Investing in properties, good place to throw your money?

Godknows

Hi Folks,

I currently live in north Dublin with my partner, we pay 1200€ rent/month.
I am employed full time, on 38k, I just turned 40.

I have 140k in savings.
I am thinking about buying a 1 bed flat in a good position, paying cash and move in.
After a few months I may be able to buy a 2 bedroom flat, with a mortgage, move in and rent the 1 bed. At this point i would have most of the mortgage paid by the 1 bed income.

Once the 2 bed is paid, I could rent them both and retire to Thailand ...assuming property market doesn t fall bad again...

Would that be possible or taxes would eat all my gain? My partner does not work and we could put the lease on her...

Any suggestion? what would you do with that money?

Godknows

Hi guys,

Anyone? is this the wrong forum section? shall i move it to
Accommodation & Property?

thanks

jive

General consensus is that investing in diversified funds with low fees is better. Renting is a lot more effort. A quick read of the accom. & property forum will give some good info regarding renting out a property. Rent a room scheme is appealing IMO if it suits you (€14k tax free per annum).

ironclaw

Congrats on the lump sum you have. Would be a poor move in my books. You'll empty you cash reserved fully to buy a decent apartment where you can get a decent rent (In Dublin anyway) So when you look for a mortgage, although you have collateral in the apartment, you have no savings and you're only on 38k per year (Give or take a standard grad salary), so I'm not sure what size of mortgage you could ultimately get if you wanted to upsize.

What you are suggesting is possible, but if it was me, I'd be buying a house, not an apartment. Apartments have maintenance fees etc associated with them, a house, the upkeep could be very little if you were handy and you could possibly get a long term rent from a person willing to rent in the longer term.

With all the news on rents and caps in recent times, I'd consider it a pretty volatile market. It can't continue as it currently does, it won't fall, but I can't see the uptick continuing for years to come.

keane2097

Something which might be worth a look in deciding whether to buy a place of your own or continue to rent and invest the savings is Ronan Lyons mortage vs rent calculator:

ronanlyons.com/2010/04/20/your-very-own-rent-or-buy-calculator/

topper_harley2

Sounds like a terrible idea. You're talking about risking everything on the whim of property returns and rents. Madness, especially on one salary.

Godknows

So when you look for a mortgage, although you have collateral in the apartment, you have no savings and you're only on 38k per year (Give or take a standard grad salary), so I'm not sure what size of mortgage you could ultimately get if you wanted to upsize.

@ironclaw, thanks for the insight, this makes totally sense. We should get around 50k from my partner s family in a few months.

Sounds like a terrible idea. You're talking about risking everything on the whim of property returns and rents. Madness, especially on one salary.

@topper_harley2
Move can be risky but calling it madness I think is too much. Even just after the crisis rents remained pretty much stable, you will always rent an apartment in a good position. Now even easier short term with Airbnb.
And my aim is not property return, it s the constant revenue ( small ) coming from rents.
Anyway, I appreciate your feedback, but I d like to ask, what would you do with that money in order to improve your current situation? ( renting a ****ty place/no pension/poor monthly savings )

FernandoTorres

My first tip is to not take financial advice from internet forums. Proper financial planning requires consideration of your full financial position (incl income and expenditure) as well as your goals for the future. If I were you before doing anything I'd invest time in looking at your expenses and income. Document everything and see where you can either cut expenses or boost income. There are plenty of apps these days that will help you out.

From looking at the limited info provided you're in a good position with savings, however your income for two people is low and you've no retirement plan. Buying a one bed with cash isn't a bad idea, however I would be putting off any plans of becoming a property mogul until you have a proper plan in place. By buying with cash you will reduce your expenses massively and will be in a position to start saving good money. If you can then invest more time in your job or further study you can get a better paying job and save even more while also setting up a pension. Also make sure to have an emergency fund of around 3 months expenses in case anything happens. Particularly so if you're the only earner.

