

My advice...Keep your nest egg and do not buy an investment property.
It may seem attractive to become a landlord, or at least it might appear that its an easy profit. But you dont know whats around the corner... You are very young, you could go traveling, what happens when you meet someone, want to setup a home with them, what happens if the market collapses again, you get sick, you cant get tenants, you have bad tenants, things break, situation at work/home changes, you want to get another mortgage.

Cash is king..... when you have cash in the bank, you have options.

superman28

My advice is to think its a risky investment looks like a small return for taking on such a massive amount of debt/risk relative to your salary. (unless you live in a house that has no mortgage)

You have 50k savings, why not check out something like a managed fund

http://www.irishlife.ie/funds/fund-factsheets-prices.html

You could make a decent 7 - 12% return each year without the hassle of becoming a landlord.

Having said all of that, I reckon there are a few bargains around to be had,, so I am surprised the bank has approved a buy to let on your salary, but it could be a good oportunity to buy now and flip in 3 years or so.. but a massive risk as I said..

Santa Cruz

buytolet89 wrote: »

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

Go for it and never mind the pessimists here. Have a good look at Irish Landlord.com site and you will find loads of useful info.
Main advice. Treat this as a business. Tenants are customers not friends. Do it by the book and have an accountant submit your returns. Keep receipts for every purchase.

If you are a bit handy you will be able to do a lot of maintenance yourself.
Think long term. This could be a great pension fund. Think is there anything you can do with the surplus rent.

Mrs OBumble

OP - where are you living now, and how much rent are you paying?

IlmoNT4

OP, what will the mortgage repayments be? On 24K a year, can you afford to pay this mortgage, in full for 6 months, if you couldn't get the apartment rented, while maintaining the rest of your life.

A lot of people told me back in 2007, I needed to buy and now was the time, otherwise I'd never get a home, prices were only going to go up etc etc.... so I blew my nest egg

7 years later I'm still living in my apartment, with zero options to move out, move in with someone, buy another property. I cannot live with my partner because I cant afford to rent my place, and pay rent some where else.... It was my decision, I made it, I accept it. Hard luck etc etc

If I had a time machine, I'd keep my nest egg because now I'm at a stage in my life, where I want to buy a home and its not possible because I spent my deposit 7 years ago. My apartment and choices I made in 2007 have limited me in ways I couldn't have imagine back then.

dubbie82

Well looking at this as an outsider, no mortgage here and I am not a houseowner.

You want a two bed and I assume it has to be somewhere in the Dublin region otherwise I don't think you would get 1200 Euro in rent for a 2 bed. Just had a quick look at daft for 2bd apartments for about 150k in Co. Dublin but not many of them seem to be worth the money really, or as a tenant, I would not be to pushed to pay 1250 Euro per month for it.

If you were looking for something to be a home for the next couple of years at least then sure go for it, I would because I am bit sick of the renting situation but as an investment opportunity no.

And as some people already pointed out there is a lot of other expenses to consider when you become a landlord, managment fees for example, property tax and god knows what other tax surprises are hidden in the next budget?

Why not just stick part of your money into a saving account with good interest, maybe sometime down the line you want your own business or extend your own home, upskill or whatever. See I think the whole saving for a rainy day isn't a bad thing at all.

Eldarion

I don't know if it's the older generation advising and recommending property as the only vehicle of investment or if it's just the Irish mentality but it's scary how common this discussion is out there.

I wouldn't recommend buying real estate in Ireland as an investment unless you're in a position that you can acquire 5+ units to exploit economies of scale. Otherwise, it's just a far too time consuming, risky and costly endeavor for mediocre returns at best.

handlemaster

I think property investment would be good. I Dont think the 160 for a two bed is good value. Id look at 120 Max for two bed. Or go get two one beds for what you were looking to fork out at 160. Or a three bed semi

Jaybor

buytolet89 wrote: »

Hi

I'm new to boards(made this account for advice)i am in much need of some guidance before i purchase a property to let.Long story short i earn 24k pa and have been granted 110k mortgage(50k savings) so i will be spending roughly 160k altogether.

