# 90k windfall -Buying rental property Dublin City Centre? Reading "Rich Dad Poor Dad".



## paperclip (19 Jul 2011)

Hi guys.

I'm looking for some feedback on buying a property in Dublin City centre.

I'm already a joint owner in a house that's in negative equity... but we're going to hang on to it.

I'm coming into a bit of a win fall... in the region of 80 - 90k.

I'm reading rich dad poor dad, and I've come to the chapter where he's talking about buying up property in a deflated economy.... so I had a quick look on daft.

There are properties in the city centre that are between 80 and 90k... and I'm sure you could get them cheaper with a cash offer.

Renting shouldn't be a problem, as long as you undercut the competition... so if someone's renting one next door for 500pm, rent it out for 450.

I have a few questions though, that I'm sure someone on here can help me with.

a) what are the tax implications on the rent? am I allowed to earn 10k per year before tax?

b) if I'm looking at a 10 year investment, does this sound ok?


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## shesells (19 Jul 2011)

paperclip said:


> a) what are the tax implications on the rent? am I allowed to earn 10k per year before tax?



You would be liable for the NPPR charge (currently €200) which is not tax deductible.

Tax is on ALL income less allowable deductions for wear and tear on fixtures and fittings, insurance and any maintenance expenses/management fees/letting fees. As you don't plan to have a mortgage you would not qualify for tax relief on mortgage interest which generally significantly reduces tax liability.

The 10k only applies to rented rooms in an owner occupied building, it's not applicable where whole dwellings are rented out. You also have to register each tenancy with the PRTB which is another expense.


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## Knuttell (19 Jul 2011)

Property is a long term investment, location and proximity to both population/employments are very important factors,the big one though is yield,in particular net yield ie your yield after all expenses have been deducted incl voids/management fees/repairs etc.

If your net yield is not above at least 9% after all deductions its just is not worth your while.
If more people had bothered looking at net yields or indeed any type of yield in the last decade then we would perhaps not be in the mess we are in.

Do your homework and I mean research everything from the management company to the health of the sinking fund.

http://www.irishlandlord.com/forum/showthread.php?t=1049
http://www.irishlandlord.com/forum/showthread.php?t=36


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## paperclip (19 Jul 2011)

shesells said:


> You would be liable for the NPPR charge (currently €200) which is not tax deductible.
> 
> Tax is on ALL income less allowable deductions for wear and tear on fixtures and fittings, insurance and any maintenance expenses/management fees/letting fees. As you don't plan to have a mortgage you would not qualify for tax relief on mortgage interest which generally significantly reduces tax liability.
> 
> The 10k only applies to rented rooms in an owner occupied building, it's not applicable where whole dwellings are rented out. You also have to register each tenancy with the PRTB which is another expense.



NPPR? is this a new property tax? annual I take it?

Do any of these taxes apply to foreign property investment?


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## paperclip (19 Jul 2011)

Knuttell said:


> Property is a long term investment, location and proximity to both population/employments are very important factors,the big one though is yield,in particular net yield ie your yield after all expenses have been deducted incl voids/management fees/repairs etc.
> 
> If your net yield is not above at least 9% after all deductions its just is not worth your while.
> If more people had bothered looking at net yields or indeed any type of yield in the last decade then we would perhaps not be in the mess we are in.
> ...



Thanks for the feedback, I'll give em a read... and agree... lots of people didn't do their homework.


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## PaddyBloggit (19 Jul 2011)

NPPR (FYI):

https://www.nppr.ie/


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## paperclip (20 Jul 2011)

PaddyBloggit said:


> NPPR (FYI):
> 
> https://www.nppr.ie/



Thanks, this doesn't seem to effect foreign investment property.

How about rental from foreign property... is that taxed the same?


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## PaddyBloggit (20 Jul 2011)

But you're talking about an investment in Dublin are you not?


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## paperclip (20 Jul 2011)

PaddyBloggit said:


> But you're talking about an investment in Dublin are you not?



I'm looking at both options Paddy.


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## Brendan Burgess (20 Jul 2011)

Paperclip

I really don't think you should be looking at investing in property. It's more like a business than a passive investment. The fact that you know so little about it, suggests that it will not be a successful business for you. 



> Renting shouldn't be a problem, as long as you undercut the  competition... so if someone's renting one next door for 500pm, rent it  out for 450.


This is very simplistic stuff. 

Rich Dad, Poor Dad is based on American property, tax and legal issues. I don't think it should be the basis for your investment strategy.

