Buying a semi-D 3 bed house in Clonee vs 3 bed apartment in Sandyford for €350k

ClaireSh

Should we buy a semi-D 3 bed house in Clonee or a 3 bed apartment in Sandyford for €350k?

If the housing market was to crash again within the next 4-5 years which one is more likely to get hit badly in terms of rental income and resale value. Any thoughts on this is highly appreciated.

Here are some pointers about our position/future plans.

1. Budget - €350k (€280k mortgage + €70k savings)

2. We'll be living in the property initially and plan to head to Australia after 2-3 years so we'll be renting the property for at least 3 years while we are abroad. Therefore it has to fetch us a decent rental income to pay a portion of our rent in Australia.

3. Our plan is to not come back home if things work out well in Australia. As long as we get our investment back (let alone making a capital gain) we will sell the property.

4. If the Irish housing market crashes, our plan is to continue renting out the property.

kippy

ClaireSh wrote: »

Should we buy a semi-D 3 bed house in Clonee or a 3 bed apartment in Sandyford for €350k?

If the housing market were to crash again within the next 4-5 years which of the two areas are more likely to get hit badly in terms of rental income and resale value. Any thoughts on this is highly appreciated.

Here are some pointers about our position/future plans.

1. Budget - €350k (€280k mortgage + €70k savings)

2. We'll be living in the property initially and plan to head to Australia after 2-3 years so we'll be renting the property for at least 3 years while we are abroad. Therefore it has to fetch us a decent rental income to pay a portion of our rent in Australia.

3. Our plan is to not come back home if things work out well in Australia. As long as we get our investment back (let alone making a capital gain) we will sell the property.

4. If the Irish housing market crashes, our plan is to continue renting out the property.

I'd be asking myself why are you buying at all?
Keep your 70k for something over there. There are far too many variables at play and unknowns there to buy in the first instance

Samuel T. Cogley

What research have you done as to the state of regulation etc. in regard to the Irish rental market, tax and non-resident landlords? Have you got someone who is going to step in if you've a 12-18 month battle with a non-rent paying tenant who trashes the place?

What research have you done into investing in a REIT or other investments? What returns are they projecting?

fleet

Sandyford.

When the economy takes the next hammering your Sandyford apartment will still be easy to let. It's surrounded by the likes of Microsoft who have been here 30-40 years and have huge percentages of foreign national looking to rent.

Plus there are fewer maintenance concerns with an apartment (garden, drivrways, utilities, etc.)

If you weren't planning to let then I'd be less sure. I'd question why you want to buy here now though, the market is over priced.

colm_c

Can't say which is a better location, however I think you're totally mad.

Buying a place to live then moving 1/2 way across the world.

Between the hassle of being a remote landlord, tax implications, mortgage rate implications, tying up 70k in savings etc.

Do your sums before you make any decisions.

o1s1n

Really do a lot of maths re the tax implications.

I don't know your current financials re income, but tax on rental income can be up to 40-50%.

So not only will the rental income not be paying for your Australia property, you might not even be able to cover the mortgage on the Irish property with it.

SimpleDimples

With respect, I think you're mad.

You aren't purchaing a home, you are purchasng an investment and creating unnecessary risk for yourself. It would be very different if you already had a property or were intending to stay in the property long term.

SNNUS

You are hopefully planning to stay in Australia? You are crazy then to have a burden back here! Start fresh in Oz and hopefully you will purchase a house there. Do not buy here if you do not tend to live in it!

faceman

I agree with the posters suggesting to hold off. Makes no sense to buy here if you’re eyeing up a long term move abroad.

Also as pointed out, tax on rental income is high on Ireland (another reason why we have a crisis). Only a portion of the interest on your mortgage is tax deductible so comparing a rental rate with the mortgage outgoing to not like for like.

Heres Johnny

No way will this generate enough cash to pay much of your rent in Australia.
You'll have mortgage payments, letting costs, upkeep and repairs on the house as well as a tax bill to pay before you make a penny. I've a feeling you are buying in at the top of the market too.
Rents won't always be as high as they are now. Property is such an illiquid asset too. Irish people have a bizzare fascination with it. Invest it in other ways. You'd be nuts to do what you're proposing.

awec

fleet wrote: »

Sandyford.

When the economy takes the next hammering your Sandyford apartment will still be easy to let. It's surrounded by the likes of Microsoft who have been here 30-40 years and have huge percentages of foreign national looking to rent.