I will be buying in Dublin and i am just looking for advice on how to get it started do i let an estate agent do all the paper work or is that all up to me?Also i will be buying a 2 bed apartment and hopefully rent it out asap.

Just need some tips on how to get the ball rolling, any replies will be much appreciated

I think I can give you some insight, but dont have a lot of time so ill be quick.

If its in Dublin you can count on more or less full occupancy. Out of all my properties I think ive had 3 weeks vacant in total the last 10 years.

If you are thinking apartments for rental yield only. 1 bed apartments are the most profitable. Dont count on capital appreciation, but know it can be there. eg What could you have bought that apartment for 2 years ago?

The whole being a landlord thing is actually very easy. Anyone who says its difficult must have a really easy job elsewhere. You do about a days work a month.
And if you dont even want that let an agent manage it for 8% of the rent and in reality it only costs you half that.

You dont need life insurance on an investment property.
Advertising costs are negligible.
Over many years with many properties I have found the maintenance on the 1 beds to average out at about €500 per year.

So if your rent -costs - tax can keep you close enough to your yearly mortgage payments you are looking at owning the apartment outright in 25 years or whatever your mortgage is.

Irishlandlord website has a lot of info for you.

My advice is to go to an accountant and get him to work out expected numbers for you. Then you'll be able to work out if its for you or not. Anyone with a keyboard can be an expert, so take anything you read on the internet with a pinch of salt. Get professional advice and then make your decision.

buytolet89

Mrs OBumble wrote: »

OP - where are you living now, and how much rent are you paying?

I'm living at home and will be for the next three years

buytolet89

loulou2009 wrote: »

OP, what will the mortgage repayments be? On 24K a year, can you afford to pay this mortgage, in full for 6 months, if you couldn't get the apartment rented, while maintaining the rest of your life.

A lot of people told me back in 2007, I needed to buy and now was the time, otherwise I'd never get a home, prices were only going to go up etc etc.... so I blew my nest egg

7 years later I'm still living in my apartment, with zero options to move out, move in with someone, buy another property. I cannot live with my partner because I cant afford to rent my place, and pay rent some where else.... It was my decision, I made it, I accept it. Hard luck etc etc

If I had a time machine, I'd keep my nest egg because now I'm at a stage in my life, where I want to buy a home and its not possible because I spent my deposit 7 years ago. My apartment and choices I made in 2007 have limited me in ways I couldn't have imagine back then.

Put the offer in for a 2 bed apt in Dublin, rent is yielding 1200-1250 for exact same units in the area, mortgage works out at 632 per month and i will be living rent free for the next three years so it is a no brainer

Thanks for the advice everyone i put the offer in so fingers crossed

MagicMarker

buytolet89 wrote: »

i will be living rent free for the next three years

Erm, are you only planning on having a mortgage for 3 years or something? What about when you move out?

Creeby

From what I've gathered on this board these would be the typical monthly expenses for a 1 bed apartment in Dublin:

Tax: 50
Management: 50
Repairs: 100 (on average)
Agent: 70

So 270 euro worth of expenses minus say 800 euro in rent would leave you with 530 euro profit per month.

http://www.daft.ie/sales/76-hampton-wood-avenue-finglas-dublin/720966/

Take the above for an example say it costs 80,000 to buy after everything is said and done, that equals to 12.5% ROI per annum.

Obviously I am talking in rounded figures here and am probably missing one or two things but is this the general jist?

ABC101

Whilst there are some good bargains to be had in property... the costs associated with such is not to be underestimated.

For a 2 bed apartment you could be looking at 3.5K costs just to rent it out... and that is not including mortgage repayment costs.

There is the risk for investors of Govt policy... current taxation policy is "Hostile" to landlords... this may get worse i.e. 75% reduced to 50% etc.

