Best property type for investment return

S

Smallfry

Guest
Hi all, I wonder has anyone done a study of all the different house/apartment types, taking into consideration the areas they are in, and come up with what type/area gives the best return on an investment. For example, a 3-bed house in Dun Laoghaire worth 1 million Euro can only really hope to get a rent of about €1800per month, or €21600pa. This gives a max return of 2.16%pa (am I right?), which is not a good return on an investment. What property types/areas give a higher return than this? Thank you.
 
Check out 1 or 2 bed apartments in city centre locations. Its actually possible to get 5%-7% returns.
As an example There are 1 bed apts for sale on Gardiner Street for 250k that rent for 1,200 per month - 5.76% return As a general rule prestigeous houses in up market areas usually give poorer rental yields.
 
Shano79 said:
Check out 1 or 2 bed apartments in city centre locations. Its actually possible to get 5%-7% returns.
As an example There are 1 bed apts for sale on Gardiner Street for 250k that rent for 1,200 per month - 5.76% return As a general rule prestigeous houses in up market areas usually give poorer rental yields.
Click to expand...

You don't take into account stamp duty -10k, legal fees 1k min, service charges(at least 1200) , insurance(400), repairs and time empty(1/2 month per year min) between lets. This would give a yield of about 4.5%.
 
sandymount said:
You don't take into account stamp duty -10k, legal fees 1k min, service charges(at least 1200) , insurance(400), repairs and time empty(1/2 month per year min) between lets. This would give a yield of about 4.5%.
Click to expand...

Which is pretty poor when you can get around the same in a deposit account with zero risk
 
New_Buyer said:
Which is pretty poor when you can get around the same in a deposit account with zero risk
Click to expand...

Which deposit account would that be? Northern Rock?
I wouldn't call that "zero risk". You're guaranteed about 90% of your capital up to about €50000. And that's actually over twice a generous as the guarantees for accounts overseen by the Irish authorities. See thread in savings and investments forum.
 
Persius said:
Which deposit account would that be? Northern Rock?
I wouldn't call that "zero risk". You're guaranteed about 90% of your capital up to about €50000. And that's actually over twice a generous as the guarantees for accounts overseen by the Irish authorities. See thread in savings and investments forum.
Click to expand...

If you are smart you can spread your deposits over a number of banks meaning that it is pretty much risk free. Still significantly less risk than property investment.

And to be honest, there is still very little chance that NR will go bust as of yet.
 
Don,t see your point new buyer.

Rental yields should go up especially in a tight market like Dublin City Centre so 5.76% is a great starting point especially with ECB rate at 4%.

Vacancy rates in inner city are extremely low and demand is rampant as rents have increased 15-20% in the last year.

Why is property high risk if u are getting a 6% yield with low vacancy rate,cost of debt 5%,rampant demand and limited new inner city supply coming on market-where is the risk?


Finally,sticking your money in a bank will erode through inflation(time value of money) and is not risk free as Barings bank/BCCI investors & depositors will relay to u.

Bank of England have stated they bailed Northern Rock out as they were solvent-in other words if in BOE eyes Northern Rock not solvent,depositors would have lost their money over 30-50k safety net.
 
macbri said:
Why is property high risk if u are getting a 6% yield with low vacancy rate,cost of debt 5%,rampant demand and limited new inner city supply coming on market-where is the risk?
Click to expand...

have you not noticed that prices are dropping? i'm sure if you think there's no risk that plenty of people would gladly let you take their property off their hands!
 
macbri said:
Why is property high risk if u are getting a 6% yield with low vacancy rate,cost of debt 5%,rampant demand and limited new inner city supply coming on market-where is the risk?
Click to expand...

It's high risk because you can't get 6%. Please provide examples of properties that give a 6% yield when you take into account stamp duty, legal expenses and letting expenses.
 
sandymount said:
It's high risk because you can't get 6%. Please provide examples of properties that give a 6% yield when you take into account stamp duty, legal expenses and letting expenses.
Click to expand...

I'll sell an Irish property to anyone willing to take it off my hands. Even throw in a guaranteed yental yield even if it sits empty. Catch a falling knife sums up Irish property at the moment. Any other conclusion is denial.
 
I'm getting rental yield from previous poster who stated that 1 inner city property had yield of 5.7%.
As well,daft had a report on rental yields for July coming in at 5-5.25% in dublin-this presumably is an average so presumably some properties are giving a higher yield.As well this yield is based on historical prices and if prices are dropping,by definition yield is increasing.

You can check their website for details www.daft.ie

In a falling market,u should easily get 6% as your offer will always fall short of asking prices.

As said before 6% is a great return and should leave u cash flow positive on your investment even if your 100% geared(cost of debt around 5%)

If your worried about interest rates,then fix long term 10-20 years,capital depreciation not an issue in short/medium term as u are cash flow positive.

As well,u should be able to increase rent by at least inflation which shouold cover maintenance costs and a nice little annual profit.

Again,I ask the question where is the risk especially in inner city dublin which has greatest demand for renters?
 
it may be wise to invest in commercial property as the leases are longer than residential with rent reviewed upwards only. The commercial property market is strong at the moment and if you currently hold resi properties it might be wise to spread the risk to your investment. Commercial yeilds vary quite a bit depending on type and location. Take a look at some of the large agencies websites where they have annual and quarterly reviews. Also the bible of commercial property is the Irish Times property section on Wednesdays. Do some research - you can never do too much.
 
As well,u should be able to increase rent by at least inflation which shouold cover maintenance costs and a nice little annual profit.
Click to expand...

Revenue will also want their share of the nice little annual profit. See [broken link removed]
 
bacchus said:
Have you ever approached a bank to get say €250k loan to invest in a deposit account? :rolleyes:
Click to expand...

but gearing has a very negative effect in a falling market:
if you have €50k and invest in shares that fall 10% you are down €5k
but if you mortgage to invest in a €500k house that drops 10% you are down €50k
 
If u are cash flow positive from your investment,then it doesn,t matter if you make a notional capital loss as its' unrealised,obviously if u decide to sell your property its' different but why would u sell when property is making u money.

Another poster mentioned that u would have to pay tax on your investment,to me thats' great news as it means your property is making u money.

Interestingly,Fed cut interest rates by .5% today
 
macbri said:
If u are cash flow positive from your investment,then it doesn,t matter if you make a notional capital loss as its' unrealised,obviously if u decide to sell your property its' different but why would u sell when property is making u money.
Click to expand...

If there is a fall in property prices generally, this will tend to reduce rents. So you start off at, say, a 6% yield, but due to falling prices similar properties to yours come on the market at lower rents. You may have to cut your rent and reduce your yield to compete, possibly making you cash flow negative.
 
You must log in or register to reply here.
Back
Top