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Investment Property

  • 21-01-2023 12:22am
    Registered Users Posts: 5

    Hi all, hoping for some advice please - homeowners with a rental property.

    Our family home has equity in it but out of this equation.

    Our rental property has 4 years left on a tracker mortgage, value roughly 350k, remaining loan roughly 40k. Rental yield 1k per month.

    My wife and I both work in state jobs.

    A property next to us is coming to market and we are interested, due to its proximity. Roughly valued at 300k.

    I know there are a huge range of factors that come into this but has anyone any general advice on how to proceed with respect to raising finance, or indeed not bothering to raise finance.

    Thanks all.


  • Registered Users Posts: 1,064 ✭✭✭DubCount

    My advice...

    1) Do some research on why small landlords are leaving the market at a time when rents are at a record high. Go read some threads on the Accommodation and Property forum. Read some RTB cases. Read the long volumes of legislation in the area.

    2) Consider your existing rental. I reckon you have a gross yield of 3.4% on that. Thats not great.

    3) Talk to a financial advisor and get some proper independent advice.

    4) Dont do it.

  • Registered Users Posts: 114 ✭✭AnF Chuckie egg

    As pointed out your current rental yield is hopeless. I'm still getting close to 8% yield and would not dream of buying any property here that I couldn't an that yield. For instance I picked up an apartment last April which cost €145k and rents out for €1200. I paid down €75k which left a Mortgage with a loan to value ratio of < 50% which gives the lowest Mortgage rates for rentals. After expenses that's a yield of 7.5%. Same apartment (not mine) on the block sold for €185k the other day. Property prices have gone mad and are detached from any economic model at these prices. What's worse is I do believe we will see another 10-15% rise over the next 2 years.

    If you are hell bent on doing this then you would need to be able to rent out that €300k house for €2450 a month. Not an easy thing to do with a house, the only way you'd see that is by renting it out by the room and that's a nightmare of it's own. Houses are more prone to non paying tenants too which is why I avoid anything other than a small 2 bed and even then it would want to be for the right money.

    From what I can see we are heading back to the borrowed to the hilt society who equate property ownership via huge debt as wealth. The same lads that were laughing at me buying rentals back pre 2020 are now asking advice and thinking of buying!! You really have to wonder what has made their brains go to mush..........

  • Registered Users Posts: 20,456 ✭✭✭✭dxhound2005

    If prices have gone mad and are detached from any economic model, how come they could go up by another 10 to 15%? In the current economic model, demand for property purchases is very healthy.

  • Registered Users Posts: 114 ✭✭AnF Chuckie egg

    The economic reality is now rental yields are falling well below 5% in many places and even much lower.

    But Supply and demand, not enough properties to cover the demand. No hope of any decent supply coming any time soon so expect prices to keep rising as people start to get desperate to get on the property ladder.

  • Registered Users Posts: 5,833 ✭✭✭daheff

    @AnF Chuckie egg I think you are calculating your yield wrong. The yield is the return based on what you paid out (ie deposit + fees), not on the value of the house. the return would also include the capital appreciation made.

    So if I paid 100k for an apartment that is now worth 500k, but earning 10K a year in rent (lets forget about taxes to keep this simple), my yield is (10K + 400K/number of years owned)/ initial outlay (100K).

    not 10k/500k

    we don't know what % yield the OP is gaining as we don't have enough information.

    @manxcat Should you wish to proceed with what your plan, I would think you need to remortgage the existing property to a value that allows you to release sufficient equity to buy the second property and have enough equity in both to keep your mortgage interest rates as low as possible.

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  • Registered Users Posts: 114 ✭✭AnF Chuckie egg

    I`m calculating my net rental yield as

    Annual rental income - associated costs = Net rental income

    Then Net rental income / Purchase price inc all fees X 100 => Net rental yield percent

  • Registered Users Posts: 13,048 ✭✭✭✭Geuze

    AFAIK, gross rental yields are always based on the current value of the asset.

  • Registered Users Posts: 114 ✭✭AnF Chuckie egg

    We are discussing the yield in the context of whether to buy or not so the value of the property is the current purchase price.

    I think what folks are trying to figure out is return on investment which can really only be calculated at the exit of an investment.

    ROI for a Investment property would be