Plus there are fewer maintenance concerns with an apartment (garden, drivrways, utilities, etc.)

If you weren't planning to let then I'd be less sure. I'd question why you want to buy here now though, the market is over priced.

It might be easy to let but there's a good chance the amount of rent will be much lower in the event of another proper crash.

Anyone buying for such a short time frame is crazy.

ClaireSh

I really appreciate all the insights. I think your comments in relation to being a non-resident landlord and the burden (high costs/tax on rental income, maintenance etc.,) that goes with it are all valid.

Looks like I'm better off considering other investment options. I know this is a very different topic and I'll have a lot of research to do before I venture into this. Thanks very much for some of the options proposed.

How cost-effective is it to sell the property before we moved abroad. If we bought a property now and lived in it for 3 years, we'd save ~ €20k on rent based on the math I did (current rent - mortgage repayment with fixed interest rate for 3 years). This excludes all the costs such as selling agent fee, solicitor fee etc., plus the stress when selling. Am I mad to be thinking in these lines too?

Heres Johnny

Honestly, yes you are. You are now into investing with a horizon of 3 years. And it's a leveraged investment, you are borrowing to do it. You're also speculating on where Irish property values will be in 3 years.
It's also not diversified, you are putting your whole investment into the Irish property market and if that falls, you are in negative equity and can't sell. Your deposit of 70k may shield you from this but you could lose a significant chunk of that 70k.
You can do it, but it's extremely risky.
The life insurance company I work for has a global property fund but the fund managers will not invest in Irish Property, it's considered too volatile.
I was a financial advisor in a previous career and if anyone ever wanted to invest in a risky product for 3 years I always advised them not to.
5 years minimum and even then that's very risky. Always liked to have people looking 10+ years as the markets are more predictable long term but short term they can be very volatile.

kippy

ClaireSh wrote: »

I really appreciate all the insights. I think your comments in relation to being a non-resident landlord and the burden (high costs/tax on rental income, maintenance etc.,) that goes with it are all valid.

Looks like I'm better off considering other investment options. I know this is a very different topic and I'll have a lot of research to do before I venture into this. Thanks very much for some of the options proposed.

How cost-effective is it to sell the property before we moved abroad. If we bought a property now and lived in it for 3 years, we'd save ~ €20k on rent based on the math I did (current rent - mortgage repayment with fixed interest rate for 3 years). This excludes all the costs such as selling agent fee, solicitor fee etc., plus the stress when selling. Am I mad to be thinking in these lines too?

Agree with the previous reply. You'd be mental to do what you are talking about knowing what your plans are. Where are you living at the moment? What's stopping you continue to live there for the three years? Or move to Aus sooner?

ClaireSh

kippy wrote: »

Agree with the previous reply. You'd be mental to do what you are talking about knowing what your plans are. Where are you living at the moment? What's stopping you continue to live there for the three years? Or move to Aus sooner?

We are living in Phoenix Park Racecourse and been here since we got married. Things have changed since. We have a two year old and another one on the way so looking for a larger place to live. Renting is so difficult now so we thought we might as well buy.

We've put our Australia plans on hold for two years as my husband is up for a promotion this year and he has been working very hard for it. I'm in a similar situation. He likes the company he works for and would like to stay with them but relocate to Australia eventually. They've promised him a relocation to Australia but it is not likely to happen at least until 2020. We are surely at the brink of housing affordability in Ireland right now so we are worried about loosing a chance to invest on a house if our Australia plan doesn't work out.

kippy

ClaireSh wrote: »

We are living in Phoenix Park Racecourse and been here since we got married. Things have changed since. We have a two year old and another one on the way so looking for a larger place to live. Renting is so difficult now so we thought we might as well buy.

We've put our Australia plans on hold for two years as my husband is up for a promotion this year and he has been working very hard for it. I'm in a similar situation. He likes the company he works for and would like to stay with them but relocate to Australia eventually. They've promised him a relocation to Australia but it is not likely to happen at least until 2020. We are surely at the brink of housing affordability in Ireland right now so we are worried about loosing a chance to invest in the Ireland property market if our Australia plan doesn't work out.

There's a serious amount of unknowns/unsure of's in there.

If the "australia" thing doesn't work out you might be sorry you didn't go for a house that's more suitable for your family unit here in Ireland.

Heres Johnny

Claire I'm always cautious when I advise people I don't like to see anyone make decisions that hurt them financially.