I haven't read the book but from reports, it recommended borrowing up to the hilt and continuously remortgaging properties. In this way, you would own a property empire and wouldn't have to work. A lot of people who took this advice are now in a negative equity hole so deep, that they may not recover.

Rich Dad, Poor Dad has been discussed before on Askaboutmoney
http://www.askaboutmoney.com/showthread.php?t=8125



> I'm already a joint owner in a house that's in negative equity... but we're going to hang on to it.



In general, you should spread your money around. If you already have property, then you probably should not be increasing your exposure. Negative equity and large loans will limit your flexibility. Can you use the cash to get rid of your negative equity? If you have a tracker mortgage, can you negotiate a deal with the lender to get additional credit for repaying the mortgage early?


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## Slim (20 Jul 2011)

paperclip said:


> I'm looking at both options Paddy.


 
Hi Paperclip. It's clear from looking at the posts last night that you are investigating quite a few options for your windfall - and fair play to you! I invested in a rental property 7 years ago. I am well away from Dublin so rents are about half Dublin rates. Anyway, for the first few years there were no problems. Local workers rented the house. They moved out two years ago and took a lot of my stuff with them. A lot of what was left was not working. The house had to be cleaned up and re-painted. To be expected of course. Since then I have had a couple of quite short rentals. Damage, dirt and theft seem to be the standard approach from tenants nowadays. Deposits are a joke, they set the final month's rent against it! I have always had to subsidise the mortage payments - interest only which expired this year but I got it extended for two years.

Overall between maintenance, vacancies, damage, calls from neighbours etc it has been a bit of a money pit. I hope to sell within the two years interest only periodd. I HOPE to get my equity back!! It is a pain in the arnotts and I will never buy investment property again. It is not worth the worry. People do not look after other people's property. Add to that the reduction in interest relief, NPPR charges, PRTB etc, it's not worth it here anyway. I also think that rental of foreign property is very hard to achieve and manage. There is also a lot of competition out there. Of course, there are lots of opportunities to get what seems like good value in the market now. Also, see my post re Turkey in Overseas Investment thread.

For the medium to long term, I would look at 5 - 10 year investments in commodities, stocks and government gilts etc. I do not hold any except An Post Savings Bond and (haha) bank of Ireland shares. As Brendan posted, maybe spread it around a bit. Less worry than property which is no longer a "guaranteed" one way bet.

Incidentally, I invested against much advice here on AAM Doh! Slim


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## meadow (20 Jul 2011)

paperclip said:


> Hi guys.
> 
> 
> I'm reading rich dad poor dad, .



Might be worth your while reading this review of the book as well


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## paperclip (20 Jul 2011)

Slim said:


> Hi Paperclip. It's clear from looking at the posts last night that you are investigating quite a few options for your windfall - and fair play to you! I invested in a rental property 7 years ago. I am well away from Dublin so rents are about half Dublin rates. Anyway, for the first few years there were no problems. Local workers rented the house. They moved out two years ago and took a lot of my stuff with them. A lot of what was left was not working. The house had to be cleaned up and re-painted. To be expected of course. Since then I have had a couple of quite short rentals. Damage, dirt and theft seem to be the standard approach from tenants nowadays. Deposits are a joke, they set the final month's rent against it! I have always had to subsidise the mortage payments - interest only which expired this year but I got it extended for two years.
> 
> Overall between maintenance, vacancies, damage, calls from neighbours etc it has been a bit of a money pit. I hope to sell within the two years interest only periodd. I HOPE to get my equity back!! It is a pain in the arnotts and I will never buy investment property again. It is not worth the worry. People do not look after other people's property. Add to that the reduction in interest relief, NPPR charges, PRTB etc, it's not worth it here anyway. I also think that rental of foreign property is very hard to achieve and manage. There is also a lot of competition out there. Of course, there are lots of opportunities to get what seems like good value in the market now. Also, see my post re Turkey in Overseas Investment thread.
> 
> ...



Cheers for the feedback Slim... yes, I'm looking into many options 

I'm joint owner in a separate property, and have never had any trouble with the tennants... well one drunk Welch dude, but we gave him the boot.

Where was your property if you don't mind me asking, sounds like you had some real scum...  We keep our rent super low, so I guess this could make them appreciate it a little more.

I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%.... does this mean that if you buy a property for 100k, the annual rent will be 7k?

Anyway, yes it could be a real headache... Did you use a management company?

I've no problem taking a hit on the rent if it means having happy, long term tennants... 

What did they steal by the way?


