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Buying a property for the purposes of renting

Marymoore

I wanted to get advice on an idea I had to see if people think it’s a good or bad idea?!

so I have built up 30,000 in savings. I rent an apartment but can’t afford a mortgage for my family with my salary. I was thinking I could buy a small 1 bed apartment somewhere where the houses are cheaper and rent it out. That way it could be a good investment without letting my savings dwindle away with inflation. The tenants would then pay my mortgage. Or am I missing something? Thanks

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Caranica

No no no no no no no no no no!!!

You'd be on a hiding to nothing. Don't do it. Being a landlord isn't for the faint hearted. If it was that easy small landlords wouldn't be leaving the market with haste.

Tax and maintenance and upkeep don't seem to be on your radar. It is far from as simple as tenants "paying your mortgage". No guarantee your tenants would pay for starters.

mrslancaster

If you buy somewhere that property is cheaper ie, outside of your location, dont forget to add the cost of a managing agent/ local estate agent to look after the place to your expenses. Lots of small landlords have already left the business for various reasons- high taxes, a quagmire of tenant legislation, rented building regulations, eviction bans and difficulties getting property back. Also as Caranica said, the possibility of a non-paying tenant - that could be very stressful.

herbalplants

You can't afford a mortgage for your family but want to buy an investment! No no no.... You can make a proper big mistake. Taxation, non paying tenants, maintenance... You could get in big debt very fast.

Landlords are choosing to leave properties empty... Do you think they are stupid!

Focus on saving money for a property for your family. That is where you should focus on.

The Spider

Big one here if you do it you lose your first time buyer status

[Deleted User]

After taxes the rent might just about cover the mortgage for the investment property. You will have additional expenses so be prepared to pay out of pocket until the mortgage is repaid.

You also need to factor in a non performing tenant. It could take a year to evict them. If you are not receiving any rent are you in a position to cover the mortgage on the investment property and support your own family at the same time. If they damage the property are you in a position to be able to refurbish it before letting it to a new tenant.

If the state continue to legislate to make the rental market even less appealing to small landlords. If they legislate to prevent evicting tenants when selling the property are you prepared to take a haircut on your investment.

Rentals now only really work at scale or if you don't require a mortgage.

ApeEvolved

The absurdity of the OPs question and "thinking" highlights what a mess government has led this Country into 🤣.

This thread should be pinned on top of "Accommodation and Property"

3DataModem

I'm a big advocate of the value of investing in the lower-end of the Dublin property market.

But borrowing to do so with a 30k deposit? Nooooooooo.

DubCount

https://www.boards.ie/discussion/comment/120310392#Comment_120310392

I would not recommend anyone to become a one-property landlord with a mortgage. Lack of diversification, risk of rogue tenants, increasing interest rates and other costs with limited scope for rent increases, constantly changing regulations ... its hard to find a positive.

As for a 30k deposit. With a maximum LTV on buy to let mortgages of 70%, that leaves a maximum spend of 100k (not even allowing for solicitor costs and stamp duty etc.) You wont be buying a 1 bed apartment for 100k in Dublin -

Grumpypants

You would be better off buying bitcoin it would be less risky than becoming a landlord.

There is a reason 25,000 landlords have left. Why 40% of all houses sold this year are by landlords and why 20% have indicated they are very likely to sell soon.

When Asked why landlords are selling up – % of responses

No longer wish to be a landlord – 48

Taxation is too high on rental income – 45

Being a landlord is not profitable – 43

The regulatory environment – 36

I am retiring and my properties are my pension – 26

The property is no longer in negative equity – 24

Too much time needed in managing properties – 22

Gautama

I think it's a bad idea.

If at all possible I'd concentrate on buying a property for you and your family to live in. And fully utilise your first time buyer status.

Anecdotally I've heard that apartments really aren't an investment. They don't appreciate in value the way a house does.

Have you crunched the numbers on the rental income you'll make? You do realise you'll have to pay tax on the rental income? And that I must emphasize it paid on the income, not on the difference between the rent coming in and the mortgage going out. Your yearly profit may be minuscule, or be a loss!

