Buying apartment to rent/sell in a couple of years?

Whipping Boy

Looking for some advice folks: I'm still at home in Dublin but looking to move out soon.

With Dublin rents the way they are I'm debating buying but while I have a decent deposit saved, I probably wouldn't have enough for the type of house I'd really want in the LT.

As such I'm swaying towards buying an apartment instead. My plan would be to live there for 1/2 years and then either a) sell it off and buy the proper home or b) rent it out while I go travelling or a year or so.

Any thoughts?

Bar 'using up' my first time mortgage benefit (the 10% deposit of up tom €220k) am I missing any other potential pitfalls?

If you rent it out any increase in value when you sell it on will be subject to CGT, also only the interest (75% of) on the mortgage is deductible as an expense. You'll probably pay some income tax on the rent.

Get a sh1tty/awkward tenant that knows the law you can be taken for a serious ride financially..... in saying that I'm a landlord over 10 years now and have never had an issue.

dearg lady

Augeo wrote: »

If you rent it out any increase in value when you sell it on will be subject to CGT

Only partially true, the time OP has it as PPR is taken into account

jlm29

Id imagine the cost of selling it on would make it a bad idea to buy it if you were only going to hold on to if for a year or two. Couple that with the loss of first time buyer status, and it would seem to make more sense to rent.
If you intend to rent it out after a couple of years, there's plenty definite and potential costs associated with that too.

viper006

I sometime have to do a double when posts like this come up. Your thinking of buying an apartment and potentially flipping it about a year or so to upgrade to a house and then going traveling for another year then .the madness is well and truly returning in the market!!

You'd be a lot better off going traveling and see where life takes you and reassess your decision to buy somewhere after. A huge financial outlay like a property purchase to avoid renting and selling in short term is a huge risk and I think your underestimating the complexity renting the property when going traveling to boot

I have a similar plan to the op (no intention of going travelling though). Planning to buy somewhere asap as I refuse to pay the extortionate rents so will tolerate sharing until I buy. I would live in it for a few years and then most likely rent it out when I want to upgrade to a bigger place/move back home where I want to settle down for good.

Villa05

Property is a high risk as a short term investment

Be prepared to accept the consquences of it not working out

aido79

You also need to take into account just how little you would actually pay off the mortgage in the first couple of years. I think it might be something like 80% of the payments go towards interest in the first year or 2.

zl1whqvjs75cdy

The boom is well and truly back if we are having serious discussions about flipping properties for profit in the short term. Did we learn nothing at all from the last time?

Barely Hedged

Villa05 wrote: »

Property is a high risk as a short term investment

Be prepared to accept the consquences of it not working out

Can you explain why Dublin property is a high risk investment over the next couple of years?

Barely Hedged

donkeyoaty0099 wrote: »

The boom is well and truly back if we are having serious discussions about flipping properties for profit in the short term. Did we learn nothing at all from the last time?

Why do people use 'the boom' as an economic reference point? It's like the property market never existed either side of it and the implication is, with a statement like this is, that any investment will end up tanking like in 2008. It's an awful and uninformed analysis of any investment decision

GreatDefector

viper006 wrote: »

I sometime have to do a double when posts like this come up. Your thinking of buying an apartment and potentially flipping it about a year or so to upgrade to a house and then going traveling for another year then .the madness is well and truly returning in the market!!

You'd be a lot better off going traveling and see where life takes you and reassess your decision to buy somewhere after. A huge financial outlay like a property purchase to avoid renting and selling in short term is a huge risk and I think your underestimating the complexity renting the property when going traveling to boot

Plus if you leave long term and become a non residental landlord, the tenants will be responsible for paying 20% of the rent directly to the revenue

http://www.rentalincome.ie/rental-types/non-resident-landlords/

Barely Hedged

GreatDefector wrote: »

Plus if you leave long term and become a non residental landlord, the tenants will be responsible for paying 20% of the rent directly to the revenue

http://www.rentalincome.ie/rental-types/non-resident-landlords/

Or you could assign a person (a family member) based in Ireland to collect the rent in full

MarkAnthony

Whipping Boy wrote: »

Looking for some advice folks: I'm still at home in Dublin but looking to move out soon.

With Dublin rents the way they are I'm debating buying but while I have a decent deposit saved, I probably wouldn't have enough for the type of house I'd really want in the LT.

