Seeking advice - to buy a house or not.

Pussyhands · 16-08-2018 01:06PM

steo_magra wrote: »

As Jim stated above property is the worst investment you can make but on the flipside I'll be buying a house in the coming years as I will need somewhere to live and grow a family. At the moment what you need is patience.

Take all the good advice you can get.
Question though, Do you plan on meeting someone in the future and possibly starting a family ?
Is that a possibility ?

It's not something I'm looking for or even thinking about.

I don't know why you say property is the worst investment to make seeing as a lot of rich people are involved in property.

I was even looking at if interests rates went to 6% (not done so since 2000) and the interest payments would be less than 1100 a month. The example apartment I was looking at was fetching rent of 1300 a month for the full apartment.

SteM · 16-08-2018 01:32PM

Pussyhands wrote: »

I was even looking at if interests rates went to 6% (not done so since 2000) and the interest payments would be less than 1100 a month. The example apartment I was looking at was fetching rent of 1300 a month for the full apartment.

Things don't happen in a bubble though. If mortgage rates go up and the economy is hit by something major like a disastrous brexit then jobs will start to be lost. You're talking like you can absorb an increase to 6% but that's only if your (and your tenant's) circumstances don't change. You're also pointing out that average rates have not been at 6% since 2000 but they were pretty bloody close in 2007 & 2008 when people were losing their jobs.

You talk about people that have gotten wealthy from property. Landlords that can buy with cash or small loans during a recession when prices are low, rent out the property for the long term or sell after a recovery are the ones making money. I'm not aware of many single landlords property that are getting rich from their property, especially ones that bought at high prices. Most small landlords look to be getting out of the business from what I can see here.

Pussyhands · 16-08-2018 01:36PM

SteM wrote: »

Things don't happen in a bubble though. If mortgage rates go up and the economy is hit by something major like a disastrous brexit then jobs will start to be lost. You're talking like you can absorb an increase to 6% but that's only if your (and your tenant's) circumstances don't change. You're also pointing out that average rates have not been at 6% since 2000 but they were pretty bloody close in 2007 & 2008 when people were losing their jobs.

You talk about people that have gotten wealthy from property. Landlords that can buy with cash or small loans during a recession when prices are low, rent out the property for the long term or sell after a recovery are the ones making money. I'm not aware of many single landlords property that are getting rich from their property, especially ones that bought at high prices. Most small landlords look to be getting out of the business from what I can see here.

Do you see a fall in house prices from current levels happening?

SteM · 16-08-2018 01:41PM

Pussyhands wrote: »

Do you see a fall in house prices from current levels happening?

There's a real sense of deja vu in this thread.....

Jim2007 · 16-08-2018 02:50PM

Pussyhands wrote: »

So basically you're saying the only way to make money on property is in a recession. How is there so many wealthy people due to property then?

As Kenny Rodgers says - "every hand's a winner and every hand's a loser".

Bank fraud was systematic all over. Lehmans, AIB etc.

Stocks really aren't appealing to me as much as property seeing we're at an ATH andCGT is 33%.

BTW do you mind me asking how much you are worth?

Like I said at the end of the day it is up to you.... if you are just looking for someone to validate your opinion that is not me.

Bigmac1euro · 17-08-2018 12:13PM

Obviously it up to yourself.
I'm only going by what I've read.
People getting rich off property are usually the people who got in when the market was low.
Most likely cash buyers too. Starting off investing you'd be better looking at stocks.
At the moment stocks are extremely high so its probably not a good time.
Timing is everything. There seems to be a lot of people predicting the stock market to suffer a massive drop soon and with the way things are going i wouldn't be surprise.
My opinion would be as soon as it does take a hit invest in stocks. Property in Ireland is probably not a great investment unless you have enough cash to buy outright and at the right time. Right now the timing is bad as we are suffering a housing shortage. This is all just my opinion though. You could be right buying an apartment and sharing it while getting your mortgage paid, seems like a no brainer and could be the best decision you've ever made. Timing is everything though and of course its up to you. People are going to agree and disagree with every decision you make and in this case myself and others are disagreeing but we of course could be wrong.

dubliner999 · 20-08-2018 08:45PM

Interesting thread all round. I'm in a position close enough to the OP and I'm finding it really tough to decide to buy or not (and renting out a room). On one hand, the market is very pricey, but on the other hand I could potentially get a mortgage of a fixed rate of 2% for 25 years using the rebuilding Ireland scheme.

