Opinions on buying to let 1 bed apartment in Tallaght

Ush1

I'm considering buying a 1 bed apartment to let in Tallaght. I have a family home already but my salary should easily cover both mortgages.

I would be looking to buy for around 110k and to rent for 1100 per month. I would be getting the 35k deposit as a loan from a close friend. Thoughts?

athtrasna

Ush1 wrote: »

I'm considering buying a 1 bed apartment to let in Tallaght. I have a family home already but my salary should easily cover both mortgages.

I would be looking to buy for around 110k and to rent for 1100 per month. I would be getting the 35k deposit as a loan from a close friend. Thoughts?

Do a search on this forum to find the pitfalls of being a landlord and the tax burden. Buy to let is not the easy money people think it will be.

The bank probably wouldn't look kindly on the deposit being a loan.
I also wouldn't borrow that much from a friend - when do they get their money back?

MarkAnthony

50% deposit required on BTLs AFAIK.

antoinolachtnai

Trip to the accountant is called for to figure out the tax treatment of the interest on the loan from your friend. This is pretty critical to whether it is worthwhile.

Your friend also needs to understand that he is lending a substantial sum of money to you with little or no collateral. You would need to be paying him well over 8 percent interest to make this worth his while.

I would not see 1100 a month from a one bed in Tallaght as long term sustainable but I do not know the market in the area that well.

I would not do this if I were you but it depends on your own view of how good an asset it is.

I do think it is a pity that the government has not provided a tax efficient way to invest in actually building of new residential property.

Barely Hedged

MarkAnthony wrote: »

50% deposit required on BTLs AFAIK.

It's well publicised that it's 30%

MarkAnthony

Barely Hedged wrote: »

It's well publicised that it's 30%

Are you sure? On a one bed?

johnnyskeleton

MarkAnthony wrote: »

Are you sure? On a one bed?

50% does seem high to be honest. Although I know that some banks have views on one beds. KBC, for example, wont lend on one beds at all even to owner occupiers (when i checked with them in c. 2013)

MarkAnthony

johnnyskeleton wrote: »

50% does seem high to be honest. Although I know that some banks have views on one beds. KBC, for example, wont lend on one beds at all even to owner occupiers (when i checked with them in c. 2013)

The norm for some banks, for example ulster bank will only loan 50%. Granted they do 70% in Dublin, Galway and Limerick. I'd be surprised if the banks will be falling over themselves to offer the OP 70% on a one bed especially that far out but then, who knows, the madness seems to be returning.

TBH a megathread seems a good idea for these (weekly) requests.

heretothere

If you are earning a nice enough wage to cover 2 mortgages you're probably already in the high tax bracket. So all the income on your rental would most likely be at taxed at 41%.
The banks won't let you use loan money to take out a mortgage. Your friend would have to sign a letter from a solicitor stating that they would not be seeking the money back. Even if you are going to pay the money back in full your friend may not like having an official letter stating that you do no need to pay the money back. But if they did agree to sign the letter and agree repayments behind the banks back as such you would need to pay CAT (33%) on the 'gift' of money from your friend

wyndham

Ush1 wrote: »

I'm considering buying a 1 bed apartment to let in Tallaght. I have a family home already but my salary should easily cover both mortgages.

I would be looking to buy for around 110k and to rent for 1100 per month. I would be getting the 35k deposit as a loan from a close friend. Thoughts?

Awful idea on many levels. Why is your friend loaning you the deposit? What security/interest rate/repayment plan are you offering them?

cactusgal

1100 per month seems awfully high for a one bedroom apartment. Especially if it's in Tallaght.

the_syco

Ush1 wrote: »

I would be getting the 35k deposit as a loan from a close friend.

If you can't afford the deposit yourself, why do you think that you can afford the mortgage?

April 73

Bad idea on so many levels.

1) You can't come up with the deposit yourself. Borrowing it from a friend and then taking out a mortgage for the rest means you are borrowing 100% of the value of the property.
2) €1,100 a month rent on a property worth €110,000 isn't sustainable.
3) The current tax treatment of landlords won't allow this to be a profitable exercise. You'll have a loan, a mortgage, management fees, insurance, furnishings, upkeep, tax, PRSI & USC to pay. If you do up a realistic income v expenditure sheet you'll see the pitfalls.

zl1whqvjs75cdy

As a tenant there is no way I'd be paying 1100 for a one bed in tallaght. Is that really the going rate?

MarkAnthony

donkeyoaty0099 wrote: »

As a tenant there is no way I'd be paying 1100 for a one bed in tallaght. Is that really the going rate?