As such I'm swaying towards buying an apartment instead. My plan would be to live there for 1/2 years and then either a) sell it off and buy the proper home or b) rent it out while I go travelling or a year or so.

Any thoughts?

Bar 'using up' my first time mortgage benefit (the 10% deposit of up tom €220k) am I missing any other potential pitfalls?

Quoting the OP as it seems to have gone OT a bit.

There isn't a tradition of doing that in Ireland OP. 1/2 years is definitely the very short term. If it was more like 5 years then I'd say assess the housing market and make a decision. Being from the UK I see nothing wrong with the 'property ladder' and it's something my relations did without too much issue. You start of small and work your way up. Due to the boom it has bad connotations here but I wouldn't let that put you off. What should put you off if the potential that apartments might see a fairly big drop. At the moment there are very small volumes and apartments seem to be doing slightly strange things in terms of price. There's just enough Paddy property investors out there whose level of research is asking down the pub or on boards buying apartments to rent out 'because you never lose on property"!

If you're still at home and your family aren't abusive I would strongly recommend staying there at the moment if it's for a year or so. It could potentially take that long to close on a place anyway. Go traveling without the albatross of a non paying tenant or potential of negative equity hanging around your neck.

If you've a few quid saved and nothing to do with it for 12-36 months talk to a Financial advisor. If he/she thinks property is a good idea then go with it. If they can give you a safer investment with better return then you'd be a bit of a fool not to go with that wouldn't you?

Hollister11

donkeyoaty0099 wrote: »

The boom is well and truly back if we are having serious discussions about flipping properties for profit in the short term. Did we learn nothing at all from the last time?

I did. I was a teenager during the bust, anf what I've learned is going to benefit me immensely financially in my future.

PhoenixParker

Crunch the numbers carefully and thoroughly. Generally a 1 - 2 year timeline for property ownership is very inadvisable as the costs of buying and selling aren't readily paid back by savings on rent vs interest repayments.

JimmyMW

Hollister11 wrote: »

I did. I was a teenager during the bust, anf what I've learned is going to benefit me immensely financially in my future.

Well done, I am the same, although slightly older than yourself. It has benefited me massively already, and will hopefully do so in the future (I bought at the height of recession in 2012) Always keep in mind the massive financial crash we just had and you wont ever go too far wrong.

zl1whqvjs75cdy

Barely Hedged wrote: »

Why do people use 'the boom' as an economic reference point? It's like the property market never existed either side of it and the implication is, with a statement like this is, that any investment will end up tanking like in 2008. It's an awful and uninformed analysis of any investment decision

It doesn't exactly take a PhD in economics to see that flipping a property in a short time frame is risky. The costs of buying and selling are high, you'll lose the first time buyer advantage and interest rates will most likely increase in the medium term. When the op returns from his or her travels they could easily be left servicing a debt on a property that doesn't suit their needs. Property in general looks like a good long term investment, but a pretty poor short term one as there is far too much risk. Would you like more "uninformed analysis" or shall we leave it there.

SarahMollie

donkeyoaty0099 wrote: »

It doesn't exactly take a PhD in economics to see that flipping a property in a short time frame is risky. The costs of buying and selling are high, you'll lose the first time buyer advantage and interest rates will most likely increase in the medium term. When the op returns from his or her travels they could easily be left servicing a debt on a property that doesn't suit their needs. Property in general looks like a good long term investment, but a pretty poor short term one as there is far too much risk. Would you like more "uninformed analysis" or shall we leave it there.

+1

As someone who bought last year and intends to buy again in the future, I can confirm that in the short term, this would be a baaaaad plan.

The upfront costs are substantial. I'm planning on staying in my place for at least 5 years to make it worth my while. There were costs that I'd budgeted for but others cropped up that I hadnt. I'm not really even doing it as an investment, but obviously I don't want to lose money either. 1/2 years is just too tight a timeframe IMO.

In the boom a lot of people/amature property developers were making money just because the market was flying, rather than by any great business acumen on their part. This isnt really a realistic expectation anymore. Its quite possible that your property could stagnate in value/drop a few %.... and then what do you do?

I think overall, prices will rise over the next 5-10 years, but there could be fluctuations wihtin that time, and if your timescales are rigid, you risk getting caught.

Whipping Boy

Thanks for all the responses thus far, some really interesting insights.

