# Should I buy apartment from my brother?



## Raul (19 Apr 2008)

Age: 25
Salary: 40K (total annual package including benefits is over 50K)
Debt: None
Savings: 30K (owed 15K by same brother)
Equities: 12K
Current Property: None

My brother has apartments in a section 23 area with decent rental demand. His original plan was to build to sell but the slowdown in the market means that he is now renting them. He has had trouble with almost 50% of his tenants with one eviction, one warrant, one runner who still owed 500 euro and people late with rent etc....

He is still relatively comfortable financially but would really like to sell about 4 of the apartments. I am half thinking about buying one for 150K with a deposit of 30K. I would probably have to pay 50 euro extra every month after I take in the rent. I realise that I need to plan for times when the property is vacant and cost of repairs, maintenance etc...

I would like to buy/build my own home in 3-5 years time and I am wondering if it would be completely mad to purchase one. It would mean I would have to start building up a deposit from scratch plus I would lose a lot of the benefits available to first time buyers for my own home in a few years.

My brother doesn't know I am thinking about this but I know it relieve some pressure from him if I bought one. I am thinking it would probably be a bad investment given the circumstances but when family is involved, it tends to skew logical thinking. Am I completely mad or does the investment sound like it may have potential?


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## extopia (19 Apr 2008)

What advice do you think your brother would give you?


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## Raul (19 Apr 2008)

I think he would think along the same lines as me that it might not be a bad investment but it would set me back in my plans to have a large deposit to buy/build in a few years. He would not try to influence me to buy one. I think I have made my mind up not to buy one but if anybody sees any merit in it financially, please point it out.


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## jpd (19 Apr 2008)

If you are trying to get the best deal for yourself, the best way to make a profit is to "buy low, sell high". It's a buyer's market - offer him a low price!

If you are trying to help your brother, you can gift him € 3,000 a year tax-free.

There is a quote about not mixing family and money but ...


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## mercman (19 Apr 2008)

If you get the property at the right price go for it - But it all depends on location. If he is a property man, so to speak, how come he has so much trouble with dodgy tenants. Remember there is little point in helping your brother out and to give yourself heartache. Also you are saving him marketing and sales costs. Being there, done that thank you.

If you buy from him you will only pay half the stamp duty, and his solicitor would probably do you a deal, that is if you use the same. If you are going to build your own home, the FTB won't be much use to you, and in the time frame you are talking about, the FTB may be gone.

Location and Price -- Think about it.


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## Raul (19 Apr 2008)

jpd said:


> If you are trying to get the best deal for yourself, the best way to make a profit is to "buy low, sell high". It's a buyer's market - offer him a low price!


It's a bit of both really. My brother practically raised me and gave me money when things were tight during college and he helped me with contributions to my SSIA. I since gave him a loan of 15K for this project which could be knocked off the price. We are very close.


mercman said:


> If you get the property at the right price go for it - But it all depends on location. If he is a property man, so to speak, how come he has so much trouble with dodgy tenants.


Like I said, he wasn't planning on renting and this is his first time being a landlord. It was the same estate agent who got in the 3 dodgy tenants so he hasn't dealt with him since.


mercman said:


> If you buy from him you will only pay half the stamp duty, and his solicitor would probably do you a deal, that is if you use the same. If you are going to build your own home, the FTB won't be much use to you, and in the time frame you are talking about, the FTB may be gone.
> Location and Price -- Think about it.


The likelihood is that I will build in my home town in the midlands rather than buy so you make a very good point about FTB. The location is good because it is just about within commuter distance to Dublin along a main road and beside a train station. It is also a section 23 area.

If I'm honest, yesterday is the first time I seriously thought about it. Working out the maths more today especially with the desposit and what my brother already owes me, the rent would actually cover the mortgage.

Thanks for the replies folks. It all has to be taken into consideration and I will think about over the summer.


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## mercman (19 Apr 2008)

Over the Summer !!!! Well don't rush in making a decision.


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## Raul (19 Apr 2008)

mercman said:


> Over the Summer !!!! Well don't rush in making a decision.


 
Why would I rush it when there is no deadline on a decision? It's a big decision and only something I started thinking about yesterday. There are also a few other reasons to delay it.

