Are landlords selling up?/asking prices not met.

garred · 08-08-2005 9:07pm

hmmm wrote:

Jaysus that single post sums up everything that makes me shake my head at the current overseas property mania. Well done.

Its comments like "clueless investing" that does the same for me. I would be glad to hear of any investment that you get a 100% guarantee with.
Also if you have ideas on how an investment should be investigated please share. That is the whole idea of the thread/forum is to inform people, give opinions, etc.
Not being patronising by saying this, honestly, we all share what info/experience we have.

Bluehair · 08-08-2005 11:27pm

The highly geared nature of property investment means that losses as well as gains can be very big and this is a fact that it seems the majority of Irish either don't fully appreciate or choose to ignore (since the market can never go down right?).

While you do indeed "need money to make money" these speculators(for they are not really investors) break the golden rule of investing; Don't risk what you can't afford to lose!

Unfortunately gains over the last few years have meant many are wearing rose-tinted glasses when it comes to honest research and working out genuine "plan B" situations in case something goes awry.

Zaph0d · 08-08-2005 11:30pm

I find the 10% guranteed return very hard to believe.
Why would a bank guarantee this without the money held in trust?
Have you spoken to anyone in the bank to verify this story?
Presumably the 10% return is gross. What's the predicted net return?

garred · 09-08-2005 9:54am

Zaphod, a lot of foreign property development are guaranting rental income. Of course some of the price you are paying for the property (still think they are slightly overpriced at the mo) is covering some of this.
The Dutch bank actually have done this many times before. Yes they are covering this (emailed them) but hav'nt investigated it fully as I did'nt go for this. My solicitor over here has heard of a few people that have dealings with them.
Net gains, well obviously you would have to pay tax (no tax agreement between the two countries) but no maintenance charges as it is all covered by the hotel during this time. Its up to the individual to do the maths as to whether or not they can support it, but with a return of 9k (10%) a year gross it would certainly cover the costs of a topup and more.

Man this has gone way off topic, sorry, but while we are here, anyone any other investment ideas besides foreign property?

Bluehair · 09-08-2005 10:05am

garred wrote:

Man this has gone way off topic, sorry, but while we are here, anyone any other investment ideas besides foreign property?

I'd be interested to hear your ideas on my post above re: ignoring the consequences of gearing and not risking what you can't afford to lose.

garred · 09-08-2005 10:19am

Bluehair wrote:

I'd be interested to hear your ideas on my post above re: ignoring the consequences of gearing and not risking what you can't afford to lose.

Sorry.
Suppose it is a bit of speculating/investing. What I can't afford, don't know what you mean by that. Sure I'm borrowing but don't know what you may think will happen, that the propery here and abroad will crash, interest rate rocket?
Suppose it could all happen. Say for arguments sake the foreign property will be at the very least covering its costs, so that leaves you with your property you borrowed against. If the price falls, your still covering your investment. If interest rates rocket, depending on the rate, you could still cover costs, maybe take a small loss. What kind of scenario do you have in mind?

Bluehair · 09-08-2005 11:04am

Your post typifies exactly what I'm talking about! There's an awful lot of "could, maybe" in there given the kind of money on the line and you are relying on things working out. Whats your plan B if it doesn't?

Just for a small example btw roughly a €100k mortgage would set you back approx €450 a month(@ 3.5%). Thats before life/property insurance, maintanence, fixtures and fittings, lettings agents etc.

If rates were 5.5% that would go upto close to €570 pm. Working off that figure should be your minimum for risk purposes and then factor in all the above costs. Presuming a 10-month year (as is standard in this equations too) are you still covering costs? Good.

Now what if the capital appreciation doesn't happen (forget the crash for a minute). Your costs already mean you need a certain percentage growth before you hit any profit. Have you worked out that margin?

I'll give the benefit of the doubt here but why don't you share the actual maths with us and demonstrate why this is a good investment (and not speculation).