To be clear: flipping the property over for a profit was not my main priority. I'm basically looking to move out but not willing to pay the extortionate rents at present and, as such, I was looking to instead purchase an apartment as a launch pad to a house in a couple of years. This may be delayed by a year if I decide to travel but the basic principle is the same.

The costs up front of doing so are probably more extensive than I have envisaged however, along with the obvious risks in terms of market value...

Barely Hedged

donkeyoaty0099 wrote: »

It doesn't exactly take a PhD in economics to see that flipping a property in a short time frame is risky.

Your original context for that was 'the boom' is back, not that flipping property is risky. Flipping property is risky in the current, rising Dublin market?

donkeyoaty0099 wrote: »

The costs of buying and selling are high, you'll lose the first time buyer advantage

Buying in Dublin - so what? The price of property negates the benefit.

donkeyoaty0099 wrote: »

and interest rates will most likely increase in the medium term.

Medium term = 1/2/3 years?

donkeyoaty0099 wrote: »

When the op returns from his or her travels they could easily be left servicing a debt on a property that doesn't suit their needs.

what makes you think that?

donkeyoaty0099 wrote: »

Property in general looks like a good long term investment, but a pretty poor short term one as there is far too much risk. Would you like more "uninformed analysis" or shall we leave it there.

Yes, if your benchmark is 'the boom' not the many, many years before 05 - 08 where the property market was stable. Pretty poor range you have selected for your analysis.

SarahMollie

Barely Hedged wrote: »

Your original context for that was 'the boom' is back, not that flipping property is risky. Flipping property is risky in the current, rising Dublin market?



Buying in Dublin - so what? The price of property negates the benefit.



Medium term = 1/2/3 years?



what makes you think that?



Yes, if your benchmark is 'the boom' not the many, many years before 05 - 08 where the property market was stable. Pretty poor range you have selected for your analysis.

2 things.

1. Prices havent been rising in Dublin for the past year or so.
2. Prices don't negate the benefit of being a FTB (altough personally I don't think its that much of a benefit). You pay 10% up to €220k, and 20% thereafter. On your next purchase, you need 20% of the entire purchase price. We don't know the OP's budget, but for example if its €250k, then the FTB rules apply to the vast majority of the purchase price, with 20% only applying to €30k of the purchase price.

SarahMollie

Whipping Boy wrote: »

Thanks for all the responses thus far, some really interesting insights.

To be clear: flipping the property over for a profit was not my main priority. I'm basically looking to move out but not willing to pay the extortionate rents at present and, as such, I was looking to instead purchase an apartment as a launch pad to a house in a couple of years. This may be delayed by a year if I decide to travel but the basic principle is the same.

The costs up front of doing so are probably more extensive than I have envisaged however, along with the obvious risks in terms of market value...

Whats your budget OP, and what area and property type are you thinking of?

Worth noting that some lenders won't even offer mortgages on 1 bed apartments.

Barely Hedged

SarahMollie wrote: »

2 things.

1. Prices havent been rising in Dublin for the past year or so.
2. Prices don't negate the benefit of being a FTB (altough personally I don't think its that much of a benefit). You pay 10% up to €220k, and 20% thereafter. On your next purchase, you need 20% of the entire purchase price. We don't know the OP's budget, but for example if its €250k, then the FTB rules apply to the vast majority of the purchase price, with 20% only applying to €30k of the purchase price.

Prices in Dublin are up 4% yoy, based on February's figures.

Personally speaking, I think the FTB rules are irrelevant for Dublin and that more weight should be attached to LTI in this case. Buying in Dublin is more to do with the LTI rather than your ability to raise a deposit

SarahMollie

Barely Hedged wrote: »

Prices in Dublin are up 4% yoy, based on February's figures.

Personally speaking, I think the FTB rules are irrelevant for Dublin and that more weight should be attached to LTI in this case. Buying in Dublin is more to do with the LTI rather than your ability to raise a deposit

Agree. I do think its the deposit requried that is actually causing the Dublin market to stutter a bit. If you look at the month by month breakdown, its up one month and down the next. I think this is reflective of (i) low volumes and (ii) people really struggling to save the required deposits, especially on family homes as they can be significant.

Whipping Boy

SarahMollie wrote: »

Whats your budget OP, and what area and property type are you thinking of?

Worth noting that some lenders won't even offer mortgages on 1 bed apartments.

Really? That's interesting. I would be looking for a one or two bed apartment for in and around €250k.