At the same time though, I have my savings in the stock market over the past few years and it has been doing quite well. Problem is: if say you have 60k in stocks and it increases 10% or whatever - that's great, but houses seem to be going up just as fast and that's on a much bigger figure than 60k so you're still losing out.

But OP - leaving money in the bank isn't the way to go in my opinion.

Jim2007 · 20-08-2018 10:23PM

dubliner999 wrote: »

but houses seem to be going up just as fast....

The figures say otherwise. And when you consider the additional risks I have already outlined when investing in property, it is actually a pretty poor return.

dubliner999 · 20-08-2018 10:27PM

Jim2007 wrote: »

The figures say otherwise. And when you consider the additional risks I have already outlined when investing in property, it is actually a pretty poor return.

Interesting, thanks. But when you've a significantly less amount of savings compared to the value of a property, sometimes it feels like you're missing out.

I do hope you're right and things start to drop though.

Pussyhands · 21-08-2018 12:07AM

dubliner999 wrote: »

Interesting, thanks. But when you've a significantly less amount of savings compared to the value of a property, sometimes it feels like you're missing out.

I do hope you're right and things start to drop though.

The thing about buying a house for me is I get other people to contribute paying off my mortgage as well as a probable increase in value. I also don't pay tax on profit when I eventually sell. (I wouldn't plan on living in it forever but after 4 years I'd have at least 80k saved again to go for another mortgage or something.

Stocks profits are subject to 33% tax.

Also the stock market is at an ATH and seems unsustainable while housing in Dublin and commuter areas will always manage to get someone in to rent.

Jim2007 · 21-08-2018 09:08AM

Pussyhands wrote: »

The thing about buying a house for me is I get other people to contribute paying off my mortgage as well as a probable increase in value. I also don't pay tax on profit when I eventually sell. (I wouldn't plan on living in it forever but after 4 years I'd have at least 80k saved again to go for another mortgage or something.

Of course at the end of the day it is your call, but you are now make the same arguments as people were making in 2005 - 2007 and look how that worked out. In four or five years time you could be sitting on negative equity and spend the following decade waiting for it to recover. And during that time your wealth will not be be growing. Equities have always recovered faster.

Pussyhands wrote: »

Stocks profits are subject to 33% tax.

Ah yes what I call the great Irish argument for avoiding equities, if I made a profit I'd have to pay taxes... make the profit and then worry about the taxes! Look at the diagrams above, you could pay a lot of taxes and still be ahead of property.

Pussyhands wrote: »

Also the stock market is at an ATH and seems unsustainable while housing in Dublin and commuter areas will always manage to get someone in to rent.

So how often do you thing people said that during the periods covered by the diagrams??? You should not try to time the markets in any case.

I have seen this play out several times now, the Swiss way, keep property very low and concentrate on equities hammer the Irish approach hands down. In a recession they can be far more flexible because their financial commitments is to the next three months rent and their investments recover far quicker than property. Based on what I've seen working in the industry, you can expect the average craft worker to retire with 750k - 1m in assets.

Pussyhands · 21-08-2018 07:43PM

Jim2007 wrote: »

Of course at the end of the day it is your call, but you are now make the same arguments as people were making in 2005 - 2007 and look how that worked out. In four or five years time you could be sitting on negative equity and spend the following decade waiting for it to recover. And during that time your wealth will not be be growing. Equities have always recovered faster.

Ah yes what I call the great Irish argument for avoiding equities, if I made a profit I'd have to pay taxes... make the profit and then worry about the taxes! Look at the diagrams above, you could pay a lot of taxes and still be ahead of property.

So how often do you thing people said that during the periods covered by the diagrams??? You should not try to time the markets in any case.

I have seen this play out several times now, the Swiss way, keep property very low and concentrate on equities hammer the Irish approach hands down. In a recession they can be far more flexible because their financial commitments is to the next three months rent and their investments recover far quicker than property. Based on what I've seen working in the industry, you can expect the average craft worker to retire with 750k - 1m in assets.

and if the stock market crashes like a few years ago you'll wait years to make it into the positive again.

dubliner999 · 21-08-2018 08:52PM

Pussyhands wrote: »

The thing about buying a house for me is I get other people to contribute paying off my mortgage as well as a probable increase in value. I also don't pay tax on profit when I eventually sell. (I wouldn't plan on living in it forever but after 4 years I'd have at least 80k saved again to go for another mortgage or something.