Paying for some independent impartial advice wouldn't be the worst idea in your situation. If you get a good adviser they'll more than pay for their fees in savings/tax reductions. Just stay away from the salesmen and bank staff. The bad news is there are no shortcuts to becoming financially independent despite what you might see on TV and the internet. It's a slow process but once you buy into it and have a plan you'd be surprised how satisfying it can be.

Sleepy

One thing worth noting is that rent is taxed as income so while letting out an apartment for e.g. a 1000 a month where you only have a mortgage of 800 on the property sounds like a no-brainer, it's quite another when the government will turn that 1000 a month in rent into 500 after tax and that's before you factor in gaps between tenancies, the risk of having a bad tennant over-hold and / or cause tens of thousands in damage to your property (which you'll never be able to retrieve via the courts).

Denny_Crane

Godknows wrote: »

Move can be risky but calling it madness I think is too much. Even just after the crisis rents remained pretty much stable, you will always rent an apartment in a good position. Now even easier short term with Airbnb.
And my aim is not property return, it s the constant revenue ( small ) coming from rents.
Anyway, I appreciate your feedback, but I d like to ask, what would you do with that money in order to improve your current situation? ( renting a ****ty place/no pension/poor monthly savings )

AirBnB is under constant attack from multiple groups. Many OMCs (or enough members thereof) don't want AirBnB units. There looks to be some moves on planning becoming an issue also. Furthermore it's high maintenance.

The small revenue stream will be eaten up by tax. I've an apartment I'm stuck with, rents out for €1050 (below market rate to attract the right tenant) with a mortgage of c.€600. It just about breaks even. Property investment is great of you need a low interest loan to invest. I don't know much about investing, but I do know a bit about poker and don't play with what you can't afford to lose.If you get someone who decides not to pay the rent and wreck the place you'll be looking at 18 months of no rent and c.20K in legal fees to get them out. Now this isn't as big a problem as it's made out in A&P forum as you can offset the losses against tax but do you have c.€50K (voids on rent, legal and repair costs) available if needed?

As for your own position, is there no hope of getting a mortgage? €140K deposit with a, say €130K, mortgage will put you in a low LTV and give you a good interest rate and you'll find a house in D5/D13. You can then rent a room out and make more than you'd ever make renting an entire apartment out with a fraction of the hassle.

keane2097

Godknows wrote: »

@ironclaw, thanks for the insight, this makes totally sense. We should get around 50k from my partner s family in a few months.



@topper_harley2
Move can be risky but calling it madness I think is too much. Even just after the crisis rents remained pretty much stable, you will always rent an apartment in a good position. Now even easier short term with Airbnb.
And my aim is not property return, it s the constant revenue ( small ) coming from rents.
Anyway, I appreciate your feedback, but I d like to ask, what would you do with that money in order to improve your current situation? ( renting a ****ty place/no pension/poor monthly savings )

From a tax POV alone you ought to look at starting a pension.

topper_harley2

Godknows wrote: »

@topper_harley2
Move can be risky but calling it madness I think is too much. Even just after the crisis rents remained pretty much stable, you will always rent an apartment in a good position. Now even easier short term with Airbnb.
And my aim is not property return, it s the constant revenue ( small ) coming from rents.
Anyway, I appreciate your feedback, but I d like to ask, what would you do with that money in order to improve your current situation? ( renting a ****ty place/no pension/poor monthly savings )

I do up a monthly budget. If you have poor monthly savings then the chance of getting a mortgage is slim. You need to be able to see where your money is going. Start a spending diary of every item you spend money on, down to a E2 coffee. Do this for 6 months and see where your cash is going. I did this last January and can tell you how much I spent on booze, holidays, ESB, groceries etc. The results can be rather alarming i.e. booze is twice the groceries!

Once this is in place you can see where you can cut back and redirect that into regular savings to demonstrate the ability to save. After six months of saving 500 quid per month, I would then consider a mortgage application.

I would start a pension if at all possible.