Ideally somewhere along either Luas lines or with good links to town.

Some areas I would be interested: Smithfield, Stoneybatter, Rathmines, Sandyford etc etc.

I like the look of this place in Inchicore also.

Aside from the discussions re finances, a lot of people I have spoken with have recommended foregoing the apartment and waiting until I can buy a house instead.

Their main reason was the more transient nature of those living around you and the lack of control you have over their actions. Just wondering if anyone has any thoughts on this? I suppose it depends on the area and general luck of the draw also...

Barely Hedged

Whipping Boy wrote: »

Their main reason was the more transient nature of those living around you and the lack of control you have over their actions. Just wondering if anyone has any thoughts on this? I suppose it depends on the area and general luck of the draw also...

Can you explain that comment a bit more?

McGrath5

It is a high risk game you are playing OP, but once you are aware of the potential consequences then by all means work away.

It will be interesting to see in a few years all these "investors" coming back onto this forum moaning that there investment has gone south, and yet crying out for their "bailout".

Whipping Boy

Barely Hedged wrote: »

Can you explain that comment a bit more?

Basically when compared with a house, an apartment will likely have more neighbours directly around it. And these neighbours are likely to change quite a bit given that a lot will be renting. As such, there's a greater chance of something going wrong in terms of people being loud, leaks etc

SarahMollie

Whipping Boy wrote: »

Really? That's interesting. I would be looking for a one or two bed apartment for in and around €250k.

Ideally somewhere along either Luas lines or with good links to town.

Some areas I would be interested: Smithfield, Stoneybatter, Rathmines, Sandyford etc etc.

I like the look of this place in Inchicore also.

Aside from the discussions re finances, a lot of people I have spoken with have recommended foregoing the apartment and waiting until I can buy a house instead.

Their main reason was the more transient nature of those living around you and the lack of control you have over their actions. Just wondering if anyone has any thoughts on this? I suppose it depends on the area and general luck of the draw also...

few things...

1. BIG difference between the 2 Luas Lines. With your budget I'd suggest Red is more realistic.
2. That property in Inchicore is very small for a 3 bed. I think it would be tight, but go see it and find out.
3. When you buy into a block of apartments, chances are that a fair proportion are rented. Tenants tend not to look after their properties and communal areas as well as owner occupiers. Secondly, you're also buying into a Management Company, and you have to abide by the "house rules", so yes, you've less control than if you own a house. Also, an OMC can fail if there is an issue with non payment of fees etc. Have you even taken the cost of management fees into account?

MarkAnthony

€250K gets you striaght into 3 bed semi/end of terrace territory if you're canny about the area.

I spent around that on a 4 bed Semi within 2 minutes walk of the DART station. I'd suggest it would be very illadvised to sped that amount of money on an apartment. The yield would be terrible.

Berry's close has some interesting 'wildlife'. Well more the area, it's grand but you'd want to bnot be afraid of telling knackers to feck off.

Hollister11

MarkAnthony wrote: »

€250K gets you striaght into 3 bed semi/end of terrace territory if you're canny about the area.

I spent around that on a 4 bed Semi within 2 minutes walk of the DART station. I'd suggest it would be very illadvised to sped that amount of money on an apartment. The yield would be terrible.

Berry's close has some interesting 'wildlife'. Well more the area, it's grand but you'd want to bnot be afraid of telling knackers to feck off.

Where in Dublln did you get a house for 250k close to a dart station ?

That sounds like a pretty good deal to me.

SarahMollie

I'm going to guess a fixer upper around Kilbarrack or similar?

yqtwqxqm

donkeyoaty0099 wrote: »

The boom is well and truly back if we are having serious discussions about flipping properties for profit in the short term. Did we learn nothing at all from the last time?

I know what I learned.

- Booms and busts happen every decade or less.
- Waiting and trying to time markets one way or the other isnt going to work.
- Its all gambling at the end of the day.
- Everybody in Ireland seems to be either a property expert or an economist.
- I only personally know of two or three people whos expert knowledge of property has led to them retiring and living off their earnings, while i know of hundreds who spout how expert they are and have made no money from this "expert" knowledge.

MarkAnthony

Hollister11 wrote: »

Where in Dublln did you get a house for 250k close to a dart station ?

That sounds like a pretty good deal to me.