The reason why the "establishment" has this hostile policy is that they do not want small investors getting into property.

As for various charges... LPT, Water, Broadcasting, PRTB we are at the "Thin edge of the wedge".

I can't see a 200K property staying at 315 euro / year for long... it will be ramped up... similar to the old car tax system.

So costs for landlords will rise.. and allowable expenses reduced.

That's just my opinion...

You might be better off looking at investing in a REIT.. ?

murphaph

Eldarion wrote: »

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

Diversity is key in any investment strategy but the OP doesn't want to simply invest in equities, he wants to leverage the lump sum he has in the form of a mortgage and use it to buy an asset he can't afford alone. The bank won't lend money to invest in shares unless you're a proven investment genius, so it's not a straightforward choice for the OP here.

The OP should certainly understand that it is a risky thing that he is contemplating, made more risky by having just one property. If you have several properties to let then you can sustain your investment when one tenant decides to pay no rent for a year. That's fatal for a single property leveraged landlord more often than not.

Having said all that, if he's lucky and never has a bad tenant or other issues then a property could be a great addition to whatever pension plan he has in place.

buytolet89

ABC101 wrote: »

Whilst there are some good bargains to be had in property... the costs associated with such is not to be underestimated.

For a 2 bed apartment you could be looking at 3.5K costs just to rent it out... and that is not including mortgage repayment costs.

There is the risk for investors of Govt policy... current taxation policy is "Hostile" to landlords... this may get worse i.e. 75% reduced to 50% etc.

The reason why the "establishment" has this hostile policy is that they do not want small investors getting into property.

As for various charges... LPT, Water, Broadcasting, PRTB we are at the "Thin edge of the wedge".

I can't see a 200K property staying at 315 euro / year for long... it will be ramped up... similar to the old car tax system.

So costs for landlords will rise.. and allowable expenses reduced.

That's just my opinion...

You might be better off looking at investing in a REIT.. ?

I have to start somewhere don't i? I am 23 now i plan to purchase an apartment in Dublin and rent it out every ten years

buytolet89

MagicMarker wrote: »

Erm, are you only planning on having a mortgage for 3 years or something? What about when you move out?

I'm living at home for the next three years then will be buying my own home

Mrs OBumble

buytolet89 wrote: »

I'm living at home for the next three years then will be buying my own home

Ya, but what will happen if Mammy gets sick of you freeloading and tells you to either move out or pay market rent - can you afford thsi?

buytolet89

Mrs OBumble wrote: »

Ya, but what will happen if Mammy gets sick of you freeloading and tells you to either move out or pay market rent - can you afford thsi?

I'm gonna be saving for my own place in the three years i plan to save another 30k to purchase my own house

Santa Cruz

handlemaster wrote: »

I think property investment would be good. I Dont think the 160 for a two bed is good value. Id look at 120 Max for two bed. Or go get two one beds for what you were looking to fork out at 160. Or a three bed semi

If it's Dublin he has missed the boat to get a two bed for 120,000 unless it's a very poor location . One beds in the right rental areas are hitting 150 to 175.
Rental for these is an average of 1000 a month if convenient to the Luas or within walking distance of the city centre. Foreigners will rent in places that the native would be inclined to and they are well use do renting.

Getting the right return is all about proper tenant selection and good management. There are too many amateur landlords who don't know the law, procedures and how to select and hold on to good tenants

Santa Cruz

loulou2009 wrote: »

My advice...Keep your nest egg and do not buy an investment property.
It may seem attractive to become a landlord, or at least it might appear that its an easy profit. But you dont know whats around the corner... You are very young, you could go traveling, what happens when you meet someone, want to setup a home with them, what happens if the market collapses again, you get sick, you cant get tenants, you have bad tenants, things break, situation at work/home changes, you want to get another mortgage.

Cash is king..... when you have cash in the bank, you have options.

