Should I buy an apartment as an investment?

john1963

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

john1963

Augeo wrote: »

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

john1963

Augeo wrote: »

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

john1963

john1963 wrote: »

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

Splitting hairs but you cannot expect 100% occupancy & no expenses over 10 years.

I have no idea what prices will be like in 10 years time, they are a lot cheaper now than 10 years ago. No doubt we will see a boom sometime in the future but I wouldn't predict how soon.

athtrasna

Moved from 3rd level accommodation

caviardreams

Augeo wrote: »

Splitting hairs but you cannot expect 100% occupancy & no expenses over 10 years.

I have no idea what prices will be like in 10 years time, they are a lot cheaper now than 10 years ago. No doubt we will see a boom sometime in the future but I wouldn't predict how soon.

+1 - or that rents will remain at their current levels which are relatively high.

frank_scorpio

john1963 wrote: »

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

frank_scorpio

caviardreams wrote: »

+1 - or that rents will remain at their current levels which are relatively high.

rent are not as high in dublin as many lead us to believe , they are relatively cheap compared to other european capitals in fact and wages in dublin are well above the average european capital

Uno my Uno.

Whether it is a good move or not depends entirely on the apartment itself. Is it in a good location where apartments (as opposed to houses) are in demand? Is it spacious and well proportioned? Is the development well run and maintained? What sort of tenants can you expect to attract?

if the answers to these questions are in the negative the maths regarding the finances aren't really important, it's s bad move,

Amirani

frank_scorpio wrote: »

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

john1963

thanks for alk the replies...lots to ponder

antoinolachtnai

Lots of good practical advice there. The other thing you should consider is buying two. Borrow another 180k from the bank with the two apartments as security and repay over ten years. You put the same money down, you will get almost the same cash flow from the two properties as you would from one over the ten years but at the end you own two apartments outright instead of one.

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

handlemaster

OP why dont you put the 180k into a house in dublin. No management fee and higher rent

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

thanks for alk the replies...lots to ponder

frank_scorpio

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

lack of liquidity is just investment community jargon , if a property is priced right and demand for rental is strong , its a good buy , the risk with property investment is troublesome tenants and contrary to public opinion , the law is completely on the side of tenants in this country

frank_scorpio

antoinolachtnai wrote: »

Lots of good practical advice there. The other thing you should consider is buying two. Borrow another 180k from the bank with the two apartments as security and repay over ten years. You put the same money down, you will get almost the same cash flow from the two properties as you would from one over the ten years but at the end you own two apartments outright instead of one.

this is poor advice , it almost never pays to borrow money for a BTL , loans are at least 5% and in an area like dublin , the return on investment after the mortgage is paid off will be less than what you would get from a savings account

property is not a good buy if your priority is capital appreciation , stocks beat it hands down and if your borrowed heavily to buy property , all you have is potential capital appreciation , it might have been ok three years ago when house prices were on the floor , not now

frank_scorpio

handlemaster wrote: »

OP why dont you put the 180k into a house in dublin. No management fee and higher rent

you wont get a good house for 180 k in dublin , santry is an average area but 180 k will buy a better income producing apartment than house

a better area than santry is beaumont though its still nothing special

frank_scorpio

john1963 wrote: »

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

if a stock is priced at $ 100 and the dividend is $8 per year , thats an 8% dividend

the further the price of a stock falls , the higher the dividend yield , no one likes to see a stock falling in price and stocks rise and fall much harder than houses but provided the dividend is not cut , 8% is incredible , its a strategy which takes incredible will power however , the temptation to sell if the stock dropped another 20% might be very great for a novice , its nearly impossible to call the bottom in a stock but many of the oil majors share prices are at near twenty year lows due to the collapse in oil price

these are 150 billion dollar plus companies however , the chances of them going broke are less than most nations

handlemaster

frank_scorpio wrote: »

you wont get a good house for 180 k in dublin , santry is an average area but 180 k will buy a better income producing apartment than house

a better area than santry is beaumont though its still nothing special

Currently 138 for sale in Dublin for 175k or less

http://www.daft.ie/dublin/houses-for-sale/?s%5Bmxp%5D=175000

frank_scorpio

frank_scorpio wrote: »

this is poor advice , it almost never pays to borrow money for a BTL , loans are at least 5% and in an area like dublin , the return on investment after the mortgage is paid off will be less than what you would get from a savings account

property is not a good buy if your priority is capital appreciation , stocks beat it hands down and if your borrowed heavily to buy property , all you have is potential capital appreciation , it might have been ok three years ago when house prices were on the floor , not now

You can write off 75% of the interest against tax also though which has to be taken into consideration.

frank_scorpio

might be also no harm to consider the fact that its not only oil companies which pay high dividend yields , the following companies all pay dividends in excess of 5%

vodafone
hsbc bank
general motors ( around 4.5% )
ford pays 4%
at+t ( americas vodafone ) also pays in excess of 5%

you could buy around ten stocks which pay a 5% plus dividend , thus spreading risk

newacc2015

frank_scorpio wrote: »

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

An oil company? Are you serious? Oil is $35 a barrel and is expected to continue to fall due to excess production and it will be worse next year with Iran. There is also currency risk, since BP is listed in GBP.

