Buy to let - apartment or house

lightspeed

Hi

I'm in the process of getting approval for a buy to let mortgage. I see some 1 bed apartments in some parts of Dublin offering over 10% yield. I was looking at the Tallaght in particular and also commuter belt areas such as Drogheda.

One of my concerns would be that there might be more periods of unoccupancy and bad tenants with a 1 bed as I would assume eventually as circumstances change, e.g new baby on the way etc more likely that the tenant would look to move from living in a 1 bed.

Another option I looked at would be to buy a house in a county council estate, rent to the council under a direct lease scheme where they take care of the maintenance but only provide 82% of the market rental value.

Any thoughts and experiences from people renting out apartments particularly 1 beds?

Gumbo

no let up in tenancy in the current climate.
just be mindful of management fees and any extras that you may have to pay to cover repairs or remedial works.

A house with no management fee may be better but then your liable for the larger site as such.

Do the numbers and see what you like best.

3DataModem

One bed apartments are (IMO) the most utilitarian investments in Dublin at the moment. Very specific target market; employed childless individuals or couples. They leave if they don't like the place, if they get married, if they split up, if they have a kid, or if they buy a house. They choose based on quality of place and location.

House renters choose based on a lot more 'emotional' aspects, and are more likely to have problems (where do we store our bikes, the garage roof whistles, the lawnmower is broken, that tree looks dangerous). I steer clear of renting houses for this additional layer of expectation, complication, and cost.

Apartments have very high occupancy if you get a good agent. Most landlords you hear complaining have no agent or a bad agent. Most landlords you never hear complaining have a good or great agent.

Apartments have very low maintenance costs even for high-end places. I only rent places with good maintenance arrangements management companies so if there is a block problem you know it will get sorted. I have an apartment 20+ years where the block has a live in "super" like in the US who does odd jobs and is the main liaison for maintenance issues. All the residents love him. All the agents who manage apartments in the block love him.

You'll get a lot of naysayers about the (very real) risks of rental in Ireland, here are my thoughts on this topic.

https://www.boards.ie/discussion/comment/122053262#Comment_122053262

And FFS whatever you choose;

• give your tenants reasonably good furniture and good mattresses
• get a good agent who takes care of tenant welfare
• pay your f'ing taxes

27cyrix

1-bedroom apartment—high yield—make sure you vet the tenant. If you do it right, there is 0% chance overholding.

House in council estate under direct leasing - lower yield, but with secure rental incomes.

boardsdotie44

https://www.boards.ie/discussion/comment/122727766#Comment_122727766

Apartments have low maintenance, not so sure about that.

Firstly you have the ever increasing management fees.. secondly I have a friend who got a bill of around 20k from mgmt company for the roof I think it was, and years ago my brother had to fork out a bit to update something or other..

Personally I would never go for an apartment in Ireland…

I am a landlord, and would never use an agent, do it all myself.. tenants have been there 7 yrs, rarely get any hassle..

Suppose if you could get a good agent it might be worthwhile as you can write it off against tax, but I doubt I would trust an agent to pick tenants for me..

JVince

a buy to let at current overinflated prices and a one-bed at that and on a mortgage at circa 5%-6%?

For the same money you'd probably get a decent commercial property with far less hassle and a better return.

DFB-D

https://www.boards.ie/discussion/comment/122728608#Comment_122728608

Commercial property is also hassle to find lessees.

The affordable property usually available can often be sitting vacant or about to become vacant, it seems like new potential tenants are limited to hairdressers & coffee shops.

Residential is easier to keep occupied.

JVince

https://www.boards.ie/discussion/comment/122728994#Comment_122728994

Commercial is not just retail. Office, warehousing, small business units and I particularly like purpose built creches.

Some good opportunities come up frequently with good tenants in situ with 8-10% returns.

I also would not restrict myself to Dublin.

3DataModem

I’ve been in the one-bed game for two decades. Good to have a variety of perspectives above though.

DFB-D

https://www.boards.ie/discussion/comment/122729303#Comment_122729303

I can't say I see the outlook for industrial or office being much better than retail (well at normal investor scales) but they probably have wider appeal, but 1 or 2 years without a tenant can really drag down the returns.

Of course there are very successful units, but I haven't witnessed many opportunities. Most of the units I have seen are untenanted or overpriced given the rent rolls haven't been achieved recently. Maybe if you go over the 1m mark, there are better options, but then it's getting a bit much for single investors to risk.

JVince

https://www.boards.ie/discussion/comment/122729751#Comment_122729751

You'll find opportunities in the 400-600k range.

One advantage of commercial is you would normally have a full repair lease, so no call out for fixing something, hence you don't need to restrict yourself to an an easily reachable location.

Though a quick search does show a few one beds at reasonable price. I particularly like https://www.myhome.ie/residential/brochure/12-brownsbarn-gardens-kingswood-cross-citywest-dublin-22/4836416

I would try to have at least 60sq m as this would all for a workspace to be created.

Those at 41-45sq are tiny

Claw Hammer

Any increase in capital values will be lower in an apartment than a house. As apartment blocks age, demand from tenants falls. At one stage some of the banks were refusing to lend for 1 bed apartments. On an ROI basis therefore the house has to be a better choice.

lightspeed

Thanks all, I really appreciate the input. I am weary of investing in commercial as I feel it can be higher risk in some ways. Hard to tell will office demand return and also the retail sector seems to be under pressure. I'm not following why a commericial yield of 8% is better than some residential properties I see at 10 to 13% yield?