Proper location, proper tenant selection and proper management will eliminate these concerns

The_Conductor

buytolet89 wrote: »

I have to start somewhere don't i? I am 23 now i plan to purchase an apartment in Dublin and rent it out every ten years

You are on a salary of 24k- living rent-free at home, and on the strength of your savings (of 50k- which admittedly is quite remarkable, given your age)- plan to start a property empire- move out in 3 years time into your own home- and add an apartment to the equation every 10 years or so.........

I'm not the most risk adverse person around- but your idea seems Walter Mitty in the extreme.

Certainly employing the 50k to try to get a return on it- is a good idea- but freeloading on your parents, to get a lumpsum together to buy your own house- when you've an investment property ticking over- is abusing the situation with your parents, regardless of how you look at it.

The figures in some of the above posts- are optimistic- and your idea that your going to get 1,250 in rental income- is also optimistic- you may achieve it now- but almost certainly it will fall for apartments (unless they're in a remarkably good area- which I seriously doubt, given the budget you're quoting).

You are looking at this with rose tinted glasses. I hope it works out for you- but you are relying on optimistic figures- and the goodwill of your parents- to make this work- which is neither fair, nor rational. You may get away with it- but you are making a lot of assumptions- god only knows how valid they are.

Blured

buytolet89 wrote: »

I'm gonna be saving for my own place in the three years i plan to save another 30k to purchase my own house

This is crazy. You earn 24k a year and are planning on building a property empire as well as purchasing your own PPR in 3 years? Do you think a bank (in these days of increased fiscal responsibility) will give you a mortgage for a PPR when you already have one for the rental property? It will be a major ask. Also, saving 30k in 3 years is quite an optimistic goal.

Being a landlord is not a great business to be in (I have an apartment in Dublin 15 I bought in 2005). Tax on your "profit" will be at the higher rate once your salary goes above 32k. Rent is high right now, but it can change pretty much overnight. Have you factored in what would happen if interest rates went up 1%, 2%, etc.

As others have said, there is better places for your nest egg, or you could use it towards your own place in 3 years when you feel like your want to move out.

buytolet89

Blured wrote: »

This is crazy. You earn 24k a year and are planning on building a property empire as well as purchasing your own PPR in 3 years? Do you think a bank (in these days of increased fiscal responsibility) will give you a mortgage for a PPR when you already have one for the rental property? It will be a major ask. Also, saving 30k in 3 years is quite an optimistic goal.

Being a landlord is not a great business to be in (I have an apartment in Dublin 15 I bought in 2005). Tax on your "profit" will be at the higher rate once your salary goes above 32k. Rent is high right now, but it can change pretty much overnight. Have you factored in what would happen if interest rates went up 1%, 2%, etc.

As others have said, there is better places for your nest egg, or you could use it towards your own place in 3 years when you feel like your want to move out.

I used to make alot more than 24k i was made redundant and i have over 50k deposit so why not give it a go it's been on my mind for a while and i don't want to have any regrets

ABC101

Lets say you rent it out for 1000/ month and there is no mortgage.

Total Annual Income = 12,000

Total Annual Expenses = 3000, could be more but lets say 3K.

Total profit = 9,000.

Looks great... but if you are on the high taxation rate ..

That 9000 gets chopped up... you would be lucky to get 4,500 euro per year after taxation and PRSI etc.

If the apartment originally cost 100K... then that is a 4.5% real return annually.

So you need to compare this 4.5% to other financial products and see if it represents good value.

While a extra 4.5K is not to be sneezed at... is it really a worthwhile reward for all the hassle and risk which is associated with being a landlord?

If it is... then you know what to do.

fash

ABC101 wrote: »

That 9000 gets chopped up... you would be lucky to get 4,500 euro per year after taxation and PRSI etc.

If the apartment originally cost 100K... then that is a 4.5% real return annually.

So you need to compare this 4.5% to other financial products and see if it represents good value.