Risking your own cash is one thing. Risking money you've borrowed is quite another.

garred · 09-08-2005 1:41pm

Okay:

30 year mortgage (say 3.5%) on 100k monthly repayments= 450

Setup fees:

Solictior 800 (includes notary, translation, etc.)
Permit for propery foreign buyers 900
Elec connection 300

Ongoing fee
Property insurance (inc earthquake) 350 annually
Life insurance 25 monthly

1st year income (10%) 9000
less
mortgage 5400
start up fees 2000
Insurance 350
Mort Protection 300

+950 first year
less Turkish Tax
(25% on 75% of profit) 178

Gives you a pre Irish tax profit of 771

2nd year and each subsequent

Income 9000

less
Insurance 350
Mortg Protection 300
Mort Repayments 5400

Gross 2950

Less Turkish Tax
(25% on 75%) 553

Gives you a pre Irish tax profit of 2396 x 9 years = 21567 + 1st year (771)

Leaves over 10 years pre Irish tax profit of 22338 euro

There are no maintenance/fixture&fittings,etc as this is all covered as specified on the site.

In Turkey you pay 25% on 75% of your profit.

Also add into the equation repayments on initial 100k loan (don't have the actual calculator with me) but would be brought down to arond 75k maybe even less.

On top of this is the fact that the property may go up in value. But that are the figures based on circumstances today. Don't think I forgot anything, rounded up/down to the nearest euro.

EDIT:

Sorry just read what I wrote and in Turkey your taxed on the gross 9000 (25% of 75% of this = 1263 annually). So with amended figures (I was hungry at the time

):

After 10 years = pre Irish Tax profit of 10,630.

MorningStar · 09-08-2005 2:16pm

Didn't the recent bombimg on Kusadasy (sp?) effect the prices in Turkey especially to Irish investors?

soma · 09-08-2005 2:42pm

garred wrote:

1st year income (10%) 9000
less
mortgage 5400
start up fees 2000
Insurance 350
Mort Protection 300
+950 first year
less Turkish Tax
(25% on 75% of profit) 178

Gives you a pre Irish tax profit of 771

is that 9000 gross..? if so, surely your calculations will be affected..?

Having said that, I think garred is not an example of the blind-leading-the blind property crazed "investor" (they are speculators not investors). If I recall from another thread he is either turkish or at least of turkish origin so is in a far better situation to be analysing the situation and prospects there, and if things are going sour perhaps he'll be lucky and be one of the first to catch wind of any danger due to having some contacts on the ground(?).

What is insane is the buy-anywhere,buy-anything,buy-now crowd who would be hard pressed to locate their latest investment on a map.

Or whats truly hilarious are those radio ads along the lines of "want to invest in a foreign property? but want to do it hassle free?" etc... my god, if u are about to plonk down 100-250k, and unless u are super rich, you'd better be prepared for some hassle and effort to ensure you are making a sound, wise & secure investment.

garred · 09-08-2005 2:51pm

I think this has gone on for long enough. Nope not Turkish, but as I say I've done my sums for my particular propery (not the one given), granted I do have different circumstances that are slightly more beneficial than borrowing straight mortgage (although am still borrowing) so I guess we'll agree to disagree lads. Good and fair points made by you all though.
God bless and good luck

Victor · 09-08-2005 6:40pm

garred wrote:

Zaphod, a lot of foreign property development are guaranting rental income.

In what currency? Will your mortgage be in the same currency? What if this (third country) "bank" goes bust?

garred wrote:

1st year income (10%) 9000

9000 what?

Can you get a 3.5% mortgage in Turkey? Will an Irish bank give you a mortgage on a Turkish property?

Does this include management, maintainence, cleaning, vacant periods (how much rent is "guaranteed"?)

garred · 09-08-2005 8:27pm

Okay Tusky, was'nt going to reply to this anymore but seeing as your a mod gotta keep on your good side

The currency is in euro. 9000 euro which is 10% of the property price=guaranteed rental income.
The original "argument" was about topping up a mortgage to pay for a foreign property, so that is how you would get the "cash" for this as Irish banks don't give straight mortgages for international properties. At least mine does'nt (IIB).
The bank is the Dutch bank, international bank of Holland, doubt it will go bust. However with everything nothing is concrete.
As stated it covers all maintenace fees, property maintenance, cleaning, furnishing replacements, etc, there would be no deductions from your rental income for ongoing maintenance of the property.

