Should I buy a €50k house in my 20s?

Laura2015

Hi Guys,

I am looking for some advice. I have been considering the idea of buying a house in my 20s.

I have seen a property, 2 bed terraced property (735ft2/68m2) in Loughrea for 50k which seems to be a great investment opportunity. The house is clearly small but in great condition and similar properties in Galway city go for 100k+ management fees between 1k-1.6k per year! The location is not completely ideal but is a 30-45 minute commute from work as I work in the East side of the Galway city and do not get the worst of traffic as I work 8-4.

I have the deposit saved and my mother said she would loan additional fees (solicitors, furnishing etc.). My mother is very encouraging of the idea whereas my friends think I am mad considering getting a mortgage at 25! Maybe I am, which is why I am posting this thread...

I have checked out finances and a 20 year loan for 50k would roughly be 275 per month or 335 per month on a 15 year basis. I would be hoping to rent out the spare room for <200 a month. Currently I pay 300 in rent a month which works as 3600 a year. In the next 5 years of renting, I would pay 18k whereas I would have a 1/3 of a mortgage off on this house.

The main concerns I have to consider is that I am permanent but only make 25k with little scope for progression in pay. Also, given my age, I am wondering is too much to take on or does it seem like a good investment?

I also need to consider if I would like to travel abroad for a year but I could reckon I could rent the house for a year and I do know the area so I could rent it out to people I know on the cheap.

Really appreciate an advice anyone could offer and please feel free to share your own personal experience.

Thanks,
Laura.

Moonbeam

25 isn't that young:)
I bought my 1st house at 23 and have never regretted it.
It cost nearly 4x that and is not much bigger,it was during the boom.
If I bought a 50k house I would pay if off super quick and own it outright and then it is definitely an asset.
Mortgage was cheaper then rent,I needed somewhere to live and I made sure it had rental potential.
Do not buy it if you do not know if you want to live there unless it has rental potential.
Do not let anyone pressurise you in to it wither,only you know if you want to buy it.

Atlantic Dawn

I would visit this house first to see what condition it is in before you go making any plans, could be in a terrible state of repair or in a ghost estate. If it all checks out if would seem a sound investment especially for you commuting from there to work, can't see how you would lose as it would cost more to build the house.

sdanseo

Atlantic Dawn wrote: »

I would visit this house first to see what condition it is in before you go making any plans, could be in a terrible state of repair or in a ghost estate. If it all checks out if would seem a sound investment especially for you commuting from their to work, can't see how you would lose as it would cost more to build the house.

Although the situation is likely a lot worse in rural locations, ghost estates up this direction are starting to receive a lot of attention, some starting to look like they'll be very nice places to live when eventually finished up. I wouldn't lose hope based on that if it is the case, as they will have huge potential when the opportunity and funds are there for a developer to finish them.

Pat Mustard

I can't comment on the location or state of the house but you seem confident that these are good. If the mortgage is sustainable by your income and if it will remain sustainable while you travel abroad for a year, that's good.

You need to consider what will happen if you move to another part of the country to work. If you can continue to pay the mortgage while you do that, fine.

According to your figures, the cost of the mortgage is comparable to the cost of your rent. That may not be a completely fair comparison if you are comparing the rent in Galway city to the cost of paying a mortgage on a house in Loughrea, so maybe the cost of the mortgage in Loughrea should be compared against rent in Loughrea.

You understand that there will be additional costs involved in owning a house. You will have to pay Local Property Tax and you will have to pay for insurance, maintenance and repairs. Also, with a 70 minute round trip commute every day, you will be paying more for car repairs, maintenance and tyres.

If you are satisfied with all of the above, go for it.

Rosser

You're not going to live there but rent it? If that's the case what's the rental market like in Loughrea and if you can rent it will that pay the cost of the mortgage.

If you're living there I can't imagine that you'd loose on €50k over say 5 years, might be pain now but if you get lucky, make the right trade ups you'll be in great shape in your late 30s when your pals are trying to get on the ladder.

johnp001

Loughrea was a town that was on the list for the "Town Renewal Scheme" tax break, which was one of the worst attempts of the previous administration to delay the inevitable property crash and led to the creation of a good proportion of the country's ghost estates.
Some estates in Loughrea have already been demolished as far as I am aware.

Laura2015

Atlantic Dawn wrote: »

I would visit this house first to see what condition it is in before you go making any plans, could be in a terrible state of repair or in a ghost estate. If it all checks out if would seem a sound investment especially for you commuting from their to work, can't see how you would lose as it would cost more to build the house.

Thank you for the advice. I would definitely check out the house first, I have gone into the estate and peaked through the windows (checked property is currently vacant) and downstairs looks as per online photos. Rang estate agent first to check that it was vacant of course, and have arranged to view it properly this Friday. Going my general guidelines for Galway, it costs 1k per square meter to build a house so that it would cost easily 70k to build. Property has been up 6 months + so buyer might be eager to sell.

From initial consideration, it does seem like a good investment opportunity (house built in past 10 years or so), provided it is structurally sound. And it does have 2 parking spaces and a back garden. It is also a 30-45 minute drive from my home town so I would be close to my family too.

Laura2015

Moonbeam wrote: »

25 isn't that young:)
I bought my 1st house at 23 and have never regretted it.
It cost nearly 4x that and is not much bigger,it was during the boom.
If I bought a 50k house I would pay if off super quick and own it outright and then it is definitely an asset.
Mortgage was cheaper then rent,I needed somewhere to live and I made sure it had rental potential.
Do not buy it if you do not know if you want to live there unless it has rental potential.
Do not let anyone pressurise you in to it wither,only you know if you want to buy it.