I will buy in August at the earliest as I will be out of the country for a while with work. I should have a deposit of 30K built up by then also. There is a good chance that several jobs will be created in the area between now and then which would secure a higher rental demand. I guess I am also waiting to see how the rental demand along with property prices go between now and then with a possible levelling off occuring.


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## Shark Trager (19 Apr 2008)

Raul,you mention the property is a section 23,Midlands,presume you are talking about Longford,I own some property there,bought purely for the tax relief,in terms of rental demand I find them to be a lot slower to let than property in Dublin or in Mullingar,and the rents are prob lowest in the country,presume you are aware of this?


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## Raul (20 Apr 2008)

Shark Trager said:


> Raul,you mention the property is a section 23,Midlands,presume you are talking about Longford,I own some property there,bought purely for the tax relief,in terms of rental demand I find them to be a lot slower to let than property in Dublin or in Mullingar,and the rents are prob lowest in the country,presume you are aware of this?


 
Yes I am Shark Trager. I have one big advantage in that I can see first hand what the issues are in the area  and what the average rental income is through my brother. This is one of the reasons I am waiting until end of summer to see what way it pans out.

Do you regret buying in this area?


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## Shark Trager (20 Apr 2008)

No not at all,I bought purely for the section 23 relief,so went in eyes open,was well aware of overbuild,they do take a long time to rent though,on one occasion three weeks.You mentioned commute time,I left Edgeworthstown  18.OO hrs and arrived in lucan village at 18.45hrs not bad!
I have ran into a few bogey characters there,more than I would have thought,you learn to recognise these guys very quickly though,hanging on to good tenants is more than half the battle.


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## sidzer (20 Apr 2008)

If you relayed above info without including the fact that you were giving your-fella a dig out I'd say no! Section property is usually overpriced and does not appreciate at the same rate as other non-section property. Maybe u will cover the mortgage by rent but what if the property goes down in value!!! This could easily happen... 

Unless your brother is going bust I would hold out and maybe he will ride the storms and sell at some stage in the future...


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## extopia (20 Apr 2008)

If you want to help your brother, just give him some cash, or a loan. If you buy apartments, you have legal and stamp duty costs etc, not to mention all the hassle of being a landlord.


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## Raul (21 Apr 2008)

My brother is in no danger of going bust. He has built and sold at the peak of the bubble before which makes this situation a lot more comfortable for him.

The loan is about a 3rd of what the current total value of the apartments are. It's just that he would like to get one or two of them sold for a little peace of mind.

I probably am not going to buy one but I just thought I would post it up here to see the pros and cons of it. Thanks to all those who replied and offered advice.


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## biggerry (21 Apr 2008)

Raul, if your brother has paid tax on his rental income and has used the S23 relief to reduce the tax he owes, won't he be liable to clawback if he sells you an apartment before the relief has expired?


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## rmelly (21 Apr 2008)

Shark Trager said:


> You mentioned commute time,I left Edgeworthstown 18.OO hrs and arrived in lucan village at 18.45hrs not bad!


 
?


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## mercman (21 Apr 2008)

Shark: If you are able to travel from Edgeworthstown to Lucan in 45 minutes at the time of day stated, you either have a suicide wish or remain as a serious danger to other road users. Are you not embarrassed by admitting this ???


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## Shark Trager (21 Apr 2008)

Why would I be embarassed?? I kept to the speed limit.How often do you travel up from Edgeworthstown to Lucan?


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## mercman (21 Apr 2008)

Well I travel from Galway to Dublin mostly twice a week and I don't drive a banger. Kinnegad to Lucan (including the Toll) on off peak hours is the best part of 40 minutes and you are travelling much further.


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## mercman (21 Apr 2008)

Lucan to Edgeworthstown to Lucan is 93 km. Do you have a short cut ??


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## Raul (21 Apr 2008)

biggerry said:


> Raul, if your brother has paid tax on his rental income and has used the S23 relief to reduce the tax he owes, won't he be liable to clawback if he sells you an apartment before the relief has expired?


 
The apartments are still in the company's name so therefore he is not exercising the section 23 tax relief. He might buy them from the company in the coming months.


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