No.

It might be what people are asking but I doubt they're getting it given what 2 beds are. There is a possibility that people are being forced to pay 1100 due to it being the first place they can afford, but a begrudging tenant and a clueless landlord do not a happy combination make!

OP what research have you done on this? Have you engaged an accountant to see if it's profitable? Have you approached a bank to see if they'll lend? You'll probably get a view from people as you do that.

NIMAN

I wouldn't.

Ush1

Thanks for the advice.

On the loan from the friend, they are happy to sign that they do not expect it back however I would aim to pay them back within around 5 years(I've done a similar arrangement before with them).

To the people saying I won't get 1100, what should I get do you think? Please show me letting ads for less than 1000 per month. To me it seems there is a shortage of 1 beds altogether.

Ush1

wyndham wrote: »

Awful idea on many levels. Why is your friend loaning you the deposit? What security/interest rate/repayment plan are you offering them?

Because they trust me, I have the ability to repay within five years and we've had a similar arrangement before.

Ush1

the_syco wrote: »

If you can't afford the deposit yourself, why do you think that you can afford the mortgage?

Because I can afford the repayments. I could save the deposit but it would just take more time.

Ush1

MarkAnthony wrote: »

No.

It might be what people are asking but I doubt they're getting it given what 2 beds are. There is a possibility that people are being forced to pay 1100 due to it being the first place they can afford, but a begrudging tenant and a clueless landlord do not a happy combination make!

OP what research have you done on this? Have you engaged an accountant to see if it's profitable? Have you approached a bank to see if they'll lend? You'll probably get a view from people as you do that.

I've spoken to a number of landlords, the friend loaning being one of them. Not spoken to a bank yet or an accountant but have worked out some figures myself.

I will speak to ulster bank, not sure if the mortgage calculator on their website accounts for tax relief on mortgages for BTL, anybody know?

Ush1

heretothere wrote: »

If you are earning a nice enough wage to cover 2 mortgages you're probably already in the high tax bracket. So all the income on your rental would most likely be at taxed at 41%.
The banks won't let you use loan money to take out a mortgage. Your friend would have to sign a letter from a solicitor stating that they would not be seeking the money back. Even if you are going to pay the money back in full your friend may not like having an official letter stating that you do no need to pay the money back. But if they did agree to sign the letter and agree repayments behind the banks back as such you would need to pay CAT (33%) on the 'gift' of money from your friend

Thanks for that.

Without getting too specific, there shouldn't be an issue with CAT.

MarkAnthony

Ush1 wrote: »

Thanks for the advice.

On the loan from the friend, they are happy to sign that they do not expect it back however I would aim to pay them back within around 5 years(I've done a similar arrangement before with them).

To the people saying I won't get 1100, what should I get do you think? Please show me letting ads for less than 1000 per month. To me it seems there is a shortage of 1 beds altogether.

I've an apartment smack bang in the CC. I get €1050 a month. I could have probably got more but you need to pick you tenants. There are a lot of myths about accommodation in Dublin. Lots of people at viewings does not equal lots of quality reliable tenants.

You may, if the apartment is a very nice one in a desirable part of tallaght get €1100 a month. The issue is this is a long term project, what has the market done there over the past 10-20 years? You need to look at that and see if it's sustainable over the mortgage term. What is your exit strategy?

RainyDay

Ush1 wrote: »

Thanks for that.

Without getting too specific, there shouldn't be an issue with CAT.

Without getting too specific, if this is based on an assumption that the fellas in Revenue won't hear about what's going on, you are on dodgy ground.

RainyDay

RainyDay wrote: »

Without getting too specific, if this is based on an assumption that the fellas in Revenue won't hear about what's going on, you are on dodgy ground.

If a loan has no or a small rate of interest compared to a loan from a bank etc then the lack of interest is considered a gift for CAT purposes. However you have both a tax free threashold and more importantly in this instance you can receive a gift of 3k per year tax free from every individual. Without exact figure I can't make a calculation but I'd be very surprised if a loan of 35k would be over 3k per year in interest from a bank and therefore the gift of no interest can be covered by this 3k per year tax free gift.

exaisle

Maxton Round Diesel wrote: »

If a loan has no or a small rate of interest compared to a loan from a bank etc then the lack of interest is considered a gift for CAT purposes. However you have both a tax free threashold and more importantly in this instance you can receive a gift of 3k per year tax free from every individual. Without exact figure I can't make a calculation but I'd be very surprised if a loan of 35k would be over 3k per year in interest from a bank and therefore the gift of no interest can be covered by this 3k per year tax free gift.