I've been renting out a three bedroom house in south Dublin for the last decade or so. I'm raising the rent this summer for the first time in five years. The maximum I'm permitted to raise it is €106 per month. Which is less than what the mortgage has increased in the last few months.

Gautama

https://www.boards.ie/discussion/comment/120310901#Comment_120310901

That adds up to 244% though. Not 100%. Just being pedantic.

SwimClub

https://www.boards.ie/discussion/comment/120324637#Comment_120324637

Because some leave for more than one of the reasons listed, not profitable and regulatory environment both contributing to decision to sell for example.

amdublin

To answer your question in your first line:

Bad idea. Very, very bad idea.

MayoSalmon

Government will tax you out of existence...I wouldn't bother.

Gautama

The paperwork is a joke too. It’s now necessary to re-register tenants on an annual basis. I’ve had the same tenants for the last eleven years. Yet I must re-register them every October or face a fine if I don’t. And (as of the last time anyway), there was no “re-register” button.

farmingquestion

https://www.boards.ie/discussion/comment/120331979#Comment_120331979

how can it not be profitable? Unless they're not counting the capital appreciation which would be a smoothbrain thing to do.

SwimClub

https://www.boards.ie/discussion/comment/120339325#Comment_120339325

Non-paying tenants could make it unprofitable, repairing extensive damage by tenants, increases in buy to let mortgage interest rates.

Getting locked in to a low rent by rent controls years ago might make it unprofitable.

The extent of capital appreciation depends on house prices, do you have a crystal ball on Irish property prices over the next 5 years?

It's also possible to lose equity based on house price drops you know.

Any thoughts on how regulatory changes introduced by a new government might impact on buy to let property value?

Long Sean Silver

Personally I would advise against it. I can think of many other ways of risking your hard-earned money, most of them much less stressful and many far more enjoyable. Unless you have a ball of money burning a hole in your pocket, an inheritance, lottery win or the likes, I certainly would not set out to become a LL as things stand. Borrowing money to fund this investment would be (imo) crazy and fraught with danger, especially with rising interest rates, an increasingly onerous & unsympathetic regulatory environment, and the prospects of SF and their fellow left-leaning TDs likely to form a future Government.

Landlords have been vilified to such an extent in this country, that I usually never reveal to anyone (Tenants & Revenue aside) that I am one. If the OP buys a property down the country, don't be too shocked to find yourself cast as "the Cute Hoor from Dublin down to rip off the poor locals". Interestingly one of the Healy-Rae's (who owns multiple properties and good luck to him) said pointedly in a recent RTE interview that he was "a provider of accommodation". The word Landlord was not used. (Cute Hoor indeed).

1874

I think everyone has covered this, but I strongly recommend you not do this, speaking as someone who got out, not worth it for so many reasons, many/most mentioned. Aside from the fact that I think 30k isn't sufficient to start out on such a venture, 100% of your savings will be eaten away by this, more than 100% because you will be paying to maintain this venture before you can even save money. Most of the problems have been highlighted. Maybe others have left out other problems for politically correct reasons. If anything, it will limit/prevent you from using your savings (now gone) if an opportunity to buy ever arises (however unlikely it may seem), it will be absolutley gone forever if you invest in a property to rent, unless you can substantially add to your savings by earnings or winning the lotto.

1 Bed apartments? no room for growth in terms of usage for the occupant (owner or tenant), The best and possibly only case scenario (my opinion for now) for buying a 1 bed apartment is it's the only place you can afford when you dont have children, but imo people have gotten trapped in apartments with negative equity and cant afford to sell. For quality of life it may be better to rent somewhere cheaper thats more suitable than own and live somewhere not suitable. It's great if someone isn't spending money on rent, which is all gone once you stop renting (but necessary for many people, ie rentals are necessary). So, an owner paying your own mortgage, invests into your own asset what you would otherwise sink into rent, great.