Stocks profits are subject to 33% tax.

Also the stock market is at an ATH and seems unsustainable while housing in Dublin and commuter areas will always manage to get someone in to rent.

I'd be doing the same. Would work out about 1k a month mortgage and I'd probably get about 700 quid for renting a room. It's tempting.

Jim2007 · 21-08-2018 09:14PM

Pussyhands wrote: »

and if the stock market crashes like a few years ago you'll wait years to make it into the positive again.

Look at the charts the answer is right there before your eyes, but you choose to ignore it. You will find the same pattern on previous occasions.

EmptyTree · 22-08-2018 12:00AM

dubliner999 wrote: »

I'd be doing the same. Would work out about 1k a month mortgage and I'd probably get about 700 quid for renting a room. It's tempting.

/OP
It's tempting, but that's assuming that you'll always get 700 (or more) for the room. In 2, 5, 7 years time? Who knows. House prices go up. House prices go down. Interest goes up. Interest goes down. Over the lifetime of a mortgage you could well see a bit of everything. But we can't assume it'll stay this way forever.

To be fair I'm having the same debate myself as to whether I should buy or not. Ultimately we are at historic low interest rates which let's not forget are controlled from Germany. If the German economy begins to overheat they won't hang about increasing interest rates (they won't be too pushed about how it'll impact Ireland) much of the money funding the banks comes from China, who knows what a trade war will do to that.

Granted this is a bit dooms day but Brexit and a combination of who knows what could impact jobs here, not to the same extent as 2008 but less jobs, less people renting, less people buying, that would certainly take the wind out of the sails of spiralling rent prices. Let's face it, it probably won't be Brexit but instead some other weird or wonderful thing no one has even thought of yet that'll muck things up.

It really bothers me how so much of this thread reads so vividly like something from 2007.

By all means buy if that's what's right for you, but don't be fooled into thinking house /rent will only ever go up and buying could never go wrong.

TLDR:
The economy
Far away things are scary
We're all doomed
You have to take a chance.... By all means you can jump first

rom · 22-08-2018 12:36AM

Can I interest you in some magic beans?

smacl · 22-08-2018 11:15AM

EmptyTree wrote: »

It's tempting, but that's assuming that you'll always get 700 (or more) for the room. In 2, 5, 7 years time? Who knows. House prices go up. House prices go down. Interest goes up. Interest goes down. Over the lifetime of a mortgage you could well see a bit of everything. But we can't assume it'll stay this way forever.

Additionally, houses cost money to maintain in addition to the mortgage. I've my own home and another house that I bought for my dad which I have rented out since he passed on. Total cost of the second house after the refurbishment was more than it has been worth since and the rent doesn't quite cover the outstanding mortgage. White goods go on the blink, you need to get them fixed. Plumbing or heating glitch, you need to get it fixed, etc... Redecorating is needed a number of times over the length of the mortgage, you pay. Advertising the place costs, and you receive no income for any vacant periods (or defaulting tenants) but you still pay the bank. Over a twenty five year mortgage, chances are you're going to hit at least one major recession, so you will have some lean rental period when you're least likely to be able cope with it.

For all that, buying a house and renting a room out to help pay the mortgage isn't a bad idea if you think you can afford the inevitable shortfalls. My experience has been that you get ~9-10 months rent that contributes to the mortgage for a 12 month period after costs. Personally, I'd hang out for the next downturn and be the person renting the room until then unless you've got a family.

Pussyhands · 22-08-2018 12:51PM

smacl wrote: »

Additionally, houses cost money to maintain in addition to the mortgage. I've my own home and another house that I bought for my dad which I have rented out since he passed on. Total cost of the second house after the refurbishment was more than it has been worth since and the rent doesn't quite cover the outstanding mortgage. White goods go on the blink, you need to get them fixed. Plumbing or heating glitch, you need to get it fixed, etc... Redecorating is needed a number of times over the length of the mortgage, you pay. Advertising the place costs, and you receive no income for any vacant periods (or defaulting tenants) but you still pay the bank. Over a twenty five year mortgage, chances are you're going to hit at least one major recession, so you will have some lean rental period when you're least likely to be able cope with it.

