First Time Buyer Options for Property Investment

Hi,

I'm in the lucky position at the moment to be living rent free with my partner which is allowing me to save a decent amount of money each month towards a deposit on a property of my own. I'm hoping to be in a position to start shopping around for houses early 2017.

My partner has his own property and I would like one of my own, purely funded by myself and in my name. Price bracket for the property will be around 250k and as a first time buyer I'm hoping to avail of the 10% deposit rule for the first €220k.

Depending upon what house I end up buying next year, we may or may not choose to live in the property I buy. Instead we may decide to stay put in the house we are currently living in as we don't have any rent or mortgage repayments on it.

We are both very DIY handy and I'm preferably looking to buy a "fixer upper". Would there be any issues with me applying for a mortgage as a first time buyer with the intent to live in the property and after some time renting it out?

Any advice appreciated.

This doesn't sound like a wise investment to me to be honest. If you're going to maintain two properties while the DIY is going on, you'll be paying a lot of money in insurance, tax and utilities on two houses for a period that might stretch to years depending on the amount of work required and your motivation to keep at it (believe me, I know from personal experience).

Some good advice already on whether to go for a fixer upper... I'd just note don't buy a property that you wouldn't be willing to live in yourself if you had to.

I would generally be one of the most positive posters here about property investment, but I don't see where you are coming from. What are you trying to do here.

You ask would there be any issues applying for a mortgage. Well any bank will want to know if its an investment property or a home you are buying. It seems to me that you are not sure yourself.

If you want property exposure, you might be better going down the liquid listed REIT / fund route.

Thanks for the responses. It is true, I'm not 100% sure what I want to do except that I want something of my own, bricks and mortar. The REIT option doesn't appeal to me.

My best option at the moment is probably to keep saving and when the right property comes on the market it will determine what route I take.

If you are a first time buyer, you need a deposit of 10% on the first €220,000 and 20% on the remainder. You also have a lot of criteria to meet on ability to repay etc.

If you are buying it as an investment, you need a 30% deposit and you need to satisfy the bank re rental income against mortgage. The interest rates are higher too.

So be sure what you want as they are two completely separate propositions.


As an aside on wanting bricks and mortar. If you want an investment, it is not always a good idea to put your money into one single asset in a small country on the periphery of Europe just so you can drive past it and point it out.

My pension fund has lots of different stocks in it. When you own stock, you are a part owner of that company.

So, every time someone buys Star Wars or Frozen merchandise, I make money because I am a part owner of Disney.
Every time you brush your teeth, I make money because I am a part owner of Colgate-Palmolive.
Every time you wash your clothes, I make money because I am a part owner in Unilever.

There are people all over the world buying these products and have been for decades. I am not reliant on just one person renting my property. And I can sell my stock and get my money back in a week.



Steven
www.bluewaterfp.ie

SueJ64 said:

I want something of my own, bricks and mortar. The REIT option doesn't appeal to me

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Why?

You can buy a single illiquid asset on a small island in Europe.

Or you can buy a liquid property portfolio with exposure to many properties in multiple jurisdictions.

I know which I would choose!

A very interesting question.

Do you see your relationship with your partner as short term? Has it the possibility of being a long-term relationship?

As a general rule, you are better off not buying property until you are ready to move into it. If you split from your partner after 5 years, you may have different accommodation needs then. But you will be stuck with a property and will have used up your first time buyer advantages. If you don't split from your partner, you are better off investing in a portfolio of shares.

Irish people have a love affair with property and think that it is risk-free and safe. Actually, it's very risky and a lot of hassle as a landlord and a lot of tax and other compliance issues.

Save up your money. When you are ready to move into a house, you will have a bigger deposit and so probably a lower loan to value and therefore a lower mortgage rate.

one risk of this strategy is that your investment in shares could fall while the price of houses rise, so your savings become a much smaller percentage of the house price. You can hedge against this to some extent by buying a REIT.

Brendan

I think you caught me on my personal reasons for wanting to invest in a house Brendan. I'm in a committed relationship and I most definitely see it as long term but I've been burned in a relationship in the past. So until he puts a ring on my finger I'm thinking it would be a lovely safety net to have my own place to turn to if things went sour.

I'm saving hard and I think I'll stick with the saving plan for the time being and see where I am when I've got the money together.

SueJ64 said:

So until he puts a ring on my finger I'm thinking it would be a lovely safety net to have my own place to turn to if things went sour.

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On the flip side, imagine how this would look to him? Could your escape plan preparations put doubts into his mind?

If you do buy and have it rented out, then a few years down the line things do turn sour, it could take some time to get vacant possession of the property for you to move.