While a extra 4.5K is not to be sneezed at... is it really a worthwhile reward for all the hassle and risk which is associated with being a landlord?

If it is... then you know what to do.

What other investment products give you 4.5% guaranteed? Is that after tax? Can you leverage to get it?
Do you expect rents to go higher or lower over the next few years?
OP is not on the higher rate of tax- so he won't be paying that ( at present in any case). Also presuming he gets a mortgage some of this cost is tax deductible.

Rent income is also diversified income. If the OP finds a suitable property with a suitable yield- go for it.

ABC101

fash wrote: »

What other investment products give you 4.5% guaranteed? Is that after tax? Can you leverage to get it?
Do you expect rents to go higher or lower over the next few years?
OP is not on the higher rate of tax- so he won't be paying that ( at present in any case). Also presuming he gets a mortgage some of this cost is tax deductible.

Rent income is also diversified income. If the OP finds a suitable property with a suitable yield- go for it.

Don't forget the example I gave is buying a 100K apartment with 100K cash, i.e. no mortgage.

The OP stated that he is spending 160K... 50K of his own and 110K borrowed.

So a 4500 annual cash return would represent less than 3% (about 2.8125%) of the value of the property.

And also he would have the associated borrowing costs of servicing the 110K mortgage.

Whilst the points you make are relevant.. you left out one other most important one...

Will the ECB raise rates next year? Apparently the FED in the US has mentioned raising rates in the near future!! If Europe continues to recover... the ECB will do the same.

The OP should base his finances on an interest rate of 7% in my opinion at least.

Santa Cruz

buytolet89 wrote: »

I used to make alot more than 24k i was made redundant and i have over 50k deposit so why not give it a go it's been on my mind for a while and i don't want to have any regrets

I wonder how many of the people discouraging you from going ahead have actually ever been involved in the rental of properties from a landlords perspective. It's the usual negative comments about hassle with tenants, falling rents etc. Do they want you to leave the 50000 in a bank account and get 0.5% interest if your lucky while inflation eats it's real worth away.
Ideally buy as close to the bottom of the market as you can, minimise your costs through your own labour and best of luck

ABC101

Santa Cruz wrote: »

I wonder how many of the people discouraging you from going ahead have actually ever been involved in the rental of properties from a landlords perspective. It's the usual negative comments about hassle with tenants, falling rents etc. Do they want you to leave the 50000 in a bank account and get 0.5% interest if your lucky while inflation eats it's real worth away.
Ideally buy as close to the bottom of the market as you can, minimise your costs through your own labour and best of luck

I'm just chucking out a few basic facts about Landlord costs etc.

Anyway.... I think talking about it now is pointless... the OP mentioned that he is going ahead with the purchase... and best of luck to him/her etc etc.

But if you really want my opinion... (which I'm sure you don't) if I had 50K to spare... I'd be going into the stock market.

murphaph

buytolet89 wrote: »

I used to make alot more than 24k i was made redundant and i have over 50k deposit so why not give it a go it's been on my mind for a while and i don't want to have any regrets

You won't get a mortgage for your own home in 3 years if you take one out now for a BTL. The banks aren't considering rental income any more.

murphaph

Santa Cruz wrote: »

I wonder how many of the people discouraging you from going ahead have actually ever been involved in the rental of properties from a landlords perspective. It's the usual negative comments about hassle with tenants, falling rents etc. Do they want you to leave the 50000 in a bank account and get 0.5% interest if your lucky while inflation eats it's real worth away.
Ideally buy as close to the bottom of the market as you can, minimise your costs through your own labour and best of luck

I'm a landlord in Ireland and Germany and I think he needs to review his plans. He simply won't get a mortgage in 3 years (or in 10 years) with an outstanding BTL mortgage) and it seems buying his own home forms part of the plan.

fash

ABC101 wrote: »

So a 4500 annual cash return would represent less than 3% (about 2.8125%) of the value of the property.