I guess some people just have a dislike of foreign/local property investment.
Blind/speculative investing, etc, obviously if anyone is going for it or investigating the possibility do homework, get tax/legal advice, research developer/similar developments, etc.
I've given reasons, facts, figures, not much more I can do.
Its one option as there are plenty out there.

This really is my last reply.
God bless.

hmmm · 09-08-2005 10:25pm

Just one more reply - I can't find any reference on the Dutch banking regulator site to the "International Bank of Holland" and google returns zero results. If like you say you have done your research would you mind pointing me towards your review of this bank? Not saying there's anything funny here, but I would like some more background on it.

This developer - could you let us know when they built their first property under these conditions (10 years guaranteed rent) and how long their first clients have been receiving these payments? I'm assuming as you're about to sink large amounts of money into one of these developments that they have a long pedigree you can tell us about?

RainyDay · 09-08-2005 10:44pm

garred wrote:

Okay:

30 year mortgage (say 3.5%) on 100k monthly repayments= 450

Setup fees:

Solictior 800 (includes notary, translation, etc.)
Permit for propery foreign buyers 900
Elec connection 300

Ongoing fee
Property insurance (inc earthquake) 350 annually
Life insurance 25 monthly

1st year income (10%) 9000
less
mortgage 5400
start up fees 2000
Insurance 350
Mort Protection 300
+950 first year
less Turkish Tax
(25% on 75% of profit) 178

Gives you a pre Irish tax profit of 771

2nd year and each subsequent

Income 9000

less
Insurance 350
Mortg Protection 300
Mort Repayments 5400

Gross 2950

Less Turkish Tax
(25% on 75%) 553

Gives you a pre Irish tax profit of 2396 x 9 years = 21567 + 1st year (771)

Leaves over 10 years pre Irish tax profit of 22338 euro

There are no maintenance/fixture&fittings,etc as this is all covered as specified on the site.

In Turkey you pay 25% on 75% of your profit.

So what about your Irish tax liability?

A note of caution to those who see no risk in using the equity built up in your own home. You are putting your home at risk for the purposes of an investment. IMHO, anyone with kids who is prepared to put their family home at risk for an investment is crazy.

Banks don't insist on mortgages for the crack. They insist on mortgages because they can and will repossess the property if they have to. They wont do this lightly - it will only be their last resort. But they will reposs the property if they have to.

This is a high-stakes game.

MorningStar · 10-08-2005 8:15am

RainyDay wrote:

They insist on mortgages because they can and will repossess the property if they have to. They wont do this lightly - it will only be their last resort. But they will reposs the property if they have to.

This is a high-stakes game.

Banks don't insist on mortgages it's a loan. You ask the bank for it

Did you mean mortgage protection?

Either way apparently there has not been an increase in home repossesion which is a nice thing to know.

ionapaul · 10-08-2005 9:07am

I don't think many in this country with a young family are 'freeing the equity in your property!!!!*' (as the banks like to encourage us to do) to fund property investment or speculation. At least in my experience, it is younger people without children or older couples with the kids flown the nest who choose this level of risk. Unfortunately, most of these 'investors' don't really know the first thing about investing, don't know about diversification, and are likely to own multiple properties but not a single share, bond or mutual fund investment!

*does this phrase scare anyone else?

Bluehair · 10-08-2005 10:22am

ionapaul wrote:

*does this phrase scare anyone else?

Hell yeah, there's nothing free about it! :eek:

For what it's worth I know quite a few people with young kids who are getting on board with this kind of nonsense. It's a dream that's being sold not just an investment property "sign here and someone else will pay for it, i.e. 'the rent'", "sell on in few years time and double your money" etc. etc

I prefer to listen to the wisdom in an older maxim "if it's too good to be true then it's not true".