If you want to buy a house in Ireland but still plan to move to Australia just bear in mind the following:

You are now buying a financial asset instead of just buying a home. Every financial asset carries risk. It could work out but it might not.

House prices are near a peak I feel. 350k for a 3 bed in Clonee is overpriced any way you look at it. These houses can not go to 400k. Just no way. There could be another correction coming.

Rents, like house prices are artificially high for the same reason. Lack of supply. This will not always be the case and rents will drop.

If you buy a house at the top of the market and rent prices drop, you will be using your Australian salaries to rent over there and possibly to pay some mortgage here.

You're trying to do 2 things really and it's very difficult to do that.

Sounds like you need a home to call your own with the young family but the move to Australia complicates things.

You might be ok doing this, it's your call but once you understand the risk and uncertainty you can make the right call for yourselves.

Very best of luck and if you do buy something, please buy the house over the apartment. I'm thinking of it as a home for you and the kids and not some financial product. Get a family home first and foremost.

ClaireSh

Thank you all very much and apologies for the delay in acknowledging the responses. Your responses really opened our eyes to what challenges we might face if we bought a property here just to rent and then moved to Australia.

ClaireSh

Heres Johnny wrote: »

Claire I'm always cautious when I advise people I don't like to see anyone make decisions that hurt them financially.

If you want to buy a house in Ireland but still plan to move to Australia just bear in mind the following:

You are now buying a financial asset instead of just buying a home. Every financial asset carries risk. It could work out but it might not.

House prices are near a peak I feel. 350k for a 3 bed in Clonee is overpriced any way you look at it. These houses can not go to 400k. Just no way. There could be another correction coming.

Rents, like house prices are artificially high for the same reason. Lack of supply. This will not always be the case and rents will drop.

If you buy a house at the top of the market and rent prices drop, you will be using your Australian salaries to rent over there and possibly to pay some mortgage here.

You're trying to do 2 things really and it's very difficult to do that.

Sounds like you need a home to call your own with the young family but the move to Australia complicates things.

You might be ok doing this, it's your call but once you understand the risk and uncertainty you can make the right call for yourselves.

Very best of luck and if you do buy something, please buy the house over the apartment. I'm thinking of it as a home for you and the kids and not some financial product. Get a family home first and foremost.

Thank you Heres Johnny After a lot of contemplation over the last few weeks we decided to buy a house where we can raise our kids. I understand this is not the time to buy a property in Ireland just for the investment reason so apartment is no longer our choice. It's pity that this is happening to Ireland real estate but I might be wrong and it might even be great for the future Irish economy.

Fol20

ClaireSh wrote: »

I really appreciate all the insights. I think your comments in relation to being a non-resident landlord and the burden (high costs/tax on rental income, maintenance etc.,) that goes with it are all valid.

Looks like I'm better off considering other investment options. I know this is a very different topic and I'll have a lot of research to do before I venture into this. Thanks very much for some of the options proposed.

How cost-effective is it to sell the property before we moved abroad. If we bought a property now and lived in it for 3 years, we'd save ~ €20k on rent based on the math I did (current rent - mortgage repayment with fixed interest rate for 3 years). This excludes all the costs such as selling agent fee, solicitor fee etc., plus the stress when selling. Am I mad to be thinking in these lines too?

Not worth the hassle tbh. You rent for mobility while you buy for long term. Potentially you could save money money on buying now but that’s only “potentially”. You are investing a lot of your hard earned cash that will be locked in until it’s sold. Houses prices can go up and down in 3 or 4 years and if it goes down you need to be prepared to take the hit which could be substantial or happy days if it remains the same or goes up in the value. Buying property is a long game. Not short game.

Let’s say you buy a house for 400k and the prices remain the same. You will have legal fees of say 2k to buy and another 2k to sell. Estate agency fees will be circa 6k. Total cost =10k . You said you could save rent of about 20k so you have an opertunity cost of 10k.(20-10=10)
If the price goes up by 40k. Then you would have 50k extra saved. Or likewise if it goes down by 40k you would be down 30k. That’s not including buying furniture. Maintenance etc.

If I were you, just for piece of mind when it’s short term, I would continue to rent. The risk reward just isn’t there for maybe 10k

standardg60

You have contemplated right. It's always the right time to invest in property as long as you can afford it if your reason for doing so is to have a home to raise your kids.

The move to Australia may have been an aspiration for you and your husband but you have different priorities now, forget about it and enjoy the life you now have.