Wasn't that after tax? And assuming OP was paying the higher rate? And if you are calculating it that way, why base it off the house price- he is only putting forward 50k- base it off that and it is 9k/50k.

ABC101 wrote: »

And also he would have the associated borrowing costs of servicing the 110K mortgage.

a business expense that is mostly tax deductible (75%). And only in the short term- if it is cash flow positive as an investment.

ABC101 wrote: »

Will the ECB raise rates next year? Apparently the FED in the US has mentioned raising rates in the near future!! If Europe continues to recover... the ECB will do the same.

ecb rates are going nowhere- or else down. The UK and the US are very different economies. There is no recovery in the EU- it is Draghi pumping in cheap money to keep states afloat.

ABC101 wrote: »

The OP should base his finances on an interest rate of 7% in my opinion at least.

I'd try 6%- and throw in some rent increases.

The only reason to not do it is if it would impact on his position to buy hoods own property in a short time span. Frankly if that is 3 or more years away and he comes across a goods rental property with a decent yield in the mean time- but the property

minusthebear

sounds like a naive plan on such a meagre salary. how did you accumulate the savings?

The_Conductor

minusthebear wrote: »

sounds like a naive plan on such a meagre salary. how did you accumulate the savings?

Living at home- not paying rent, and not drinking or smoking it- no doubt. It is possible to save improbably large sums of money- if you live frugally- however I'd have to question whether its 'living' or accumulating money........ There is a lot more to life than accumulating as much money as possible- and life is damn short.

buytolet89

minusthebear wrote: »

sounds like a naive plan on such a meagre salary. how did you accumulate the savings?

I was on alot more in my old job and was made redundant received 27k, I'm also working full time and studying part time i will get my first degree this year and going to enroll in another part time course which will be 5 years time to pursue a second degree.

I will be 28 by then so i hope to god I'm not still earning 24k or i will drive my car off a bridge

ABC101

fash wrote: »

Wasn't that after tax? And assuming OP was paying the higher rate? And if you are calculating it that way, why base it off the house price- he is only putting forward 50k- base it off that and it is 9k/50k.

a business expense that is mostly tax deductible (75%). And only in the short term- if it is cash flow positive as an investment.

ecb rates are going nowhere- or else down. The UK and the US are very different economies. There is no recovery in the EU- it is Draghi pumping in cheap money to keep states afloat.

I'd try 6%- and throw in some rent increases.

The only reason to not do it is if it would impact on his position to buy hoods own property in a short time span. Frankly if that is 3 or more years away and he comes across a goods rental property with a decent yield in the mean time- but the property

Granted he did mention that, would be on the low rate of taxation...

However you are making assumptions, rental income going up etc, ECB rates staying low... Govt hostility not getting worse etc.

How about you give a summation of the total costs for this venture...mortgage of 110K, 50K cash.. so the property must be going for around 155K or so. What would be your synopsis of costs vers profit?

RainyDay

fash wrote: »

What other investment products give you 4.5% guaranteed?

Why guaranteed? The rental income is far from 'guaranteed'.

fash wrote: »

Can you leverage to get it?

You do understand that leverage = risk, right? As soon as you leverage (in this case leveraging the €50k by a factor of three), the risk of loss to your €50k is also multiplied by three.

fash wrote: »

OP is not on the higher rate of tax- so he won't be paying that ( at present in any case).

Will the planned rental income push him into the upper bracket?

fash wrote: »

Rent income is also diversified income.

Sorry? How did you work that out?

Santa Cruz wrote: »

Ideally buy as close to the bottom of the market as you can, minimise your costs through your own labour

No-one can judge the bottom of the market. Those who claim to have judged this are spoofers, or just lucky. And if you put zero value on your own time, it's easy to claim a big return on your investment.

fash

RainyDay wrote: »

Why guaranteed? The rental income is far from 'guaranteed'.

It is certainly more certain than the return on equities- and higher than the return on deposits. Leaving aside the issue of leverage.