I would forget about Thailand also

With 140K deposit and 50K coming in soon, with some cleaning up of spending habits and extra savings I think buying a decent gaff is fairly easily achievable in a years time. I wouldnt buy 1 bed apartment. As mentioned, at least you have rent a room option with 2 bed, which you can get up to 14K rent tax free now. Much easier than landlording for real

Best of luck

Das Reich

topper_harley2 wrote: »

I do up a monthly budget. If you have poor monthly savings then the chance of getting a mortgage is slim. You need to be able to see where your money is going. Start a spending diary of every item you spend money on, down to a E2 coffee. Do this for 6 months and see where your cash is going. I did this last January and can tell you how much I spent on booze, holidays, ESB, groceries etc. The results can be rather alarming i.e. booze is twice the groceries!

Once this is in place you can see where you can cut back and redirect that into regular savings to demonstrate the ability to save. After six months of saving 500 quid per month, I would then consider a mortgage application.

I would start a pension if at all possible.

I would forget about Thailand also

With 140K deposit and 50K coming in soon, with some cleaning up of spending habits and extra savings I think buying a decent gaff is fairly easily achievable in a years time. I wouldnt buy 1 bed apartment. As mentioned, at least you have rent a room option with 2 bed, which you can get up to 14K rent tax free now. Much easier than landlording for real

Best of luck

Saving 500 euros in a 3k salary is same of nothing. I earn way less (23k year) and in 2010 I did managed to save 18k, now with car (700 € insurance plus 385 tax) i can save only 13 or 14k. In his case I think its because a lot of his salary is to pay rent 14,400 or 38% of his salary. He is basically earning the same as me if excluding the rent, then spending the rest by two people. If he gets rid of the rent he could save massive money, in his place I wouldnt mind to by a house 1 hour from Dublin (let's say Mullingar or Edgeworthstown) for less than 100k, invest the other 40k and save the 14,400 and spending a fraction of this on commuting.

Nabber

Das Reich wrote: »

Saving 500 euros in a 3k salary is same of nothing. I earn way less (23k year) and in 2010 I did managed to save 18k, now with car (700 € insurance plus 385 tax) i can save only 13 or 14k. In his case I think its because a lot of his salary is to pay rent 14,400 or 38% of his salary. He is basically earning the same as me if excluding the rent, then spending the rest by two people. If he gets rid of the rent he could save massive money, in his place I wouldnt mind to by a house 1 hour from Dublin (let's say Mullingar or Edgeworthstown) for less than 100k, invest the other 40k and save the 14,400 and spending a fraction of this on commuting.

Don't be dismissive of commuting. High mortgage over time will drop. Plus wage increase means less burden on mortgage repayments.

Driving 90 minutes to work and 90minutes home will only ever change with job change or house move.
I have seen many a people say "it's only 40 mins away" only to see the drop into a depressed state and ultimately rent close to work.

topper_harley2

Nabber wrote: »

Don't be dismissive of commuting. High mortgage over time will drop. Plus wage increase means less burden on mortgage repayments.

Driving 90 minutes to work and 90minutes home will only ever change with job change or house move.
I have seen many a people say "it's only 40 mins away" only to see the drop into a depressed state and ultimately rent close to work.

Agree 100%. 3 hours commuting per day, 15 hours per week. No thanks. That's before you factor in fuel, increased car maintenance etc.

Earthhorse

Godknows wrote: »

I have 140k in savings.
I am thinking about buying a 1 bed flat in a good position, paying cash and move in.
After a few months I may be able to buy a 2 bedroom flat, with a mortgage, move in and rent the 1 bed. At this point i would have most of the mortgage paid by the 1 bed income.

Are you sure the numbers work for this? You've taken into account that you'll have to pay a management fee, insurance, LPT etc. on the property?

I just don't see how the rent from a 1 bed apt could cover the mortgage on a 2 bed. If it works, great, but I really encourage to run the numbers for a best case, medium case and worst case scenario on this.