Buying apartment as an investment?

spongebob89

Currently have about 30k saved and don't know much about investing. Im wondering is it that simple to get a mortgage for €180,000 for a two bed apartment and rent it out for say €1000 a month for about 15 years to earn the money back and then sell it and make a profit? Shouldn't have a problem getting tenants well at the moment anyway.. is there any other serious gamble being taking with this ?

Atlantic Dawn

Tax is high on rent, 50% or so of the gains will be eaten up in tax. Instead of buying 1 apartment in a decent area it might be better to buy 3 apartments in a rural setting and rent them out.

spongebob89

Atlantic Dawn wrote: »

Tax is high on rent, 50% or so of the gains will be eaten up in tax. Instead of buying 1 apartment in a decent area it might be better to buy 3 apartments in a rural setting and rent them out.

That high on tax?? Wow, I see now too good to be true. Suppose if it were that simple everyone would be snapping them up.

newacc2015

For a BTL you need a LTV of less than 75%. The interest rates on BTL are ridiculous. You need to accept the fact, if you miss two repayments on the mortgage that the bank can appoint a receiver who can basically sell the house for whatever price without recourse as receivers are completely unregulated (receiver is the banks way of repoing a BTL property and they aren't court appointed. The bank signs a form and you have lost your property).

If you have a non-paying tenant, you could be waiting up to a year to evict them as the RTB are seriously slow.

Tax is insane. The marginal rate is like 56% and you have your mortgage interest relief capped at 80% at the moment. So you could make a loss and be paying tax on it

There is the fact you are housing someone. You are dealing with all their ****. I know landlords who have had to deal with tenants beating their partners, attempted suicides etc. All of your tenants problems often become yours. Like having to get up 4am to let them in as they lost their keys drunk.

Honestly property is a horrific investment in Ireland. You really need scale to make it work ie be an REIT or a dodgy vulture fund.

ixus

spongebob89 wrote: »

Currently have about 30k saved and don't know much about investing. Im wondering is it that simple to get a mortgage for €180,000 for a two bed apartment and rent it out for say €1000 a month for about 15 years to earn the money back and then sell it and make a profit? Shouldn't have a problem getting tenants well at the moment anyway.. is there any other serious gamble being taking with this ?

Do you already have a home or rent? Intentions regards this? Married or intend to get married? Kids?

If you intend buying a home in the future, putting the 30k into an investment property may hinder future mortgage approval if investment property goes into negative equity.

Weddings & kids are expensive.

Occupation? Are you in a secure job? Potential to lose it at some stage? Savings are a good thing in this event. Thinking of setting up your own business ever? You could use those funds to get started and claim back tax throughthe SURE govt fund.

spongebob89

ixus wrote: »

Do you already have a home or rent? Intentions regards this? Married or intend to get married? Kids?

If you intend buying a home in the future, putting the 30k into an investment property may hinder future mortgage approval if investment property goes into negative equity.

Weddings & kids are expensive.

Occupation? Are you in a secure job? Potential to lose it at some stage? Savings are a good thing in this event. Thinking of setting up your own business ever? You could use those funds to get started and claim back tax throughthe SURE govt fund.

Hi, well yes I definitely do intend on buying my own house, just debating whether to travel a bit first for a year or two before I buy a house for myself.

I am an IT contractor so I don't know if banks like to give out mortgages at all to contractors.. I have a 3 year contract atm though. Im not married or have kids.. im just really interested in investments instead of leaving money in the bank doing nothing for me. Im just not prepared to roll the dice in stocks or that without proper guidance.

Appriciate the advice guys ill shy away from thinking about property as an investment with those tax figures

ted1

spongebob89 wrote: »

Currently have about 30k saved and don't know much about investing. Im wondering is it that simple to get a mortgage for €180,000 for a two bed apartment and rent it out for say €1000 a month for about 15 years to earn the money back and then sell it and make a profit? Shouldn't have a problem getting tenants well at the moment anyway.. is there any other serious gamble being taking with this ?