The crazy thing is many foreign properties are recognised to have 3 prices; 1 for the locals, 1 for the foreigners and 1 for the Irish. No prizes for guessing the highest!

MorningStar · 10-08-2005 10:51am

I only think it is scarey as the ill informed ignore the risks. I have not seen a bank promote equity release other than the short lived parental helping mortgages. They do have products available but never saw a poster or ad say" Borrow on your equity to buy stuff or another house and make a profit" in Ireland. Even the dodgy UK finance ads aren't quite so blatant.
Banks want profits and the will rip people off but legislation is pretty strict. You need to ignore a lot to put yourself at risk. Your solicitor asks you do you understand you could lose your home if payments aren't met on top of the banks. I would love to say screw them when things go bad but it will effect us all.

Johnny Jukebox · 10-08-2005 10:58am

My advice, from experience is to only believe what you can see, touch and hear yourself. If you're buying abroad, fly there and take a couple of weeks of *work* to familarise yourself with the local business environment covering everything from real estate, utilities, banking, tourism, services, rental market (local and holiday) and so on. I've found that the reality as relayed in good faith by the Irish intermediaries is no substitute for on the ground experience.

Only then are you in a position to factor everything in and do the math on the investment risk.

Culchie · 10-08-2005 11:01am

I think there is a lot of emotive language being used to describe entrenched positions.

There are those who simply risk averse, and there are those who are willing to invest in overseas property.
Often this can be down to personal circumstances....kids etc...

I think if people properly study their prospective overseas markets, upcoming infrastructure improvements, political status, economic indicators, rental potential, ease of access, competition, local real property prices, have a good solicitor etc... then investing overseas should be based on the same logic and fundamentals as investing in Ireland.
If you don't do the above research etc... you are an idiot.

That is the biggest pitfall I see people making, not putting in the same work and research on an overseas property than they would with an Irish investment.

Victor · 10-08-2005 9:48pm

MorningStar wrote:

Banks don't insist on mortgages it's a loan.

The "mortgage" is where the bank holds the deeds and registers "first dibs" on the property if it is sold. It is different from, but part of the "mortgage loan".

Johnny Jukebox wrote:

good faith by the Irish intermediaries

Tee hee hee

RainyDay · 10-08-2005 10:22pm

MorningStar wrote:

Banks don't insist on mortgages it's a loan. You ask the bank for it Did you mean mortgage protection?

They insist on securing any loan for overseas property on your existing property. This means they can and will reposses your existing property if your overseas investment goes very bad. You are putting your family home at risk for an investment.

MorningStar wrote:

Either way apparently there has not been an increase in home repossesion which is a nice thing to know.

Just wait until the rates start climbing up again, and the much-promised growth in Bulgaria/Croatia/Turkey fails to materialise. I'm not suggesting that repossesions will be common-place. I am suggesting that anyone who uses the equity in their own home for investment purposes needs to fully understand the risk they are taking.

Culchie wrote:

That is the biggest pitfall I see people making, not putting in the same work and research on an overseas property than they would with an Irish investment.

That's certainly a big pitfall and a very common one. But for me, the biggest pitfall comes earlier in the cycle, when the investor plumps for property as the preferred option without considering the other options available to them.

Culchie · 11-08-2005 12:39pm

I dunno Rainyday, it seems that some people don't agree with any type of property investment, full stop.

MorningStar · 11-08-2005 2:06pm

RainyDay wrote:

They insist on securing any loan for overseas property on your existing property. This means they can and will reposses your existing property if your overseas investment goes very bad. You are putting your family home at risk for an investment.

It is still a choice I haven't heard of any bank manager holding a gun to anybodies head and say borrow more money. The banks want to insure the money in a legal district they have control so what is the big deal

RainyDay wrote:

Just wait until the rates start climbing up again, and the much-promised growth in Bulgaria/Croatia/Turkey fails to materialise. I'm not suggesting that repossesions will be common-place. I am suggesting that anyone who uses the equity in their own home for investment purposes needs to fully understand the risk they are taking.