1 Beds, even many apartments with more than 1 bed, are going to only attract a small certain base of people and they run the risk of being used for situations when the tenants outgrow it but cant move themselves, so potentially excessive wear and tear. Also, places in a cheaper price location are going to return lower rent and possibly only attract certain tenants. Right now the worst things are imo,

1. Eviction bans, because this is the only reason private individuals invest in property, it is an investment, not a short term one, but they need to get it back eventually. 2. It is a very slow costly process dealing with removing either a paying tenant at the legitimate end of a tenancy and even worse dealing with non paying tenants, who can refuse to pay for years and wreck a place and not a cent can be recovered from them, its an absolute joke of a system. 3. Ridiculous bureaucracy, which is in my opinion designed to stymy landlords dealing with problems, which in itself causes problems by encouraging bad tenants to behave badly.

I'd throw the whole idea out right now, but if you need to verify yourself, (pay to) speak to an accountant and clarify what your liability will be for taxes, (pay to?) to speak to a solicitor about what your legal obligations and what little rights you will have. It will be money well spent and likely to save you a fortune. Tax is owed/due on the full rental, many think this is fair, but you will essentially own, maintain and run a property with all its associtaed costs, which you may never be able to use yourself or even recover for sale, for the sole purpose of doing something the State cant or wont do, which is to provide housing and act as an agent to hand over half the money back in tax to the State (potentially 52% in tax alone, never mind other costs). The State who wont provide housing private landlords do. It's a different discussion but many see this tax level as fair and cant understand that it is solely an investment vehicle and not a responsibility to provide housing.

Even if I wont the lottery and would be completely unlikely to need to recover the property for my own use, I would be hard pressed to invest in property for a domestic rental now, because you may not even be able to recover any value from that investment by selling as it is difficult to recover property now, assuming there isn't an eviction ban in place at the whim of the Govt of the day. Never mind the hassle and time of dealing with it. I can speculate, I believe I know why, but wear and tear on certain rentals is very high, white goods dont last when people dont give a damn about misusing them.

I'd look into other investment opportunities, this isn't one, not 100% sure what is. If you have money to burn, then maybe property and is better than leaving it in the bank, other than that, throw this idea out and run away from it fast.

KristPom

I’d suggest broadening the search to include property management companies in the area. They often handle furnished rentals and might know of something that fits the timeframe.

Hontou

Read all the above comments, OP. I have 2 empty properties and am petrified of rerenting them, currently for sale. However, in hindsight, I believe the best rentals with the best return and least maintenance costs are 1-bedroom apartments. For example, you could buy an apartment in an undesirable town that has reasonable employment in factories and get a working tenant. Just stay away from all the potential tenants that, in legislation, I'm not allowed to mention here. (By the way, the problems are not caused by tenants but by the legislation that encourages them to be bad tenants. Most tenants, despite this, are good.)

SupaCat95

https://www.boards.ie/discussion/comment/120339325#Comment_120339325

How can it not be profitable? First the government tax you 56% you have a mortgage and you are probably at the mercy of the varible rate. Then you have to do the apartment to standard and maintain it, paint it, furnish it. Then you have to deal with trades men (be there next week dont turn up and cost the earth etc etc).

Then you hope you get good tenants. You think they are going to mop everything up, dont put the hot cups on the couch or worse the wood table? Then you get the bad ones they dont pay, love the pharma, and are antisocial that get you in trouble with the neighbours, introduce pets after the fact. Then you have the RTB and you can do nothing while you are in dispute with them. I had associates who, the landlord wanted to sell the house, they still paid the rent, ignored the problem and refused to leave. It was messy, lovely but unfortunate guys. You really want to bring that upon yourself? There are plenty of other stories (and videos) of landlords being chased off their own property by new tenants. Long gone are the days of hiring a few tough lads to remove troublesome tenants (see a case of UCC student who sued a landlord for wrongful eviction about 2 years ago?).

Lumengg

I’d suggest broadening the search to include property management companies in the area. They often handle furnished rentals and might know of something that fits the timeframe.
For example, this service on axonproperties.ca might offer options that aren’t listed publicly, especially if they manage student or family rentals that could be temporarily available.

mrslancaster

https://www.boards.ie/discussion/comment/122984746#Comment_122984746

Looks like that management company are located in canada. A local Agent would be better placed for managing a property in ireland.