Thanks for the reply. My mother build her house at 24 but then again she had me so that have her more motivation to do so I think I would like to live there, I like my own space and my friends and my boyfriend lives in the city so its not like I can't stay in a night during the week or weekend so I could still have a social life! I don't think I could afford a mortgage of less than 15 years although I think it is more than I would be cautious of getting a shortage term than that. I think the price of this property is what is making me consider the idea seriously.

Laura2015

Rosser wrote: »

You're not going to live there but rent it? If that's the case what's the rental market like in Loughrea and if you can rent it will that pay the cost of the mortgage.

If you're living there I can't imagine that you'd loose on €50k over say 5 years, might be pain now but if you get lucky, make the right trade ups you'll be in great shape in your late 30s when your pals are trying to get on the ladder.

Thanks for the reply. Apologies I probably wasn't being very clear. I would like to live there but rent out the spare room for the first 3-5 years to help with initial repayment costs. I wouldn't mind renting to 1 other person as I currently pay 300 a month for a room and share with 4 others!

scwazrh

I bought my first house at 21 so I would say your starting late at 25!

Two things to consider - Can you afford to pay the mortgage even if its not rented and you're living somewhere else ?
Are you prepared to keep it for maybe 8 , 9 , 10 years before you can sell it for a profit?

If you can answer yes to both these points I would say go for it!

Laura2015

Pat Mustard wrote: »

I can't comment on the location or state of the house but you seem confident that these are good. If the mortgage is sustainable by your income and if it will remain sustainable while you travel abroad for a year, that's good.

You need to consider what will happen if you move to another part of the country to work. If you can continue to pay the mortgage while you do that, fine.

According to your figures, the cost of the mortgage is comparable to the cost of your rent. That may not be a completely fair comparison if you are comparing the rent in Galway city to the cost of paying a mortgage on a house in Loughrea, so maybe the cost of the mortgage in Loughrea should be compared against rent in Loughrea.

You understand that there will be additional costs involved in owning a house. You will have to pay Local Property Tax and you will have to pay for insurance, maintenance and repairs. Also, with a 70 minute round trip commute every day, you will be paying more for car repairs, maintenance and tyres.

If you are satisfied with all of the above, go for it.

Thank you for the detailed informative reply. A 1 bed apt in Loughrea goes for 90-100 euro and a room would be 250-300. I am currently getting a good deal on rent in the city, rental prices appear to have gone up considerably in Galway city in the past 12 months while the housing quality is below-average in my observations and in comparison to renting in Waterford and Limerick city.

I am aware that there is considerable additional costs such as solicitor fees, land registry, house insurance, stamp duty, property tax, repairs & maintenance and bills. Of course, as you mentioned, additional car wear & tear. Thankfully, I have no car debt but the upkeep of a car can be expensive. I would try rent out the spare room for 3-5 years to help initial repayment costs.

I suppose realistically with my savings, I have the choice between travelling abroad, continuing to save to buy a house that I would like to live in for the next years or purchasing a house now and selling/renting it in 15 years or so to help buy my "forever" home. Ideally, I would love to live and raise a family around Kinvara.

Laura2015

Pat Mustard wrote: »

I can't comment on the location or state of the house but you seem confident that these are good. If the mortgage is sustainable by your income and if it will remain sustainable while you travel abroad for a year, that's good.

You need to consider what will happen if you move to another part of the country to work. If you can continue to pay the mortgage while you do that, fine.

According to your figures, the cost of the mortgage is comparable to the cost of your rent. That may not be a completely fair comparison if you are comparing the rent in Galway city to the cost of paying a mortgage on a house in Loughrea, so maybe the cost of the mortgage in Loughrea should be compared against rent in Loughrea.

You understand that there will be additional costs involved in owning a house. You will have to pay Local Property Tax and you will have to pay for insurance, maintenance and repairs. Also, with a 70 minute round trip commute every day, you will be paying more for car repairs, maintenance and tyres.

If you are satisfied with all of the above, go for it.

Thank you for the detailed informative reply. A 1 bed apt in Loughrea goes for 90-100 euro and a room would be 250-300. I am currently getting a good deal on rent in the city, rental prices appear to have gone up considerably in Galway city in the past 12 months while the housing quality is below-average in my observations and in comparison to renting in Waterford and Limerick city.

I am aware that there is considerable additional costs such as solicitor fees, land registry, house insurance, stamp duty, property tax, repairs & maintenance and bills. Of course, as you mentioned, additional car wear & tear. Thankfully, I have no car debt but the upkeep of a car can be expensive. I would try rent out the spare room for a few years (if necessary) to help initial repayment costs.

I suppose realistically with my savings, I have the choice between travelling abroad, continuing to save to buy a house that I would like to live in for the next years or purchasing a house now and selling/renting it in 15 years or so to help buy my "forever" home. Ideally, I would love to live and raise a family around Kinvara.

Laura2015

johnp001 wrote: »

Loughrea was a town that was on the list for the "Town Renewal Scheme" tax break, which was one of the worst attempts of the previous administration to delay the inevitable property crash and led to the creation of a good proportion of the country's ghost estates.
Some estates in Loughrea have already been demolished as far as I am aware.

Thanks for the reply. I drive through Loughrea on the way home to see family so I am familiar with some of these estates. There is a huge estate of unfinished houses just before the Loughrea Hotel. This estate appears to be well-established but is defintely something I would look into further before committing to purchasing in a particular estate. Given the price of the house, it is something of a concern that I need to look into further.

mad m

Sister in law lives in Danesfort. Anytime I'm down there it's a nice buzzing town, especially the night life. Had my first house at 24. Paid 62,000 punts.....Thought I'd never have a house, the biggest loan you will have is a mortgage.

If you do buy it, try and put a few extra off mortgage a month if you can, the quicker you pay it back the less interest you will pay...

Good luck with it whatever you decide.