Buying to sell

WhiteWalls

Paying rent in Dublin as a couple for the next 4 years. Approximately 1800 a month in rent. Works out at nearly 20k a year which over 4 years is 80k.

Would it make any sense to buy an apartment for say 250k to turn around and sell it in 4 years to get another mortgage in another part of the country. Can you stay on the same mortgage and swap house or would you be starting again in the new property with a new mortgage?

I read somewhere before that when you get a mortgage the first few years are paying mainly interest.

I'm aware this is a long winded question, any advice appreciated

Sweet.Science

Yes the first few years won't knock much off the mortgage
When you sell you clear your existing mortgage and applog for a new one

Remember as a first time buyer you only need a 10% deposit, anything after you need 20%. It's a massive difference.

There are calculators that show exactly how much interest you'd be paying, e.g. https://www.drcalculator.com/mortgage/old/ie/

Samuel T. Cogley

I wrote a fairly long post but it's better put like this. If the market tanks you're f'ed. You'll pay almost nothing off the mortgage in 4 years.

catrionanic

We did something similar. Bought a tiny 500sqft house in the city centre in 2015 as newly weds. It was super small and no garden so no room to extend or anything.

We had one baby there, then put it on the market when expecting our second as you couldn't swing a cat in it. We got lucky and made a fair bit on money on it when we sold 3.5 years later.

That was 2.5 years ago now. I often think about the young couple who bought it as first time buyers. The house is now worth significantly less than they paid for it. There's a good chance they'll end up stuck there, perhaps trying to raise a couple of kids in it like another couple on the street who bought during the last boom and are still in negative equity.

The lesson I've learnt from it is that you should never buy a property that you could not spend at least 10 years living in, if you had to.

cruizer101

In terms of what you will pay of the mortgage because current interest rates are low it is not as bad as a lot of people think.
If you borrowed 100k at 2.35% (Ulster 4 year fixed) your repayment would be 387 a month, after 4 years you would have paid 18,594 and would have 90,370 left on your mortgage, meaning just over 50% of your payments went off the principle.
If interest rates were 5% it would only be about 25% of your repayments went off the principle.

So while it is only a portion of the payment that goes off the principle I think a lot of people think it is much less than it is because of the current low interest rates.

That said, I don't think buying a property with the intention of flipping it in a few years is a good idea in general, though I can understand with the crazy high current rents how it could make sense. If the mortgage repayment is going to be much less than the rent for similar property it could make sense.

ted1

you will use lose your first time buyer benefits such as lower deposit and help 2 buy grant.

BrokenArrows

If you can afford to buy instead of renting then do that, but don't go into it thinking its guaranteed profit.

Assume that the market might tank.

But at 1800 per month in rent being lost anyway the market would have to tank a lot for you to be negative after 4 years.

spurshero

4 years rent at 1800 a month is 86400. Depressing really . Also add in the fact that you will pay a bit off your mortgage and your probaly 100k better off by buying . Is it possible the apartment drops 100k I suppose it is . But in your shoes I would deffo buy and take my chances .

ted1

spurshero wrote: »

4 years rent at 1800 a month is 86400. Depressing really . Also add in the fact that you will pay a bit off your mortgage and your probaly 100k better off by buying . Is it possible the apartment drops 100k I suppose it is . But in your shoes I would deffo buy and take my chances .

Don’t forget Estate agents fees+ solicitor fees.
He will also be a chain next time he buys so may have trouble buying the place he wants. Many sellers woolly take a lower price for the benefit of having someone who is not in a chain

Darc19

If you are looking at 4-5 years, then it would be something I'd look at.

You'd probably be looking at €300-€330k for something half decent.

But the mortgage would be less than €1200.


After 5 years, 32,000 would have come off the mortgage based on a 30 year term.

Change that to 20 years and mortgage goes to €1500, but after five years over €57,000 has come off the principal.

The other advantage is that you will have a better idea of what you want from a long term property.

Kerry25x

catrionanic wrote: »

That was 2.5 years ago now. I often think about the young couple who bought it as first time buyers. The house is now worth significantly less than they paid for it.

Would be unusual for any house in Ireland to be worth less now than it was 2 and a half years ago no? Our house has only gone up in that time, as has the type of house we're hoping to upsize to.

The_Conductor

Kerry25x wrote: »

Would be unusual for any house in Ireland to be worth less now than it was 2 and a half years ago no? Our house has only gone up in that time, as has the type of house we're hoping to upsize to.

Houses in Ireland (on average) are currently worth less than they were 15 years ago.