OP you can expect about €1300 to 1400 for a 2 bed in rent roughly in D9. I would expect 95% occupancy, I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. I know you might be unlucky to get a non-paying tenant, but if you screen people right that shouldnt be an issue

Check the obvious such as the fire standards for the building, sinking fund, levels of owner occupiers in the building. The less owner occupiers, the more rough the place tends to be.

Can you take on the stress of being a landlord? If not an apartment like this one might be a better option as it is managed by an onsite company. Plus its a 3 bedroom apartment.

http://www.daft.ie/dublin/apartments-for-sale/ballymun/13-the-gateway-ballymun-dublin-1144526/

Its a student residence literally right beside DCU, so you will pretty much have 100% occupancy. I think this one might be a former tax relief student development and I know one of the advantages of that was the students didnt have traditional tenancy rights. Meaning a non-paying tenant could be evicted really easily.

frank_scorpio

Houston Famous Oboe wrote: »

You can write off 75% of the interest against tax also though which has to be taken into consideration.

not enough reason

frank_scorpio

to newacc

beit property or equities , the super buys are when no one wants to touch an asset , people said the same about property in ireland in 2011 and early 2012 , when the recovery in an asset has arrived , its too late , they are no longer bargains

Labarbapostiza

john1963 wrote: »

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

If you're a cash buyer, that's a good price. It's not that risky a place to put your money. When people borrow to "invest" it's a different story.

But, be careful with your rent projections. The rising rents this year have just been a part of a rent bubble. If you got 9k a year, 750 a month, you'd be getting 5% return which is better than the bank rate. You could even go lower and still beat the bank rate. The rent bubble has meant people agreeing to rents they can't actually pay, and then they don't pay.

If you're in it for the long haul, ten, twenty years, Or you're not going to be under pressure to sell at a point that isn't the right time, then it's a safe investment.

Amirani

frank_scorpio wrote: »

lack of liquidity is just investment community jargon , if a property is priced right and demand for rental is strong , its a good buy , the risk with property investment is troublesome tenants and contrary to public opinion , the law is completely on the side of tenants in this country

No - lack of liquidity means you can't get access to your money quickly if you need it. Also can't get access to part of your money easily without liquididating the whole assets.

If you completely dismissing this as investment community jargon then you're not really considering all the factors you should be. It isn't something that absolutely means you shouldn't buy property, but it should be a consideration.

Augeo

Augeo wrote: »

......

Crude figures
- gross income assuming 10 months rental per year €12k
.............

newacc2015 wrote: »

....... I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. ............

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

Labarbapostiza

newacc2015 wrote: »

....... I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. ............

You could have it empty for a lot longer than 2 months of the year.

The typical bank mortgage adviser, advising "investors" (that's people who borrow) to not have any tenants in the apartment, as this will lower the value of the "investment"........At least 10% of all property in Dublin is vacant all year round.

It's stomach turning what's going on in the commercial sector. The banks all bailed out, and the bollixes on the march again. I've seen a few businesses that made it all the way through the recession now being shut down, because bollixes have money from the bank to "invest", and their buildings have been sold from beneath them.

The banks actually want less availability of commercial and residential space, as this creates a scarcity of supply, driving up rents and making the returns on investment look better than they are. The ideal model NAMA and the banks would like is bollixes just selling property back and forth to other bollixes, without ever having tenants.

syklops

handlemaster wrote: »

Currently 138 for sale in Dublin for 175k or less

http://www.daft.ie/dublin/houses-for-sale/?s%5Bmxp%5D=175000

Did you look at some of them? A dog would turn their nose up at many.

rent are not as high in dublin as many lead us to believe , they are relatively cheap compared to other european capitals in fact and wages in dublin are well above the average european capital

Other capitals like where? London, Paris, Prague etc?

Is there a capital city in Europe which is as devoid of public transport as dublin where rents are higher? I doubt it.

Labarbapostiza

syklops wrote: »

Did you look at some of them? A dog would turn their nose up at many.

Well, the dogs don't often have much choice....

It's interesting looking at DAFT. There is crap that should never have been given planning permission. There are apartments in Smithfield, where the only window faces into complete darkness.

I also have a suspicion, that some of the property, if a cash buyer made a much reduced offer, they'd get it.

I bet if you had cash, you'd get http://www.daft.ie/dublin/apartments-for-sale/dublin-2/apt-3-2930-lad-lane-dublin-2-dublin-1149338/ For much lower than the asking price. It's a bit of fixer upper, but it is in a great location.