HeidiHeidi

I've reported that "poster" before for dropping random links in threads dug up from the archives.

itsacoolday

I would advise against it. By the time you deal with paperwork, PTRB, income taxation, property tax, CGT, problem tenants, repairs, complaints, negative equity, BER costs when selling, high legal fees when buying + selling, not able to increase rent in line with inflation because of RPZ, empty periods, etc it is not worth it. Look at all the landlords that lost everything last time there was a recession. The next property recession is only a matter of time. Property is always cyclical. Plus if a left wing government gets in to power in 4 or 5 years time, you will be further villified and may not be able to sell it then.

soirish

Can someone give me the TL;DR why are landlors stressed about the reasons mentioned below? Specifically asking about Dublin which seems like a solid market based on the Price To Rent Ratio w/o mortgage.

https://www.boards.ie/discussion/comment/120310901#Comment_120310901

There is a reason 25,000 landlords have left. Why 40% of all houses sold this year are by landlords and why 20% have indicated they are very likely to sell soon.

When Asked why landlords are selling up – % of responses

No longer wish to be a landlord – 48

Taxation is too high on rental income – 45

Being a landlord is not profitable – 43

The regulatory environment – 36

I am retiring and my properties are my pension – 26

The property is no longer in negative equity – 24

Too much time needed in managing properties – 22

herbalplants

https://www.boards.ie/discussion/comment/123018436#Comment_123018436

Seriously?? The list is quite long.

dennyk

A lot of the landlords "leaving the market" are small-time landlords with just a couple of properties at most, or so-called "accidental landlords" who only opted to rent their place out because selling wasn't desirable or viable for them at the time. In both cases, they usually have other sources of income besides their rental properties, meaning their rental income is taxed at their marginal rate (which is likely to be most or all in the 40% income tax bracket and a higher USC bracket), thus the "taxes are too high" claim, and their rental properties are often mortgaged, not owned free and clear.

As for the "not profitable", small landlords often tend to confuse profit with cash flow and don't understand that the principal portion of their mortgage repayments are in fact profit, so they assume they are not making a profit if the rent doesn't fully cover their entire mortgage payment and all expenses with something left over. Many small landlords would also have legitimate issues with covering negative cash flow out of their own pockets in the short term, as well, so even if they do actually understand that they are making a long-term profit, that doesn't mean the situation is sustainable in the short term, if the rent (after taxes, mind) isn't in fact covering the full mortgage payment.

Finally, being a landlord isn't for everyone; it is a job and requires time, effort, and money, and there is risk involved, as it is difficult to remove non-performing tenants or to terminate a tenancy even with a completely legitimate valid reason.

soirish

Here is a quick ChatGPT calculation showing 5.78% ROI.

https://www.daft.ie/for-sale/apartment-11-the-windmill-lime-street-dublin-2/5914118

Based on the information provided for Apartment 11, The Windmill, Lime Street, Dublin 2, here is an estimated calculation of the annual net Return on Investment (ROI) for a non-resident landlord:

1. Gross Rental Income:

•Average Monthly Rent: €3,100

•Annual Gross Rent: €3,100 × 12 = €37,200

2. Deductions:

•Property Insurance: Approximately €300 per year

•Maintenance & Repair Costs: Estimated at 1% of property value annually. Assuming a property value of €350,000, this amounts to €3,500 per year.

•Property Management Fees: Typically 10% of monthly rent. For €3,100 monthly rent, this is €310 per month, totaling €3,720 annually.

•Rent Collection Agent Fees: €524 annually

•Withholding Tax (20%): €7,440

•USC (4%): €1,488

3. Total Deductions:

•Property Insurance: €300

•Maintenance & Repair: €3,500

•Property Management Fees: €3,720

•Rent Collection Agent Fees: €524

•Withholding Tax: €7,440

•USC: €1,488

•Total Deductions: €16,972

4. Net Annual Income:

•Net Income: €37,200 (Gross Rent) - €16,972 (Total Deductions) = €20,228

5. Estimated ROI:

•ROI: (€20,228 Net Income / €350,000 Property Value) × 100 ≈ 5.78%