Buy to let (cash) in Ballymun

J

John1648

Registered User
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Dear Forum members,

Here comes a kind request to review and critique my below investment idea:

I have managed to save ~ 200 k EUR, and plan to invest them in a rental property in Dublin. I have been procrastinating for too long, and as a result was priced out of many areas in Dublin city.

Currently, I have negotiated a price of 200 000 EUR for a 2-bedroom apartment in the Charter building in Ballymun (close to Charter Cross); it is in a decent condition, 76 sq.m, 3rd floor.

It has a tenant in situ - a young single mother on HAP. The rent paid is 1450 EUR.

Would such an investment make sense to you? I know, being a landlord can be a hassle, but: i) prices are going up; ii) inflation is eating up my hardly earned savings; iii) the rental yield seems to be decent - 8% gross, 6% net.

Here come my calculations:

1. Yearly gross rent: 17400 EUR (12 * 1450).

2. Tax deductible spending: 3190 EUR ; i.e. 1800 (management fee); 1050 (letting fee); insurance (250); RTB fee (90)

3. Rental income tax at 20% rate: 1192 EUR ; i.e. 14210 EUR * 20% = 2842 EUR; minus the tax credit of 1650 EUR (with no other income currently)

4. Local property tax: 250 EUR

5. USC: 170 EUR

6. PRSI: 0 (as I currently reside abroad).

7. Tax advisory services: 250 EUR

7. Net yearly rental income: 12 348 EUR

Of course there are other costs and risks too; incl. the non-payment of the rent portion by the HAP beneficiary, difficulties of eventual eviction etc.

Would you recommend going for this investment?

Many thanks,

John
 
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Broadly speaking this seems a fair summary of what you would get for your money. Your question 'would you recommend going for this investment ' really is a matter of choice.

Some observations.

A single mother on HAP is unlikely to be a problem tenant. All going well for her she will eventually get a council tenancy, thats the gold standard and she will do nothing to risk that such as not paying her rent etc. That said if the tenant does not pay their element of the rent to the council, the council will not pay you anything.

If I had €200k and it was hard earned I wouldn't be giving €1,500 to a letting agent, especially if I had a sitting tenant.
 
cremeegg said:
Broadly speaking this seems a fair summary of what you would get for your money. Your question 'would you recommend going for this investment ' really is a matter of choice.

Some observations.

A single mother on HAP is unlikely to be a problem tenant. All going well for her she will eventually get a council tenancy, thats the gold standard and she will do nothing to risk that such as not paying her rent etc. That said if the tenant does not pay their element of the rent to the council, the council will not pay you anything.

If I had €200k and it was hard earned I wouldn't be giving €1,500 to a letting agent, especially if I had a sitting tenant.
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Thank you cremeegg!

much appreciated !

I am new to landlording, so initially I thought to have some support in overseeing the lease. But you are right on it. On the other hand, this is deductible for tax purposes ...

Does Ballymun sound all right ?
 
Does Ballymun sound all right ?
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I personally wouldn't pay €1450 per month to live there, but then I don't have family or other connections in the area.

Being abroad would be a bigger concern - it can be a pain sorting stuff out even when you are on hand. Depending on how long a journey you have to return home; you might like to build in a return flight at least twice a year for an inspection.
 
I think your plan makes sense.

By the way,
"Tax advisory services: 250 EUR"

That's the accountant? That's also tax deductible.
 
It's a good yield, but you will get >10% for the same type of property outside Dublin, with much the same risk level.

If you are living abroad anyway it shouldn't matter much.
 
NoRegretsCoyote said:
It's a good yield, but you will get >10% for the same type of property outside Dublin, with much the same risk level.

If you are living abroad anyway it shouldn't matter much.
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Sounds good too ! On the other hand I am told that in the event of a crisis, the first rents to dive are those outside Dublin. Ballymun is not a prime location either from this perspective, however the airport is near, with a number of jobs there, also DCU is close, IKEA etc.

Plus, I sense that with the current deficit of housing in Dublin, Ballymun will steeply improve itself. In the Charter Building where the apartment is located, I could see a number of apartments being brought to higher standards, with an asking monthly rental price of 1600 EUR for one bedrooms (!)