Augeo

Augeo wrote: »

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

Houston Famous Oboe

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

As things stand is well and good, one must consider longterm. For calculation purposes using 10 months/annum occupancy is a decent yardstick imo. A few years ago Dublin had less demand and more supply, no point using best case scenario when calculating longterm return, at the moment is all well and good but no guarantee of the future.

No one mentioned no occupancy so it being low on your list is nice to know but largely of no benefit to the discussion.

MarkAnthony

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

This is a frequently offered anecdote. There are quite a few people at viewings but it's not like LLs are having their arms ripped off. Especially in places like Santry. Not that there is anything wrong with Santry it's just not ideal in regards to demand - still high enough but you could still easily have a couple of weeks while you wait for the right tenant.

Furthermore we're at peak demand at the moment. Things might continue to go up in the short term but I don't believe they'll continue like this in the medium to long term. I also don't see apartment prices doing much over the next ten years.

OP I work it out as a net 6500 return (roughly) pa. Whether it's worth the hassle to you is entirely down to you, just go into being a LL with your eyes open. If I were you I'd be looking at the longer term council backed scheme's with 100% interest relief and getting a BTL mortgage. Speak to a qualified and recommended FA to get the best return on your money. I dont think having all your eggs in one basket is a good idea.

jimbobaloobob

Many more costs to factor. Small but necessary. Reg each tenant prtb, insurance, property tax. Wear and tear and upkeep.

handlemaster

syklops wrote: »

Did you look at some of them? A dog would turn their nose up at many.



The OP is only looking for 1 investment property im sure he could find one house among the 138 that someone would be happy to rent from him.

jimbobaloobob

jimbobaloobob wrote: »

Many more costs to factor. Small but necessary. Reg each tenant prtb, insurance, property tax. Wear and tear and upkeep.

Most of which are reducing your tax bill also though.

CIARAN_BOYLE

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

Yeah but 10 months a year is a good baseline for 20 years. 200 months out of 240. Lets say theres one bad tennant that overholds without paying and you can't get rid of them for 18 months and you have 22 months where you have no rent due to vacancy between tenants and renovation work being done..

newacc2015

Augeo wrote: »

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

If you look at the apartment I suggested. Its around the corner from DCU basically, where there will always be demand for student housing. Land is fixed in supply, so I don't think you can assume a new town with competing housing will be built beside DCU.

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

Labarbapostiza

newacc2015 wrote: »

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

Where do you get this 100% occupancy from? The college year is only 8 months.

I live near a large guesthouse in Dublin (it's very large for a guest house). They have students during the college year and then in summer they have the tourist trade. Accommodating students is seasonal.

caviardreams

Also, if you are renting to students the wear and tear will be much higher than with professionals typically, so you will likely have higher costs.

q85dw7osi4lebg

john1963 wrote: »

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

I've sold apartments in there, some had pyrite and the banks wouldn't lend on them.

newacc2015

newacc2015 wrote: »

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

If you look at the apartment I suggested. Its around the corner from DCU basically, where there will always be demand for student housing. Land is fixed in supply, so I don't think you can assume a new town with competing housing will be built beside DCU.

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

haha

I've lived and worked in Dublin in the past so my current location shouldn't really be taken as a presumption of what I am aware of or not, that would apply to everyone really, I wouldn't presume someone living in Dublin knows sfa about Kinsale or annywhere else.

I hadn't looked at the apartment you suggested and again my 10months/annum occupancy figure is a general guide that one should use when calculating the viability of properties.

athtrasna

Mod note

Posters are reminded to stay civil towards other posters on this forum.

john1963

I suppose I see an income of 500 a month. my money is in a fixed asset. not as risky as shares. no pressure to sell and I have 360k to invest so 170k after expenses...no liquidity problems

bmm

MarkAnthony wrote: »

Furthermore we're at peak demand at the moment. Things might continue to go up in the short term but I don't believe they'll continue like this in the medium to long term. I also don't see apartment prices doing much over the next ten years.

This is the kind of stuff people were saying in 1996 ! We had 10 more years of crazy growth !
I would estimate we would have another 10 years of strong growth in Dublin before another correction for the simple reason that Irish people are still obsessed with property and owning property. Apartment pricing will always feel a downturn more than houses, but we are getting to a stage where houses are just too expensive for middle and lower income purchasers.

johnnyskeleton

newacc2015 wrote: »

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

I think people estimate 10/12 months to deal with circumstances where tenants stop paying rent and have to be evicted etc. Referring to an average 10/12 months occupation doesnt necessarily mean no one livig there for 2 months each year, its a practical assessment that a landlord may risk, on average, 2 months rent not being paid per year for whatever reason. Kind of like a bank estimating that 1 in 10 borrowers will default etc.