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## paperclip (20 Jul 2011)

meadow said:


> Might be worth your while reading this review of the book as well



Yes, funny, I found ref to similar on another forum... and have been watching the like on youtube, http://www.youtube.com/watch?v=HE6nT0oyPt8&playnext=1&list=PL89E643C4CC1546FD


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## Complainer (20 Jul 2011)

paperclip said:


> I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%.... does this mean that if you buy a property for 100k, the annual rent will be 7k?


No, it means that once things get tough, the developers/promoters put the company that is behind the guarantee into liquidation, and your annual rent will be €0.


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## wbbs (20 Jul 2011)

Guaranteed rental income like that is worth diddly squat.


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## Purple (20 Jul 2011)

Complainer said:


> No, it means that once things get tough, the developers/promoters put the company that is behind the guarantee into liquidation, and your annual rent will be €0.


+1
Don't buy property in a neighbouring town that you don't know inside out. Buying in a foreign country you haven't lived in is gambling.


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## Knuttell (20 Jul 2011)

paperclip said:


> I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%




If you cant find it on the map without scratching your head then it aint  for you,as for guaranteed rental income over 5 years..paper *never * refused ink.

If I were you I would pay a few hundred euro for advice from an *independent *Financial adviser...and follow it.


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## ajapale (21 Jul 2011)

Topic reminder: *Buying rental property Dublin City Centre?
*
If anyone wants to discuss over seas property then do so on that subforum.


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## paperclip (22 Jul 2011)

ajapale said:


> Topic reminder: *Buying rental property Dublin City Centre?
> *
> If anyone wants to discuss over seas property then do so on that subforum.



You're right, mod, you can close thread now... the Dublin option doesn't look possible, cheers.


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## PaddyBloggit (22 Jul 2011)

You can close it yourself paperclip. Look at your first post ... you should have the option to close thread available to you.


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## deeheg (22 Jul 2011)

I think your mad, wouldnt buy anything , would just enjoy and live off it for few years ,


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## bullworth (22 Jul 2011)

I think it's a bit of a mad idea too to make a bet of everything you have on one asset class which you are already invested in through another property. 
Theres no hurry in this country to buy property. Thats for sure. If you cant sell the property for at least the same price you bought it for on the day you buy then you've lost money. The day you buy is the day you sell is my motto where property is concerned. Plus property often only makes sense as an investment compared to equities when it's leveraged with a mortgage however taking on more debt in this uncertain climate is highly risky. 



paperclip said:


> I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%.... does this mean that if you buy a property for 100k, the annual rent will be 7k?




More madness in my opinion. Many people have been stung by rental guarantees which arent worth the paper they are written on. Much better to see if you can negotiate a cheaper price in return for giving up the rental guarantee. How often would you see yourself taking flights to Turkey to check on your property? Personally if I was going down the property route I'd rather get a cheap property in Berlin or somewhere closer but with a different exposure which was not to the Irish economy. At least you know its rock bottom, regulated well by local and EU laws and will be valued in Deutschmarks if the Euro collapses. Plus a lot easier to fly to in times of increasing oil and flight costs. But one thing I wouldn't do is increase my exposure to Irish property unless I really knew what I was doing. If I was you I'd pay off the negative equity on my original house, sell it and rent but thats me


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## Greta (25 Jul 2011)

I find rich dad poor dad series are interesting books that give good ideas - provided you take them with a grain of salt The author does keep repeating that you shouldn't copy him, you should find your own way.

The main idea is buy assets, i.e. those that produce positive cashflow, i.e. invest for cashflow rather than capital gains, which is pretty sound, if more property investors followed it, fewer would now be in trouble. 

And use leverage, i.e. borrowing to increase your returns on real estate. From that point of view, you should aim to find a property that will provide you with POSITIVE cashflow even if you buy it with a mortgage. Split your windfall into deposits for several properties, all providing you with positive cashflow. 
If you can't find such properties, then don't invest yet

Another point - it's not easy to find GOOD investment properties to buy, you need to be prepared to look at 100 or so properties to buy one good one... Are your prepared for that?


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## Complainer (25 Jul 2011)

Greta said:


> you need to be prepared to look at 100 or so properties to buy one good one... Are your prepared for that?



What value to you put on your own time in these cashflow calculations?


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## Greta (25 Jul 2011)

Complainer said:


> What value to you put on your own time in these cashflow calculations?



That is a good question! It's different for everyone but obviously the potential returns need to be worth it, it terms of time invested as well as money and risk.

It' also suggested in the rich dad series that to be successful at property investing, you must actually LIKE it, like looking at properties, like educating yourself about related issues etc. If it's horribly boring, then don't do it.


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