Although this maybe wishful thinking on my side - which is often "buyer's bias" - where one tend to be charmed by own arguments, tending to ignore the risks and focus on the positives.

Hence, I would appreciate your wideawake critique of idea, pointing to the blind spots, risks that I do no see etc ...
 
John1648 said:
the first rents to dive are those outside Dublin
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So you'd accept an 8% yield over a 10% yield today because rents might fall in future? As long as it has been measured, yields outside Dublin, and on apartments, are higher.

If I wanted to build a rental portfolio in Ireland (and I very much don't!) I would pick apartments outside Dublin.
 
NoRegretsCoyote said:
So you'd accept an 8% yield over a 10% yield today because rents might fall in future? As long as it has been measured, yields outside Dublin, and on apartments, are higher.

If I wanted to build a rental portfolio in Ireland (and I very much don't!) I would pick apartments outside Dublin.
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mmm, yes, you may be right... My reasoning was to go for a sustainable rent, which would not fluctuate so much; e.g. in Tallaght, or Balbriggan, or in Ballymun itself - during the crisis times, rents went to less than half of what they are now - or landlords could plainly find no tenants for years - as many migrated outside the country ... Also in Tallaght, in crisis times, 1-bedroom apartments costed 30-40 k; now the same go for 180 k. What a roller-coaster I must say...

Why would you abstain from building a rental portfolio in Ireland ? For the above reasons?

I was looking at Netherlands, where I currently reside, but during COVID, basically overnight, prices overshot to a level where I was priced out.

So here I am looking back at the good old Ballymun. Some say Ballymun would take a dip , in the event of a crisis, but somehow, second after areas outside Dublin. Even now if you go to e.g. Mayo, you find rents of 300 - 400 for two-bedrooms. In a situation of salaries being only lower by 30 % than in Dublin, but with rents lower by 70%.
 
@John1648

If you are buying for the long term you should pay your €200k and forget about prices (and even rents) in the short term. You have no leverage so no risk of negative equity or a bank on your case.


Trying to predict future trends in rents both nationally and locally is hopeless. Is 6% a good risk-adjusted net yield right now for you? If you think yes, then go for it, and hold for a long time.


John1648 said:
Why would you abstain from building a rental portfolio in Ireland ? For the above reasons?
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In my view (over the very long run) tax-relieved pension investment provides a better return. But it depends on your circumstances and time horizon. Rental yields in Ireland are very high compared to most of Europe, and your non-resident status means you don't pay much tax.
 
NoRegretsCoyote said:
@John1648

If you are buying for the long term you should pay your €200k and forget about prices (and even rents) in the short term. You have no leverage so no risk of negative equity or a bank on your case.


Trying to predict future trends in rents both nationally and locally is hopeless. Is 6% a good risk-adjusted net yield right now for you? If you think yes, then go for it, and hold for a long time.



In my view (over the very long run) tax-relieved pension investment provides a better return. But it depends on your circumstances and time horizon. Rental yields in Ireland are very high compared to most of Europe, and your non-resident status means you don't pay much tax.
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That is a great piece of advice ! Indeed, with no mortgage, my only risks seem to be related to tenants/non-payments/difficulties of evicting them / need for majour and costly communal repairs - that is what I often hear...

6% net yield would be fairly good - no other countries in the EU offer that ... Outside EU, according to globalpropertyguide, only countries like Ukraine and Moldova would offer such levels, in Europe. But there are other risks there too, investing in those countries
 
P.s. - some say a significant downward correction in real estate prices in Ireland is due - so then I would need to wait for a year - to buy the same property for 125 k instead of 200k.

I personally do not see this happening anytime soon. After reading tons of info - the outlook for a couple of years more is - one way only - up! - for the prices.

There could be desperate - and doomed - attempts by say - SF, or other parties to limit / cap the prices / rents etc - but this will not work - or will screw the markets - by creating even more deficits and a black market for rentals - or driving black rents even higher. Look at Berlin e.g.
 