No
12000*15 =180,000
You'll pay about another 100,000 in interest
You'll pay about 6,000 in property tax
You'll pay about 18,000 in management fees
You'll pay about 3,000 getting the place painted between lets.
You'll pay about 90,000 on taxes
You'll pay about 3,000 in agent fees
You'll also to pay Capital Gains tax on any profit on the sale

You'll also have legal fees when you buy and sell

You might also be stuck with a tenant who doesn't pay and wrecks the place and the value may decrease

spongebob89

ted1 wrote: »

No
12000*15 =180,000
You'll pay about another 100,000 in interest
You'll pay about 6,000 in property tax
You'll pay about 18,000 in management fees
You'll pay about 3,000 getting the place painted between lets.
You'll pay about 90,000 on taxes
You'll pay about 3,000 in agent fees
You'll also to pay Capital Gains tax on any profit on the sale

You'll also have legal fees when you buy and sell

You might also be stuck with a tenant who doesn't pay and wrecks the place and the value may decrease

Ok.. thanks for the reply great to get some advice around here to save me the bother of even considering this further. Seems you atleast wanna buy a property with cash before you think about renting it out. But 100k interest... really...?

at9qu5vp0wcix7

spongebob89 wrote: »

Ok.. thanks for the reply great to get some advice around here to save me the bother of even considering this further. Seems you atleast wanna buy a property with cash before you think about renting it out. But 100k interest... really...?

100k interest would be a very moderate approximation based off of current BTL mortgage rates for the given LTV. I wouldn't be surprised to see it closer to 150k.

badboyblast

ted1 wrote: »

No
12000*15 =180,000
You'll pay about another 100,000 in interest
You'll pay about 6,000 in property tax
You'll pay about 18,000 in management fees
You'll pay about 3,000 getting the place painted between lets.
You'll pay about 90,000 on taxes
You'll pay about 3,000 in agent fees
You'll also to pay Capital Gains tax on any profit on the sale

You'll also have legal fees when you buy and sell

You might also be stuck with a tenant who doesn't pay and wrecks the place and the value may decrease

This is the opposite end of the spectrum 😊,

The 100,000 grand in interest has a tax allowable amount and it is going up 5℅ every year.

If you buy an apartment without management fees then you don't pay them naturally ( maybe invest outside the city centre)

Anyone that pays 3,000 euro between let's to paint an apartment is getting their pants pulled down , you and a friend would paint it over a weekend and you don't paint a place after each let

90,000 in taxes less your deducables, wear and tear , insurance , etc

Capital gains tax is only on a profit, remember if you pay 180 and end up selling for 200 the capital gains with be small .

You could get wonderfull tenants who will look after your place and remember every year your tenenat is paying down your mortgage so yout loan is decreasing and your equity is increasing

Remember interest rates are at historically low levels and over the next 15 years they will surely rise. Becasue they are so low now, a rise of even a few % points will substantially increase your payments.

Capital gains is a real issue. There is no longer any indexation to account for inflation. Unless its changed, even a low inflation rate of 2% a year compounded will mean that after 20 years you will be taxed (33%) on the 50% inflation growth of your asset.

And finally, the biggest drawback of all. It can take up to a year to cash out, if you ever need access to your funds.

30k in six dividend paying blue chip companies will likely pay you a (taxable) rising dividend over the years, with no hassle and access to your funds at just a few days notice.

newacc2015

Deleted User wrote: »

Remember interest rates are at historically low levels and over the next 15 years they will surely rise. Becasue they are so low now, a rise of even a few % points will substantially increase your payments.

Not for BTL mortgages. A BTL mortgage has an interest rate of around 5%. When the ECB refinance rate was around 3% you could get a BTL variable mortgage of around 4-4.5%. Now the refinance rate is 0.05% but you can only get a BTL mortgage of around 5%.

These rates are historically high

newacc2015

newacc2015 wrote: »

These rates are historically high

Historically high was 17%, which was what i paid for my first mortgage.

SteM

spongebob89 wrote: »

.... don't know much about investing. Im wondering is it that simple to get a mortgage for €180,000 for a two bed apartment and rent it out for say €1000 a month for about 15 years to earn the money back and then sell it and make a profit? ...is there any other serious gamble being taking with this ?...

spongebob89 wrote: »

....That high on tax??....

spongebob89 wrote: »

....im just really interested in investments instead of leaving money in the bank doing nothing for me....

You're interested in investing money but don't know much about it and thought that you could pay off a €180,000 mortgage back in 15 years leaving you with an asset paid off in full.

Sorry if this sounds rude but if you're really interested in learning about how to invest money then make sure you educate yourself.

http://www.iift.ie/control-your-financial-wellbeing/ might be a place to start if you're serious.

ted1

badboyblast wrote: »

This is the opposite end of the spectrum 😊,

The 100,000 grand in interest has a tax allowable amount and it is going up 5℅ every year.