In your opinion but it is important to note that house possesion went up in England prior to the crash. The speed that rates can go up now is so much more controlled than in the past it is a lot less of a risk. Both the irish and other country property prices need to crash.

There are risks but some people blow them up and others play them down. The stupid will never listen to good advise if they think there is a quick rich scheme. Pyramid schemes were in the news yesterday! There has to be a point where you have to just let people be stupid.

Culchie · 11-08-2005 2:17pm

MorningStar wrote:

It is still a choice I haven't heard of any bank manager holding a gun to anybodies head and say borrow more money. The banks want to insure the money in a legal district they have control so what is the big deal

In your opinion but it is important to note that house possesion went up in England prior to the crash. The speed that rates can go up now is so much more controlled than in the past it is a lot less of a risk. Both the irish and other country property prices need to crash.

There are risks but some people blow them up and others play them down. The stupid will never listen to good advise if they think there is a quick rich scheme. Pyramid schemes were in the news yesterday! There has to be a point where you have to just let people be stupid.

I don't think this post holds any more strength, where you say house prices will crash, versus the counter argument that house prices will rise.

Well tell me, what would you have said in 1995 to someone investing in property .....don't do it? Look what happened in England !!!
You would have been wrong wouldn't you?

Don't get me wrong, there are some idiots who go along to The Red Cow and sign away their equity in their house on a property they have never seen in Costa del Concrete........ however, I am getting sick of people who keep calling people 'stupid' for investing in property, but do not back it up with facts.

Property has gone up what ... 200-300% in 10 years .... hardly a 'stupid' investment.

garred · 11-08-2005 2:31pm

Culchie wrote:

I don't think this post holds any more strength, where you say house prices will crash, versus the counter argument that house prices will rise.

Well tell me, what would you have said in 1995 to someone investing in property .....don't do it? Look what happened in England !!!
You would have been wrong wouldn't you?

Don't get me wrong, there are some idiots who go along to The Red Cow and sign away their equity in their house on a property they have never seen in Costa del Concrete........ however, I am getting sick of people who keep calling people 'stupid' for investing in property, but do not back it up with facts.

Property has gone up what ... 200-300% in 10 years .... hardly a 'stupid' investment.

Amen Culchie, amen.

MorningStar · 11-08-2005 3:01pm

Culchie wrote:

I don't think this post holds any more strength, where you say house prices will crash, versus the counter argument that house prices will rise.

I always argued that prices will level out but more specifically that won't crash. I advocate the govenment create a soft landing that would increase use of existing property stock.

Culchie wrote:

Well tell me, what would you have said in 1995 to someone investing in property .....don't do it? Look what happened in England !!!
You would have been wrong wouldn't you?

I'd say hello Morningstar how long more do you think this will go on? Really? so you are looking at the long term then? 30 year investment plan with option to liquidate in 10 years with a likely healthy profit!

Culchie wrote:

Property has gone up what ... 200-300% in 10 years .... hardly a 'stupid' investment.

You must have mixed me up with somebody else. I am a landlord with probably more property than most and strong family connections in property. It is only stupid if you are basing your profits only on property increases rather than potential revenue. Good property in a good location always survives in a market as it drops the least and recovers the quickest. Lots of novices don't understand the market and while they can rent them now they may not always be the case. A profit doesn't make the actions smart the same way a win at the races does make you a genius!

Bluehair · 11-08-2005 4:06pm

MorningStar wrote:

A profit doesn't make the actions smart the same way a win at the races does make you a genius!

Best quote I've read on here in ages!

(and so applicable to the discussion in question)

Culchie · 11-08-2005 4:16pm

Yes, great quote, and as a poker player, am well aware of results orientated thinking....however it bears no relevance to my point.

I don't think you read my contributions to this thread very closely to see what angle I am coming from.

Are landlords selling up?/asking prices not met.

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