John1648 said:
during the crisis times, rents went to less than half of what they are now - or landlords could plainly find no tenants for years
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I dont think this is true and I was a landlord at the time, though not in Ballymun or Dublin. Rents weakened certainly and voids of a few weeks happened, but rents never rollercostered the way purchase prices did.
 
John1648 said:
P.s. - some say a significant downward correction in real estate prices in Ireland is due - so then I would need to wait for a year - to buy the same property for 125 k instead of 200k.

I personally do not see this happening anytime soon. After reading tons of info - the outlook for a couple of years more is - one way only - up! - for the prices.

There could be desperate - and doomed - attempts by say - SF, or other parties to limit / cap the prices / rents etc - but this will not work - or will screw the markets - by creating even more deficits and a black market for rentals - or driving black rents even higher. Look at Berlin e.g.
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Low rates for the foreseeable
And plenty of credit mean house prices, here and other countries are only heading up
 
John1648 said:
P.s. - some say a significant downward correction in real estate prices in Ireland is due - so then I would need to wait for a year - to buy the same property for 125 k instead of 200k.

I personally do not see this happening anytime soon. After reading tons of info - the outlook for a couple of years more is - one way only - up! - for the prices.

There could be desperate - and doomed - attempts by say - SF, or other parties to limit / cap the prices / rents etc - but this will not work - or will screw the markets - by creating even more deficits and a black market for rentals - or driving black rents even higher. Look at Berlin e.g.
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I'd love to know the non payment percentage of rents to councils, and if they can't collect their rents how are you going to do it? People renting are very savvy in knowing what the house owner can and can't do and any individual thinking they can just go, buy a house/apt, then rent it out and live happily ever after is living in cuckoo land. If I had €200k in my back pocket the last thing i'd do is buy a property for rent in any part of Ireland. Don't go asking me why, just go and do it and you'll find out soon enough.

John1648;
Of course there are other costs and risks too; incl. the non-payment of the rent portion by the HAP beneficiary.

That's minor if the tenant doesn't pay the council their portion. If that happens the council do not pay you anything!! Then try getting them out, good luck with that too.
 
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Here is a big dilemma in fact.

If inflation, incl on real estate, goes up, inflating various bubbles, then presumably ECB will raise the reference rates.

If this happens, then we are due a correction in prices. Some say, even a crash.

However, even if so, this will happen after say a period of one year of 10-15 % inflation in real estate. A correction, not a crash, will take us where we are now, price wise.

Yet - if rates go up, countries like Italy, Spain and Greece are doomed Re the servicing of their debt. In which case - another Euro debt crisis is looming. That was also the lowest point in time for Irish real estate in 2013.

From this what can be concluded- ECB will either NEVER increase the rates. OR, it will increase them to fight inflation but will be there to bail out Italy. However, Italy is not Greece, they have a debt over 2 trillion. Will Germany pay the bill? Or will ECB pull a FED trick and drop trillions of new Euros? In such a case - inflation high again, then increasing rates, and here we ago again to lines above. Rinse and repeat ...

But hey, how will that play out for a small investor in Ballymun?!
 
noproblem said:
I'd love to know the non payment percentage of rents to councils, and if they can't collect their rents how are you going to do it? People renting are very savvy in knowing what the house owner can and can't do and any individual thinking they can just go, buy a house/apt, then rent it out and live happily ever after is living in cuckoo land. If I had €200k in my back pocket the last thing i'd do is buy a property for rent in any part of Ireland. Don't go asking me why, just go and do it and you'll find out soon enough.
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I have read your postings on the other threads here - very interesting! Certainly very useful.

I am not totally delusional, yet, I hope, on imagining a carefree bourgeois life as a small landlord in Ballymun.

However, the hard earned savings are being eaten by rampant inflation. I do not trust the stock market now, this one is certainly overvalued - much more than the Irish real estate - and due a serious correction if not crash.

So for me, it is also a way to preserve the value of the savings - and hey, why not, try to make 1 k net in rent...

If there would be other ways or other countries offering this yield, I would be willing to learn of it, and highly appreciate it
 
So long as the central bank keeps the lending rules as they are, currently 3.5 times joint income I don't think there's danger of overheating/bubble.
But there is possibility of loosening of lending to allow first time buyers get on the ladder.
 
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