The amount of interest concerned is actually the amount that the lender is foregoing.....in this case, €35,000 at say, 1%= €350.

Ush1 is correct....unlikely to be a CAT issue (based on the available information).

Arbiter of Good Taste

Maxton Round Diesel wrote: »

If a loan has no or a small rate of interest compared to a loan from a bank etc then the lack of interest is considered a gift for CAT purposes. However you have both a tax free threashold and more importantly in this instance you can receive a gift of 3k per year tax free from every individual. Without exact figure I can't make a calculation but I'd be very surprised if a loan of 35k would be over 3k per year in interest from a bank and therefore the gift of no interest can be covered by this 3k per year tax free gift.

Except that in order to satisfy the bank the "lender" would likely have to sign a document stating they do not expect repayment. So as far as Revenue is concerned, this is an outright gift of €35k, not an interest free loan. So the OP will be taxed on the full €35k, less the tax free threshold, which is ridiculously low for loans from friends.

heretothere

Just what I was going to say arbiter. He needs to say it's a gift to the bank so revenue will see it as a gift also. Completely a hypothetical calculation based on him receiving 35k from his friend, using his 3k annual gift allowance and having full use of his threshold C allowance he would be liable for 5,585 CAT and if you have no threshold C allowance remaining it would be 10,560 in my calculation. However OP I have made assumptions on the circumstance you have given above you would need to discuss your own personal circumstances in full detail with your accountant. The above is just to give you an idea of what you would be liable to pay to revenue on what would as far as I am aware would be classed as a gift in the eyes of revenue, because you and your friend will be signing papers which states that it is a gift!

And just to be 100% clear the above is not a CAT calculation you can use for your return it is an outline of what you would be liable for. Again you would need to sit down with your own accountant in order to complete a proper calculation

Gumbo

OP, you've got to think long term. In 10 years time, to you still think you can command €1100 for a one bed apartment?

I'm not saying don't buy, just go in with both eyes open.

Best of luck with whatever you decide.

RainyDay

The 'deposit from a friend' thing sounds like a potential disaster for me. Why mix friendships and money? If the investment goes bad, do you value your friendship, and will it withstand? Are you confident about the source of the funds, or is there a possibility that you are actually getting involved in criminal money laundering without your knowledge. And that's apart from CAT issues noted above.

It is hard to comment on whether this is a sensible investment for you without knowing your overall financial position. I see that you still have a mortgage in place on your home. Would you not be better off to clear this mortgage first before you go risking spare cash on investments?

April 73

If you had a similar arrangement in the past with your friend was that also to buy a property? How did that work out?
Perhaps you have more experience at this than the first post might indicate?

Ush1

RainyDay wrote: »

Without getting too specific, if this is based on an assumption that the fellas in Revenue won't hear about what's going on, you are on dodgy ground.

It isn't, there will be nothing illegal.

Eugene Norman

Having to get the loan in the first place proves that the op can't save a deposit. Ignoring everything else that's got to fail a stress test for two mortgages.

MarkAnthony

Ush1 wrote: »

It isn't, there will be nothing illegal.

Actually there will. You've already told us your friend is going to lie ref the loan. I make no moral judgement - just sayin'.

Ush1

MarkAnthony wrote: »

Actually there will. You've already told us your friend is going to lie ref the loan. I make no moral judgement - just sayin'.

Use another name for it then. The fact is there will be no issue with CAT. Where have I said they will lie? I will pay them back, from a moral standpoint, however I won't be legally obliged to.

Ush1

RainyDay wrote: »

The 'deposit from a friend' thing sounds like a potential disaster for me. Why mix friendships and money? If the investment goes bad, do you value your friendship, and will it withstand? Are you confident about the source of the funds, or is there a possibility that you are actually getting involved in criminal money laundering without your knowledge. And that's apart from CAT issues noted above.

It is hard to comment on whether this is a sensible investment for you without knowing your overall financial position. I see that you still have a mortgage in place on your home. Would you not be better off to clear this mortgage first before you go risking spare cash on investments?

It's honestly a red herring. What I would be seeking here is business and investment advice re the property and letting. Take the deposit as an aside if you wish, its not really an important aspect of what I'm asking.

Ush1

MarkAnthony wrote: »

I've an apartment smack bang in the CC. I get €1050 a month. I could have probably got more but you need to pick you tenants. There are a lot of myths about accommodation in Dublin. Lots of people at viewings does not equal lots of quality reliable tenants.

You may, if the apartment is a very nice one in a desirable part of tallaght get €1100 a month. The issue is this is a long term project, what has the market done there over the past 10-20 years? You need to look at that and see if it's sustainable over the mortgage term. What is your exit strategy?