Kilbarrack, and before anyone asks my neighbours and others in the area are lovely! Admitadly I was slightly more than 250K but slightly smaller houses up the road are going at 220K - 3 bed C.80sqm. Not a bad little starter home especially if the neighbours were anywhere near as welcoming as they were to me.

Certainly if you're willing to entertain that part of Incicore you'd have no problem dealing with the minor issues in Kilbarrack.

SarahMollie wrote: »

I'm going to guess a fixer upper around Kilbarrack or similar?

Mint walk in condidtion on a house just under 15 years old, pretty much left us a full kit for the house minus beds. There was a five bed detached going down the road for 364K. If I'd just had a little more dosh

My brother in law just bought a bigger 3 bed semi in Clonsilla, which was a fixerupper for just over 200K. As I'm fond of saying there is value to be had in Dublin still if you're willing to go looking for it.

Edit: Here's one for example. http://www.myhome.ie/residential/brochure/23-mount-olive-grove-kilbarrack-dublin-5/3415356

sunsetter

I don't see anything wrong with spending e250k+ on a 2br apt. I done just that and it's all going well so far. Lived in it for most of last year and then took a job in Australia so I'm renting it out, and if/when I move home in 2-5 years I have a place to move back into. All taken care of through an agency. Rental yield of 7.8% which isn't bad either.

armabelle

Dominique Miniature Firefighter wrote: »

I have a similar plan to the op (no intention of going travelling though). Planning to buy somewhere asap as I refuse to pay the extortionate rents so will tolerate sharing until I buy. I would live in it for a few years and then most likely rent it out when I want to upgrade to a bigger place/move back home where I want to settle down for good.

Excuse my ignorance but won't paying extortionate rents in Ireland include sharing? I mean, the sum of the rents in the house whether you are sharing or not still need to equal the extortionate rent so you will still be paying a fortune... less, but an extortionate amount all the same.

armabelle

Whipping Boy wrote: »

Thanks for all the responses thus far, some really interesting insights.

To be clear: flipping the property over for a profit was not my main priority. I'm basically looking to move out but not willing to pay the extortionate rents at present and, as such, I was looking to instead purchase an apartment as a launch pad to a house in a couple of years. This may be delayed by a year if I decide to travel but the basic principle is the same.

The costs up front of doing so are probably more extensive than I have envisaged however, along with the obvious risks in terms of market value...

I guess one way way you could put it is that the rents are high..... but another could be that what you earn is too low? What people earn always is the last to adjust to inflation.

armabelle

armabelle wrote: »

Excuse my ignorance but won't paying extortionate rents in Ireland include sharing? I mean, the sum of the rents in the house whether you are sharing or not still need to equal the extortionate rent so you will still be paying a fortune... less, but an extortionate amount all the same.

Well even if the overall rent is high the shared rent (while still a part of an overall height rent) is still much less to my pocket and allows me to save much more per month.

That said the rent I pay is very reasonable in comparison to a lot of places, even in the same estate. I would say my rent very fair, rent was put up for the first time this month since I moved in (coming up on 3 years ago) and only by 25 euro (for my portion). My rent now is only the same now as it was in my previous house in the same estate living with 4 people instead of 3. If I were my LL id have increased the rent more as it would have been within market rates to do so.

The_Conductor

OP- you need to look at the entire costs of ownership- and not just the headline savings you'd make from not paying rent.......

Years 1 and 2- as you're living in the property- the mortgage interest is not tax deductible at all- and add to that you've management charges (which for 2 developments in Inchicore and Smithfield that I have dealings with are between 2,500 and 3,500 per annum)- alongside property tax etc to take into account- wholly aside from kit out costs, transactional costs etc- associated with purchasing the property. You may be shocked at just how high these are.

After you let out the property- 75% of the mortgage interest- becomes an allowable cost- however, you still have all the other costs of ownership- and you may have agent costs (typically 10% of rental income) to factor into the equation too- as you'll not be around........

If you're not tax resident here- you may not qualify for a tax free allowance- which may mean you end up paying a disproportionate amount of tax to Revenue.

Even allowing for all of these things- apartment prices are falling in the Dublin area (albeit on erratic and very low volumes of transactions)- if you intended to flip the property in 5 years- it is not a foregone conclusion that you'll be in positive territory- despite saving on renting somewhere else........

As you're going to discover- the only winner in the game of renting either as a tenant or a landlord- or as a property owner- are the Revenue Commissioners........