Prices rise and fall- in a cyclical fashion.

Arguably we could now be at the top of such a cycle- time will tell- I'm not issuing any such prediction.

Either way- it is entirely possible for prices to fall, and if you imagine they only go in the one direction, you're in for a shock sooner or later.

Kerry25x

The_Conductor wrote: »

Either way- it is entirely possible for prices to fall, and if you imagine they only go in the one direction, you're in for a shock sooner or later.

I understand that, just surprised her old house is worth significantly less than it was 2 and a half years ago. Prices have generally increased since then.

The_Conductor

Kerry25x wrote: »

I understand that, just surprised her old house is worth significantly less than it was 2 and a half years ago. Prices have generally increased since then.

It depends on where it is- and what it is- plenty of properties are falling in value.

Also- any new builds fall immediately once they are bought- as the price is inflated to reflect 1) the first time buyers grant and 2) lower deposit requirements for a first time buyer. Once the grant and the deposit requirements are out of the picture- the property has a fairly immediate 10-15% fall in value.......

The First Time Buyers grant- is one of the biggest cons that the Irish people have ever bought into..........

Kerry25x

The_Conductor wrote: »

It depends on where it is- and what it is- plenty of properties are falling in value.

Sure, but hers was a tiny city center house that had increased in price over the previous few years before she sold it so that doesn't sound like a new build. Anyway, doesn't matter, I was just surprised. My house is also a small city center house (Cork) and its gone up a decent amount in that time.

Wabbit Ears

Ah yea, I remember having this plan also, Nearly finished the mortgage now

I don't think we'll have a celtic tiger situation like what the OP is looking for for a long time.

The_Conductor

Unless of course that is precisely where we are.........
The expenditure we've had over the last 12 months- and the explicit relaxation of all EU budgetary rules (but only to March 22) should have alarm bells ringing everywhere- but doesn't seem to.
Our public finances are so screwed.

spurshero

The_Conductor wrote: »

Houses in Ireland (on average) are currently worth less than they were 15 years ago.

Prices rise and fall- in a cyclical fashion.

Arguably we could now be at the top of such a cycle- time will tell- I'm not issuing any such prediction.

Either way- it is entirely possible for prices to fall, and if you imagine they only go in the one direction, you're in for a shock sooner or later.

Ya bur there probaly on average 3 times what they were 30 years ago . Ya can look at it a lot of different ways . 15 years ago was 2006 prob peak house price time In Ireland of all time . Was it just by accident ya picked that ?

JPup

Kerry25x wrote: »

Sure, but hers was a tiny city center house that had increased in price over the previous few years before she sold it so that doesn't sound like a new build. Anyway, doesn't matter, I was just surprised. My house is also a small city center house (Cork) and its gone up a decent amount in that time.

I agree. House prices in Dublin City up too since 2018 despite Covid. Could be a smaller town or niche location maybe.

On the main question, I think it’s a good idea but try to think a bit strategically. Is there somewhere you could buy now that wouldn’t be too bad long term if the market turns and you are stuck there. i.e. Don’t leave yourselves miles from friends and family with a long commute. Also, ideally aim for up and coming areas where public transport is set to improve over the next few years. Maybe near a metro station or on the new Dart+ network.

Darc19

The_Conductor wrote: »

Houses in Ireland (on average) are currently worth less than they were 15 years ago.

Prices rise and fall- in a cyclical fashion.

Arguably we could now be at the top of such a cycle- time will tell- I'm not issuing any such prediction.

Either way- it is entirely possible for prices to fall, and if you imagine they only go in the one direction, you're in for a shock sooner or later.

I think it's an error to just look at the headline price.

Who got better value.
Purchaser A - bought 2015, 3 bed semi ballinteer, €380,000
Or
Purchaser B - bought 2006, 3 bed semi ballinteer, identical to purchaser A for €525,000

Answer is purchaser B

JPup

Because they would have got a tracker mortgage and are now paying a pittance in mortgage interest, is that it?

The_Conductor

spurshero wrote: »

15 years ago was 2006 prob peak house price time In Ireland of all time . Was it just by accident ya picked that ?

No, its the reference year the CSO use on which they base their house price statistics.

Darc19

JPup wrote: »

Because they would have got a tracker mortgage and are now paying a pittance in mortgage interest, is that it?

That and they got extended and higher mortgage interest relief.

Both prices are real examples from property price register for college park.

A 1% tracker v average 3.25% mortgage and assuming a 1.5% interest difference for rest of loan term and the 2006 purchase is paying over €100,000 less when purchase price and interest is taken into account