If you buy an apartment without management fees then you don't pay them naturally ( maybe invest outside the city centre)

Anyone that pays 3,000 euro between let's to paint an apartment is getting their pants pulled down , you and a friend would paint it over a weekend and you don't paint a place after each let

90,000 in taxes less your deducables, wear and tear , insurance , etc

Capital gains tax is only on a profit, remember if you pay 180 and end up selling for 200 the capital gains with be small .

You could get wonderfull tenants who will look after your place and remember every year your tenenat is paying down your mortgage so yout loan is decreasing and your equity is increasing

Over 15 years expect 5 tenants , 600 each time is a reasonable figure.

On a 20k profit , CGT is 6,660.

All apartments have management fees.
How else is building insurance, public liability, sinking fund, maintenance paid for.

ted1

ted1 wrote: »

On a 20k profit , CGT is 6,660.

Less an annual allowance of approx 1000. And 20k profit on 180k over 15/20 years is actually a decent loss (40k or 50k) when you take even 2% inflation into account.

Cute Hoor

Deleted User wrote: »

Less an annual allowance of approx 1000. And 20k profit on 180k over 15/20 years is actually a decent loss (40k or 50k) when you take even 2% inflation into account.

I presume this is inaccurate, if you don't use the €1,270 allowance in any one year you lose it, unless property is different from other asset classes.

Cute Hoor

Cute Hoor wrote: »

I presume this is inaccurate, if you don't use the €1,270 allowance in any one year you lose it, unless property is different from other asset classes.

You only get it in the year that you crystallise the capital gain ie when you sell the house.

Thats another advantage of shares; if you are making capital gains you can sell a some each year and take advantage of that allowance... every year.

Bray Head

If you are buying an investment look for something with a good yield.
Look at http://www.daft.ie/report/q3-2016-rental-daft-report.pdf
Yes, there is a lot of hassle and tax.
But one-beds in certain urban locations in Ireland offer a yield of over 10%.

Senator Palpatine

You'd be far better off buying a home for yourself and availing of Rent-A-Room Relief.

- Up to €14,000 of income tax-free.
- Lower mortgage interest rate.
- No Capital Gains Tax when you sell the property (Principal Private Residence Relief).
- You're not paying rent.

ted1

Senator Palpatine wrote: »

You'd be far better off buying a home for yourself and availing of Rent-A-Room Relief.

- Up to €14,000 of income tax-free.
- Lower mortgage interest rate.
- No Capital Gains Tax when you sell the property (Principal Private Residence Relief).
- You're not paying rent.

And you can turf out bad tenants without any hassle.

Senator Palpatine

ted1 wrote: »

And you can turf out bad tenants without any hassle.

Yes, a great point...you're not subject to tenancy rules

spongebob89

Senator Palpatine wrote: »

You'd be far better off buying a home for yourself and availing of Rent-A-Room Relief.

- Up to €14,000 of income tax-free.
- Lower mortgage interest rate.
- No Capital Gains Tax when you sell the property (Principal Private Residence Relief).
- You're not paying rent.

Hi, I just browsed over what you wrote in citizens information. Do you happen to know if the house has to be owner occupied to avail of this ?

Senator Palpatine

spongebob89 wrote: »

Hi, I just browsed over what you wrote in citizens information. Do you happen to know if the house has to be owner occupied to avail of this ?

No, a tenant can sublet and get rent-a-room.

But otherwise, yes.

scheister

spongebob89 wrote: »

Currently have about 30k saved and don't know much about investing. Im wondering is it that simple to get a mortgage for €180,000 for a two bed apartment and rent it out for say €1000 a month for about 15 years to earn the money back and then sell it and make a profit? Shouldn't have a problem getting tenants well at the moment anyway.. is there any other serious gamble being taking with this ?

using an excel loan calculator €180,000 over 15 years at 5%. Monthly repayments are €1,423.
Year 1 interest is €8,812

you talk about about getting 1k per month rent or 12k per year
1st thing to note this does not cover the payments on the mortgage. Assume you have €1,000 a year in allowable expenses

Rent 12,000
less
interest 7,049 (only 80% allowed in 2017)
other expenses 1,000

Rental profit 3,951
less
IT @40% 1580
PRSI@4% 158
USC@8% 316

Rental income 1897

From this 1,897 you have to cover the mortgage shortfall of 423 pm that's 5,076 per year

Cash outflow 3,179

So based on the above figures at €1,000 a month the property will cost you €3,179 a year.