Buying an apartment and renting it

Tonano

Hello guys,

WANT: Buying an apartment in Limerick for up to 80, 000 Eur. Take the loan for 70, 000 Eur and rent it. Monthly repayments will be a 300 Eur per month and it rents for 700 Eur.

Strategy: We are saving for a deposit to buy in Dublin for up to 350, 000 Eur and it will take some time to reach this goal so we thought to buy in a cheaper place and save the same amount of money monthly + money for rent.

Question - How difficult that is or is it even viable as there might few things that I missed in regards to this strategy?

caviardreams

You will have to pay tax on the rental income.

Also when you are buying in Dublin you will not be a first time buyer anymore so will need a 20% deposit rather than a 10% deposit - this could be a significant difference.

Wheety

What happens if you get troublesome tenants?

ButtersSuki

Wheety wrote: »

What happens if you get troublesome tenants?

+1 on this. Read the renting/tenants/Landlord threads.....

When Limerick’s finest aren’t paying you rent for a year and the PRTB are sitting on their asses you won’t be saving anything, rather paying for a solicitor. Do your research.

pwurple

Your interest rate for buy to let will be higher than with a home you live in.

You will have expenses you are not accounting for.
Lease agreement, can do yourself but recommend solicitor to draft it first time at least
Tax on rental income, and you have to pay preliminary tax on it, ie, pay the tax in advance on money you did not yet receive.
Prtb fees
Landlord insurance
Letting fees (advertising etc)
Building Management fees
Tenant management fees *do you live nearby and intend to do this yourself for a 2am call where the fire alarm is going off, or employ a company
Repairs. Tenants are harder on a property than owners, they just take less care. Wear and tear is much higher.

bigpink

How does this work exactly?

Wesser

FACT : you will need a 20 % deposit in Dublin instead of 10 % so 70000 instead of 35000.

In addition to this you will need a 10 % deposit for limerick so 8000 so this will delay you In reaching your goal for buying in Dublin and while you save that 8000 again prices in Dublin have gone up by ..... What ever percent.... say for example 5 % so you get 5 % less bang for your buck if your budget so fixed at 350000.... or else you pay 5 % ( 17000) more.

Pkiernan

Tonano wrote: »

Hello guys,

WANT: Buying an apartment in Limerick for up to 80, 000 Eur. Take the loan for 70, 000 Eur and rent it. Monthly repayments will be a 300 Eur per month and it rents for 700 Eur.

Strategy: We are saving for a deposit to buy in Dublin for up to 350, 000 Eur and it will take some time to reach this goal so we thought to buy in a cheaper place and save the same amount of money monthly + money for rent.

Question - How difficult that is or is it even viable as there might few things that I missed in regards to this strategy?

Your tax bill will be about 3500 per year on your rent.

Brego888

Not a great idea

Very low yield on your returns
Your rent with be classified as income so will be paying up to 40% tax
Value of property won't go up as we are near the peak of the market
You'll lose your first time buyer 10% deposit privilege
Buy to let mortgage rates more expensive
2-3 grand legal expenses just to buy it
Management fees on apartment
Torture of being a landlord
Small profit not worth the overall hassle

I'd keep your money and continue to save

d1980

Tonano wrote: »

Hello guys,

WANT: Buying an apartment in Limerick for up to 80, 000 Eur. Take the loan for 70, 000 Eur and rent it. Monthly repayments will be a 300 Eur per month and it rents for 700 Eur.

Strategy: We are saving for a deposit to buy in Dublin for up to 350, 000 Eur and it will take some time to reach this goal so we thought to buy in a cheaper place and save the same amount of money monthly + money for rent.

Question - How difficult that is or is it even viable as there might few things that I missed in regards to this strategy?

In addition to comments already given, i would imagine BTL loan will also require 20:25% deposit..

Heres Johnny

Absolute non runner. There's no money in it. After tax income will be only half the rent so 350 or so. Just covers mortgage. If you can flip it for a profit after a few years well and good but that's far from guaranteed it could go the other way.
Plus legal fees, refurbishment and fitting out fees, letting fees......
I certainly wouldn't use this strategy for buying my first house. It will probably set you back years to be honest.

Tonano

Thank you guys for your input. I will not do this strategy. But still curious, where it would be worth doing it, considering that at this time I can not afford to buy in Dublin.

Should I save for Dublin and just that?

Brego888

It really wouldn't be worth doing this anywhere in your circumstances and with the market back near a peak again. If your heart is set on Dublin you just need to save hard. That or reevaluate where you can afford.

ButtersSuki

Tonano wrote: »

Thank you guys for your input. I will not do this strategy. But still curious, where it would be worth doing it, considering that at this time I can not afford to buy in Dublin.

Should I save for Dublin and just that?

Brego888 wrote: »

It really wouldn't be worth doing this anywhere in your circumstances and with the market back near a peak again. If your heart is set on Dublin you just need to save hard. That or reevaluate where you can afford.

Yes to your question, and +1 on previous poster's reasons and suggestions.