With regard to using an agent, I currently use one for a local agent for a house have tenanted in Balbriggan. It has not been completel smooth sailing and only recently placed a new tenant family under the HAP scheme. It took 3 months for them to find the right tenant but i have suspicians they were not showing the house to all potential tenants as were not going to get the first month rent like they did for the first tenant.

With regard to renting to the council via a direct lease, is this only available for the repair and lease scheme?

I would only be interested in a direct lease to the council where they have to restore the property to how it was provided and also manage the tenant. How do they calculate market rent ?

DubCount

A new buy2let mortgage - you dont see many of those.

Forget gross yield. By the time you consider all the costs, your net yield will be lucky to cover the bank interest rate. Then you have negative cash flows from capital repayments. Can you sustain void periods or non-paying tenants while servicing the mortgage.

My advise, speak to a financial advisor. Leveraged Residential Property investing in Ireland might not be your best option.

Caranica

Management fees are entirely tax deductible so don't let those put you off.

Personally I'd go with the apartment, more control over who you let to

felonious_Gru

Find it hard to believe that 10% is achievable in anything approaching a half decent area ?

lightspeed

https://www.boards.ie/discussion/comment/122737684#Comment_122737684

Define decent?

Do you define decent as only somewhere you want to live or somewhere there is consistent demand even if you wouldn't want to live in the same area?

I live in Balbriggan and anytime I tell someone in a new job etc I'm from Balbriggan I get told it's Blackbriggan and they wouldn't live there. However, I bought my house being a3 bed semi D for €245,000 in Dec 2020 and it's probably worth between €360,000 and €380,000 now from looking at daft.ie. It is currently rented for €2500 and other 3 bed semi Detached I seen recently were priced between €2700 and €3000 per month.

The below is a 2 bed priced at €190k and if you look up apartments to rent in balbriggan there is a 1 bed priced at €1950 per month in same complex which is a 10% yield. A 2 bed would get a higher rent so likely yield between 10 and 12% I reckon.

Check out this property I found using Daft

https://www.daft.ie/for-sale/apartment-barons-hall-park-balbriggan-co-dublin/5575817

felonious_Gru

https://www.boards.ie/discussion/comment/122739375#Comment_122739375

Link doesn't work

I've little knowledge of Balbriggan but 10% in the current market strikes me as a red flag, I think when investing in BTL, you can't take a ride the bubble approach, I'd only buy to flip in a market like this and I wouldn't want to do that either

drunkmonkey

I'd agree with the above, I don't see any value right now, definitely not from a medium to long term capital appreciation view.

The old truism probably still exists, location, location, location.

I bought a 3 bed semi as a holiday home in 2020 for 170k, the one attached to it sold a few months ago for 385k. Another one just up the estate is now listed for 400k. Seriously thinking of flipping it then I look at hotel prices to take the kids away and can't bring myself to pay them.

The market is gone out of hand. How and when it ends I can't even guess, this can't continue though. I've had Irish employees leave the country as they can't afford to rent. Something has to give.

felonious_Gru

https://www.boards.ie/discussion/comment/122740191#Comment_122740191

" Something has to give" Yes it does!

stocks are also parabolic right now as well and our economys health can always be judged by the American stock market, such is our dependence on American corporations, corrections are always inevitable

drunkmonkey

That dependency is dangerous, shareholders constantly chasing gains can't be good for Ireland as we're looking expensive. We're way to reliant on large multinationals while squeezing local sustainable businesses to the edge of extinction with constantly rising costs.

lightspeed

https://www.boards.ie/discussion/comment/122739827#Comment_122739827

Sorry not sure why it didn't paste as link but if you copy paste the link it works. The brutal fact is people in Ireland oppose anything that is half the size of what is considered high rise elsewhere and act like this is normal. I struggle to find a developed country elsewhere in the world that has the allergic reaction to high rise that we have. This will lead to a continued under supply as population growth looks set to continue in Ireland at least.

Making the assumption that rental yield and capital appreciation will fall off a cliff suddenly like the 2007 crash Is an ignorant assumption. When will property prices fall dramatically in London or New York?

felonious_Gru

https://www.boards.ie/discussion/comment/122740383#Comment_122740383

You have your reading of the market, I have mine

I wouldn't invest in BTL right now in Ireland, I'd have zero reservations however about buying a one bed apartment regardless of market conditions

drunkmonkey

https://www.boards.ie/discussion/comment/122740383#Comment_122740383

Where do you see prices settling from now, 10, 50, 100% and when, capital yield can't keep going like this around the country. Somone is going to get caught holding the bag at some stage, they always do.

felonious_Gru

https://www.boards.ie/discussion/comment/122741912#Comment_122741912

Yes they do, all cycles end

lightspeed

https://www.boards.ie/discussion/comment/122740395#Comment_122740395

Just curious why would you have no reservations getting a 1 bed to rent but not get involved in a BTL?

Are you of the thinking that yields will fall to a point that they don't exceed the higher interest rates for BTL?

PTSB BTL rates are 5.5% so I'd be surprised if yields fell to such a low level considering the current market. ECB just lowered interest rates by a further 0.5% which will cause further overheating and capital appreciation. It should also result in some lowering of BTL rates passed on to borrowers.

felonious_Gru

https://www.boards.ie/discussion/comment/122742309#Comment_122742309

I meant I'd have no reservation about buying a one bed apartment at what I saw was the right time

BTL is different to buying a home and for me assets are currently in bubble territory

Claw Hammer

https://www.boards.ie/discussion/comment/122741993#Comment_122741993

Different phases of the cycle end. Cycles almost never end, they repeat ad infinitum.

felonious_Gru

https://www.boards.ie/discussion/comment/122744708#Comment_122744708

Let's not go to pedantic town today