For all that, buying a house and renting a room out to help pay the mortgage isn't a bad idea if you think you can afford the inevitable shortfalls. My experience has been that you get ~9-10 months rent that contributes to the mortgage for a 12 month period after costs. Personally, I'd hang out for the next downturn and be the person renting the room until then unless you've got a family.

You see I have 60k in my account now and although my rent is low I'm saving approx 18k a year.

If I go for say a 40k deposit, I can get a 30 year mortgage for about 750...I could get someone in the room for at least 500 a month. So I'd still be saving 18/19k a year. Even if the interest rates went up 400€ a month that's 5k a year..I'd still save 15k a year.

I could even put 60 into the deposit and pay a 650 pm mortgage.

I'm thinking of waiting it out while my rent is good for a couple of years and seeing what happens with prices but I still need to make my money grow...it's losing value every year.

Cute Hoor · 22-08-2018 12:51PM

OP

You started the thread on 27th May.

If you had gone out the following morning and bought €60k worth of VTI (Vanguard Total Stock Market ETF), your €60k would now be worth €64k (appreciation + dividend) give or take a few cent, it would have cost you virtually nothing to buy or sell, there would have been no maintenance costs or headaches, and it could all have been done with indenting a few keys on the puter. You would have to pay tax on your profits and dividend of course, but sure isn't it grand to have profits in the first place to pay tax on.

One could of course pick many more stocks, some that would have yielded far better results, some that would have yielded far poorer results.

Cute Hoor · 22-08-2018 12:57PM

BTW imo you're also in a great position to be paying into a pension fund, the earlier you start the better the returns long term, max the 40% tax element, your employer will (I presume) contribute as well, a no-brainer imo.

smacl · 22-08-2018 01:12PM

Cute Hoor wrote: »

BTW imo you're also in a great position to be paying into a pension fund, the earlier you start the better the returns long term, max the 40% tax element, your employer will (I presume) contribute as well, a no-brainer imo.

Pension fund has probably been one of my best investments over the years, and a no-brainer if like myself you're self employed. Makes sense at many levels.

smacl · 22-08-2018 01:30PM

Pussyhands wrote: »

You see I have 60k in my account now and although my rent is low I'm saving approx 18k a year.

If I go for say a 40k deposit, I can get a 30 year mortgage for about 750...I could get someone in the room for at least 500 a month. So I'd still be saving 18/19k a year. Even if the interest rates went up 400€ a month that's 5k a year..I'd still save 15k a year.

I could even put 60 into the deposit and pay a 650 pm mortgage.

I'm thinking of waiting it out while my rent is good for a couple of years and seeing what happens with prices but I still need to make my money grow...it's losing value every year.

First off, I'd tend to go for a shorter time frame on the mortgage. At thirty years you're paying a disproportionate amount of interest versus capital. You also have to look at the risks, in terms of the possibilities of not having an income for some period of the mortgage or not having a tenant. I certainly wouldn't sink all your cash into a deposit as you need a buffer for these times, as with a mortgage you're essentially in what can be an unforgiving debt here. If you have low rent and the chance to save, you also have to ask yourself if we're currently in a property bubble and if now is the right time to buy? My feeling is that we're in the boom part of a regular boom/bust cycle and if you can hang onto equity, I'd wait it out until the next bust.

sKeith · 22-08-2018 03:02PM

smacl wrote: »

First off, I'd tend to go for a shorter time frame on the mortgage. At thirty years you're paying a disproportionate amount of interest versus capital. You also have to look at the risks, in terms of the possibilities of not having an income for some period of the mortgage or not having a tenant. I certainly wouldn't sink all your cash into a deposit as you need a buffer for these times, as with a mortgage you're essentially in what can be an unforgiving debt here. If you have low rent and the chance to save, you also have to ask yourself if we're currently in a property bubble and if now is the right time to buy? My feeling is that we're in the boom part of a regular boom/bust cycle and if you can hang onto equity, I'd wait it out until the next bust.

If you get a 30 year mortgage, you can arrange to pay it off at the rate of the shorter period mortgage (10, 15, 25 , whatever), then you will only pay the interest of the shorter period mortgage.