RainyDay wrote: »

You do understand that leverage = risk, right? As soon as you leverage (in this case leveraging the €50k by a factor of three), the risk of loss to your €50k is also multiplied by three.

in theory - in reality - it's only if you don't know what you are doing. So long as you have no need of the money and so long as the investment is cash flow positive, you are merely facing an opportunity cost on your money.
The places I'm looking at with min 10-12% yield where the price to purchase is below build cost.
With the correct yields, a decent rental location, good build quality and proper property and tenant management there is minimal risk.
I say that with a family history of buying rental properties in the 1990's-2001- including original S23's (I.e. city centre properties rather than those in leitrim) and again a couple of receiver purchases in 2012 and 2013- the economics didn't make sense in the intervening period.

RainyDay wrote: »

Will the planned rental income push him into the upper bracket?

not on the figures that have been quoted.

RainyDay wrote: »

Sorry? How did you work that out?

The income is not dependent on you not being sick- you can receive it as a pension or if you go back to college- where you are earning no or little other money ( and so paying little income tax) it is even more valuable.

RainyDay wrote: »

No-one can judge the bottom of the market. Those who claim to have judged this are spoofers, or just lucky. And if you put zero value on your own time, it's easy to claim a big return on your investment.

It is not about timing- it is about value investing.

fash

ABC101 wrote: »

Granted he did mention that, would be on the low rate of taxation...

However you are making assumptions, rental income going up etc, ECB rates staying low... Govt hostility not getting worse etc.

There is a risk of government hostility- I personally suspect it is lower than against other asset classes- I used to be a rate whore back when banks were giving out 7% interest- who'd bother at this point with DIRT the way it is?
I suspect that if there is pressure or on landlords- it will either be tax put on all residential property or because of a perceived greater ability to shoulder tax- I.e. rents going up.
I'm not assuming rents will go up- the calculations should work whether rents rise or fall by 20% or greater. I'm merely saying rent rises are more likely than falls in good locations.

ECB rates will stay low a lot longer than the Fed or the BoE. BoE is telegraphing that they won't consider it before mid 2015 ( despite the fact they've already hit the points they said would make them reconsider). With the shocking state of finances in much of Europe- including Ireland, increased interest rates in Europe are far away. I would be more concerned with Irish banks increasing their rates- though each increase increases the danger of a foreign bank coming in to the market. With Draghi pumping in cheap credit, there is less pressure on banks to do this though.

ABC101 wrote: »

How about you give a summation of the total costs for this venture...mortgage of 110K, 50K cash.. so the property must be going for around 155K or so. What would be your synopsis of costs vers profit?

Assumptions: time spent by the landlord is cheap or minimal: cheap because it is "untaxed"- your time is cheap because you are on a minimum wage type job- and labour at the upper rate is taxed at 50+% . plus the time is invested in your future. Also frankly I get a lot of satisfaction from improving property: building work and trips to ikea etc.- I don't consider it work.
Assuming that the property will not need major structural work within the next 40 years ( excluding
Boilers etc.)- so pick a good property.

One off:
Stamp and legal at 150k: 3k
Fit-out: can vary widely. A receiver sale where you get the house contents means you might spend 4k in IKEA only. On a 2 bed apartment worst case should be kept lower than 12k with good use of adverts.ie and IKEA. Needs to be borne in mind.


Bins ( house) or management charge (apartment):
(I pay for bins for houses- arguably unnecessary): bins 320 ( with upside risk) or 1200-1500.
Rental yield annual: 11.5x monthly yield if you are efficient. 11x monthly yield if not.
Prtb:90/annum ( not always)
Daft ad:36/annum( not always)
Property tax 225/annum ( with upside risk- but not more then double)
Insurance: 400
Repair per annum: depends on how good you are at vetting tenants: 700( not always and potentially higher)
I have a yield calculating spread sheet which I feed that into