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16-06-2019, 14:47   #1
golfdiva
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Is this a good deal on a buy to let investment

Hi All

I caught up with an old college buddy this weekend. He has been working in the middle east the last 10 years and has managed to save a sizable amount in cash.

He is from Cork and looking to buy an investment property there. It will soley be used to provide an income as he is will be moving back shortly and looking to give up work.

He has looked at quite a few places but seems to have narrowed it down to one in particular. It is a 5 bed house ( all 5 beds ensuite ) . Good condition with a decent size kitchen /living room.

Its price is €280k but he will be lucky enough to need no mortgage .

House is let individually into 5 bedrooms. Each tenant pays €600 per month. It brings in €36k a year . The current agent will do the letting so takes 10%.The landlord pays bins , broadband & heating so will have expenses.



Seems a good return to me but I am no expert/experience. The house is 10 minutes from the city on the north side so don’t think it will ever appreciate much but this isn’t the reason he is buying.

What ye reckon about this deal? He has never been a landlord so may be a baptism of fire.
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16-06-2019, 18:44   #2
ted1
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I’d question paying an agent 3,600 euro. What does he do for that?
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16-06-2019, 18:48   #3
Spanish Eyes
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Sorry, I don't wish to sound mean, but if friend is in the lucky position to be able to buy a property for cash, he can afford some professional legal/taxation advice also.

No point relying on internet replies, they can give a steer but that's all. Many factors to consider really.
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16-06-2019, 19:21   #4
antoinolachtnai
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Ultimately it depends on how much he knows about the property in particular and property in general in Cork, and if he is satisfied it will go up in price. There will be a good bit of ongoing work with a property like this. He would be extremely unwise to buy the property whilst it is occupied. He would need to have vacant possession. He needs to understand the tax implications. He needs to compare the price with what neighbouring properties are getting and he needs to have professional advice to be happy with the title and that the structure is sound.

But if he doesn't mind paying tax and doesn't mind a bit of hard work, and is confident in Cork house prices, it could be good.
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17-06-2019, 06:42   #5
Lumen
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Relying on 3k/month rent from a house in an apparently unattractive area of Cork city seems a bit brave, but since it's unleveraged the risks are mostly limited to a poorer than expected yield.
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17-06-2019, 06:51   #6
AndrewJRenko
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It would also depend on his overall financial position, his appetite for risk and how much of his personal wealth he wants to focus on the Irish residential property market.
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17-06-2019, 07:08   #7
Chinese whospers
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He'll no longer be Irish domiciled and he'll need to consider other tax issues if moving back to Ireland.
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17-06-2019, 08:49   #8
Mad_maxx
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Apartments are better BTL investments if income is the number one priority, higher yield and cheaper maintenance
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17-06-2019, 10:42   #9
redarmyblues
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Apartments are better BTL investments if income is the number one priority, higher yield and cheaper maintenance
Mid terrace 2 beds in mature local authoritiy estates are the best BTLs, they can yield 10 to 15% have no management fees, low maintenance, ready to rent, are easy to insulate cheaply, are done to similar designs and generally hold surprises, no risk of the upstairs neighbor flooding and collapsing your ceiling, no common areas etc, etc
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17-06-2019, 10:55   #10
pwurple
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Ok, where to start with this one!


First of all, if it is such a good investment, think about why is it being sold? Instability in the rental market is an issue for landlords. Loads of issues, but one your friend may not be aware of, is that tenants can overhold (stop paying rent) for up to 2 years, before you can evict them. Can he sustain 2 years of no income? There is a rent pressure zone in Cork, which means he will not have control over the rent he sets after the first year, and god only knows what other changes govt will make, they have changed the rules on renting every year for the last decade.


You're not factoring in Tax. This is critical, as it's what wipes most landlords out. Property tax, tax on rental income. PRTB registration fees. Preliminary tax (paying tax on the income you didn't receive yet). Etc etc etc.

Covering all utilities is leaving himself open for service abuse. I have a set of Portuguese tenants who have the thermostats set to 30 degrees, they REALLY like the heat. Their heating bill is around 400 a month. Those expenses also can't be offset against tax as far as I know, but check it.


The agent is a necessity.

No comment on location as not enough info given.
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18-06-2019, 13:25   #11
Mad_maxx
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Quote:
Originally Posted by redarmyblues View Post
Mid terrace 2 beds in mature local authoritiy estates are the best BTLs, they can yield 10 to 15% have no management fees, low maintenance, ready to rent, are easy to insulate cheaply, are done to similar designs and generally hold surprises, no risk of the upstairs neighbor flooding and collapsing your ceiling, no common areas etc, etc
In terms of yield perhaps but a two bed apartment in a middle class area for the same purchase price is a better asset
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18-06-2019, 13:29   #12
Mad_maxx
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Ok, where to start with this one!


First of all, if it is such a good investment, think about why is it being sold? Instability in the rental market is an issue for landlords. Loads of issues, but one your friend may not be aware of, is that tenants can overhold (stop paying rent) for up to 2 years, before you can evict them. Can he sustain 2 years of no income? There is a rent pressure zone in Cork, which means he will not have control over the rent he sets after the first year, and god only knows what other changes govt will make, they have changed the rules on renting every year for the last decade.


You're not factoring in Tax. This is critical, as it's what wipes most landlords out. Property tax, tax on rental income. PRTB registration fees. Preliminary tax (paying tax on the income you didn't receive yet). Etc etc etc.

Covering all utilities is leaving himself open for service abuse. I have a set of Portuguese tenants who have the thermostats set to 30 degrees, they REALLY like the heat. Their heating bill is around 400 a month. Those expenses also can't be offset against tax as far as I know, but check it.


The agent is a necessity.

No comment on location as not enough info given.
Why it's " being sold" is irrelevant, people sell all the time for a myriad of reasons, in the case of myself I made a horrible decision to sell an apartment over two years ago, saw a 37% gain in the sixteen months I owned it but that was because I bought it silly cheap, person who bought also got it cheap and is able to charge 50% higher rent than I was getting

People sell for all sorts of reasons
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19-06-2019, 07:24   #13
pwurple
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Why it's " being sold" is irrelevant, people sell all the time for a myriad of reasons, in the case of myself I made a horrible decision to sell an apartment over two years ago, saw a 37% gain in the sixteen months I owned it but that was because I bought it silly cheap, person who bought also got it cheap and is able to charge 50% higher rent than I was getting

People sell for all sorts of reasons
They sure do. Hence, always a good idea to find out why!
Arm yourself with info.
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19-06-2019, 13:19   #14
the_syco
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House is let individually into 5 bedrooms. Each tenant pays €600 per month. It brings in €36k a year . The current agent will do the letting so takes 10%.The landlord pays bins , broadband & heating so will have expenses.
36k before tax. Also, does the €600 include bills?
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19-06-2019, 22:05   #15
redarmyblues
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In terms of yield perhaps but a two bed apartment in a middle class area for the same purchase price is a better asset
Those old terraces and the problems they have, are known knowns, mostly the formation of mold, also the original chimney will fail due to expansion of cracking in the concrete caused by ice. Recent apartment builds potentially have all sorts of problems hidden from view. Terraces if you pick your neighbourhood tend to gentrify slowly. I lived in an apartment that was in a sought after block, river view with balcony etc, when I moved in there were Doctors for neighbors when I moved out junkies to the right, travelling whorehouse to the left.
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