I'm not sure I follow what you mean about the market? What did you speculate in terms of your investment properties? We all know nothing is guaranteed to stay as is.

Exit strategy would be to sell I suppose. Again, not sure I follow what you mean here.

MarkAnthony

Ush1 wrote: »

I'm not sure I follow what you mean about the market? What did you speculate in terms of your investment properties? We all know nothing is guaranteed to stay as is.

Exit strategy would be to sell I suppose. Again, not sure I follow what you mean here.

So, try and find out what rents have been like in the area for the last 10-20 years. AFAIK tallaght was all fields 20 years ago (I'm very likely wrong on that point but there's no point going back 20 years if it was Farmer Paddy and 6 sheep out there). Plot a graph and see where the highs and lows have been. Have rents always been €1100 for a one bed or have they been as low as say €700 for a one bed. 10+ years ago in the CC I was paying €800 for a one bed as an example. Is €1100 the peak or have people paid €2400 per month at any point. If this is the peak, where are prices going given your take on the property market?

Is €700 sustainable in terms of covering your costs, taking into account your voids? What occupancy rates are there, what's it like in terms of bad tenants in the area - if you can find out.

Exit strategy - do you see prices going up or down in the next X years. How long is X for you? Why are you doing this? Are you looking for X Return on Investment (RoI) in X years, do you just fancy being a LL (perfectly valid reason to do it). At what point is the interest relief on the mortgage at a point when it's time to flip the property and buy another or is this something you want 100% ownership of without bank involvement. Is this pension planning, if so has your FA (financial adviser) looked into where you've enough diversity in your plan?

That's probably about 10%, if that, of what there is to consider. As for my 'investment' in 2006 I rushed in despite people telling me to take a breath and think about things. Money was there, market could only go up, I could borrow €500K on our combined salaries of €35K and you never lose on property! Right? :pac:

Ush1

Ush1 wrote: »

I'm not sure I follow what you mean about the market? What did you speculate in terms of your investment properties? We all know nothing is guaranteed to stay as is.

Exit strategy would be to sell I suppose. Again, not sure I follow what you mean here.

Ok, look at his rationally, the seeming appeal to you is the €1100 a month rent for the purchase price.

If the rental demand falls and you can't rent it out your exit strategy is to sell, the sale price will quite likely be lower than your purchase price if the rent is low enough for you to comtemplate selling.

Your exit strategy is deeply flawed.

antoinolachtnai

If you are not going to be able to claim your interest on the 35k loan against tax it is unlikely to be worth doing even if the property side turns out quite well. The cost of borrowing will just be too high.

The problem with Tallaght is that whilst it is well located there is quite a lot of development land and rent will inevitably drop as new supply comes on stream over the next five years.

MarkAnthony

Augeo wrote: »

Ok, look at his rationally, the seeming appeal to you is the €1100 a month rent for the purchase price.

If the rental demand falls and you can't rent it out your exit strategy is to sell, the sale price will quite likely be lower than your purchase price if the rent is low enough for you to comtemplate selling.

Your exit strategy is deeply flawed.

Can't believe I'm taking the opposing view here... :pac:

IMHO (bear in mind last paragraph in my above post) 110K is probably as low as they can go. Maybe we might see a drop to €85-90K over the next few years. It's unlikely to drop lower than that people would just hold on to stock, at least initially. I get the solid impression that revenue and the OP shall never cross paths but lets say it's washing it's face in terms of mortgage repayments.

It's not a disaster in terms of worse possible exit scenarios.

RainyDay

MarkAnthony wrote: »

I get the solid impression that revenue and the OP shall never cross paths .

Until the first tenant registers their tenancy with the PRTB, you mean....

MarkAnthony

MarkAnthony wrote: »

..........

It's not a disaster in terms of worse possible exit scenarios.

Providing he can sell it.
Many properties were on the market for quite a while when things were quite bad.

jayjay2010

OP, having lived in many apartments in Tallaght for the last 6 years or so, I definitely agree that 1 bed apartments are going in the region of €1,000 - €1,100 per month currently.

However, back only 3 years ago I was renting a 2 bed apartment in Priorsgate (Tallaght village) for €800 a month. I know things were very different back then but the price could very well fluctuate. I remember going to a viewing for a 1 bed apt. that was €700 a month and thinking that it was way overpriced and there was not much demand for it.

Just be careful. I recently bought a 2 bed in Tallaght and I have spent the last year pricing around and I am very familiar with prices in Tallaght and a lot has changed even in the last 12 months.