If you come on hard times, or have a struggle, you can always, unpenalized, drop back to normal repayments, which will be lower than the original amount, as you have been overpaying.

This is an advantage you cannot do, if you get the mortgage at the shorter term.

smacl · 22-08-2018 05:39PM

sKeith wrote: »

If you get a 30 year mortgage, you can arrange to pay it off at the rate of the shorter period mortgage (10, 15, 25 , whatever), then you will only pay the interest of the shorter period mortgage.

If you come on hard times, or have a struggle, you can always, unpenalized, drop back to normal repayments, which will be lower than the original amount, as you have been overpaying.

This is an advantage you cannot do, if you get the mortgage at the shorter term.

Though if you do this, you can get stung for an early repayment charge. We went for 20 years on both of our mortgages and looked at paying one of them down at an accelerated rate. After doing the sums it made better sense to throw the surplus into the pension.

sKeith · 22-08-2018 05:47PM

smacl wrote: »

Though if you do this, you can get stung for an early repayment charge. We went for 20 years on both of our mortgages and looked at paying one of them down at an accelerated rate. After doing the sums it made better sense to throw the surplus into the pension.

You don't fix your mortgage interest rate, you use the variable rate. There are no early repayment charges for a variable rate mortgage.

Pussyhands · 23-08-2018 06:15PM

Cute Hoor wrote: »

OP

You started the thread on 27th May.

If you had gone out the following morning and bought €60k worth of VTI (Vanguard Total Stock Market ETF), your €60k would now be worth €64k (appreciation + dividend) give or take a few cent, it would have cost you virtually nothing to buy or sell, there would have been no maintenance costs or headaches, and it could all have been done with indenting a few keys on the puter. You would have to pay tax on your profits and dividend of course, but sure isn't it grand to have profits in the first place to pay tax on.

One could of course pick many more stocks, some that would have yielded far better results, some that would have yielded far poorer results.

Show me where I buy it so.

smacl · 23-08-2018 07:32PM

Pussyhands wrote: »

Show me where I buy it so.

As Dougal might say, 'Careful now!' Very easy in hindsight to point out something that would have been a great investment three months ago. e.g. the crypto market is built on that type of logic. Before spending your hard earned, DYOR and do it well.

Pussyhands · 23-08-2018 08:58PM

smacl wrote: »

As Dougal might say, 'Careful now!' Very easy in hindsight to point out something that would have been a great investment three months ago. e.g. the crypto market is built on that type of logic. Before spending your hard earned, DYOR and do it well.

Show me exactly where I could have bought the investment you mentioned.

By the way, if I had bought a house in May I'd have earned at least 2k from rent, 400 in my own rent (plus sending the extra money into my house thus like saving it) and whatever increase in house value....tax free.

Jim2007 · 23-08-2018 09:51PM

Pussyhands wrote: »

Show me exactly where I could have bought the investment you mentioned.

By the way, if I had bought a house in May I'd have earned at least 2k from rent, 400 in my own rent (plus sending the extra money into my house thus like saving it) and whatever increase in house value....tax free.

Look buying a single share is not much better than buying a house because again you are failing to diversify to reduce risk and you just don’t have the skills or experience to stock pick.

You are better to look at some kind of fund or trust. The Foreign & Colonial Investment Trust, might be an example, not a recommendation. This is a fund with a very long history and has been doubling in value more or less every 5 or 6 years. So your 60k in there for 25 years would have come to around say 800k+. Of course had you added to it over the years it would be greater.

Now past performance is no guarantee of future success, if you go with something like that profile and stick with it for 25 years through thick and thin, adding to it each year you should do very nicely.

Jim2007 · 23-08-2018 10:06PM

Pussyhands wrote: »

By the way, if I had bought a house in May I'd have earned at least 2k from rent, 400 in my own rent (plus sending the extra money into my house thus like saving it) and whatever increase in house value....tax free.

But look at the risk and the gearing you would have had to take on to achieve 50% of what was on offer. You really need to get a handle on the concept of risk or it could well cost you in the long term.

Honestly I think the best advice I can give is to press the pause button for a year, leave the 60k where it is and spend the time educating yourself - read, read, read... it might prevent you from making a big mistake down the line.

Seeking advice - to buy a house or not.

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