As for the loan from your friend, I think if you are both mature enough to come to such agreement then I see no problem with him loaning the money. He obviously trusts you an awful lot and values your friendship - don't let him down :-)

Do you know which apartment block you are after? I have a lot of friends renting in different blocks at the moment and the prices do vary quite a bit.

Good luck, let us know how you get on!

The_Conductor

Have a look at DAFT.
There are very few one beds in Tallaght- the majority are 2-3 beds.
The only 1 beds hitting 1,000 a month- are luxury apartments, kitted to an incredibly high specification.
OP- you'll have no problem letting a 1 bed in Tallaght- but not at the price you're suggesting unless its quite a remarkable property. This one claims to be a 'luxury let'- perhaps my idea of luxury and theirs don't quite see eye to eye.

There are only 2 1 bed apartments listed for sale in Tallaght on Daft at the moment and these are both at 120k

Looking at the prices landlords are seeking- maybe your calculations are totally off the wall- how sustainable are they though? E.g. there is a 1 bed in Old Bawn that has a current list price of 1000 a month- that to me is plain bizarre- I can't see that being normal, or sustainable.........

Arbiter of Good Taste

The_Conductor wrote: »

Have a look at DAFT.
There are very few one beds in Tallaght- the majority are 2-3 beds.
The only 1 beds hitting 1,000 a month- are luxury apartments, kitted to an incredibly high specification.
OP- you'll have no problem letting a 1 bed in Tallaght- but not at the price you're suggesting unless its quite a remarkable property. This one claims to be a 'luxury let'- perhaps my idea of luxury and theirs don't quite see eye to eye.

Good God. It's a very depressing country we live in, if that's considered to be "luxury".

If people are seriously expecting that kind of money for one bedrooms - in Tallaght - then our tenants are definitely paying sinfully below market rents for two-bedroom city centre apartments....

NIMAN

I'd called that a standard apt, not a luxury one.

MarkAnthony

NIMAN wrote: »

I'd called that a standard apt, not a luxury one.

Says something about the actual 'standard spec' doesn't it!

My apartment would be a very similar spec to that one above but with a few more frills, garbage disposal, induction hob, good kitchen kit. Weaker bathroom and weaker bedroom (although I included a bloody headboard for peats sake :rolleyes:) and as above €1050 in the CC. Actually it's €1000 for the apartment and €50 for parking (different people). Now as I'm fond of saying, I could have got more but I picked my tenants very carefully.

Ush1

jayjay2010 wrote: »

OP, having lived in many apartments in Tallaght for the last 6 years or so, I definitely agree that 1 bed apartments are going in the region of €1,000 - €1,100 per month currently.

However, back only 3 years ago I was renting a 2 bed apartment in Priorsgate (Tallaght village) for €800 a month. I know things were very different back then but the price could very well fluctuate. I remember going to a viewing for a 1 bed apt. that was €700 a month and thinking that it was way overpriced and there was not much demand for it.

Just be careful. I recently bought a 2 bed in Tallaght and I have spent the last year pricing around and I am very familiar with prices in Tallaght and a lot has changed even in the last 12 months.

As for the loan from your friend, I think if you are both mature enough to come to such agreement then I see no problem with him loaning the money. He obviously trusts you an awful lot and values your friendship - don't let him down :-)

Do you know which apartment block you are after? I have a lot of friends renting in different blocks at the moment and the prices do vary quite a bit.

Good luck, let us know how you get on!

Cheers.

No block in particular but I'd imagine around the square. I think the mortgage would come to roughly 500 per month so I'm gonna work out the numbers tonight and go from there. I'll keep you posted.

Ush1

MarkAnthony wrote: »

Can't believe I'm taking the opposing view here... :pac:

IMHO (bear in mind last paragraph in my above post) 110K is probably as low as they can go. Maybe we might see a drop to €85-90K over the next few years. It's unlikely to drop lower than that people would just hold on to stock, at least initially. I get the solid impression that revenue and the OP shall never cross paths but lets say it's washing it's face in terms of mortgage repayments.

It's not a disaster in terms of worse possible exit scenarios.

I fully intend on paying tax from the income.

Ush1

Just a question for those who have apartments or would know, how much is your maintenance fees per year?

Does the maintenance fee also cover insurance for the apartment or would that be extra?

Just trying to work out all the outgoings per year, so far I have:

Mortgage
Loan payback to friend
Maintenance fees
Property tax
General repairs(how much would be a conservative figure for this?)

Also, the one off expenses when purchasing of a solicitor, stamp duty and survey.