# Are we mad to purchase rental property?



## Happy Girl (3 Sep 2011)

Any opinions or advice on the following would be very much appreciated.

The house next door to us (detached) has come on the market. It has been rented for the past number of years and was flooded due to a burst pipe at Xmas.

 The house has been completely redone and is now up for sale for 215k. There is a bid in of 200k which appears to be the highest bid being offered.

 These houses would have commanded an asking price of up to 380k a few years back. 

So My question: would we be mad to consider buying it & getting into the rental "world"? 

Basically our situation: our own house is mortgage free, both working in relatively secure jobs, and without any major expenditures on an ongoing basis. 

We would need to borrow about 120k over 15yrs. 

Should we consider buying or should we just sit back and thank our lucky stars that we are mortgage free in the current climate?


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## Brendan Burgess (3 Sep 2011)

Well the first question you must answer is whether investing in property is a good idea for you. 

We don't allow speculation about house prices, so it's a bit difficult to answer that question. 

In general, you already have a €220k investment in the property market. So it would probably make sense to diversify into shares with your other 100k cash.

If you have a pension fund, this is probably the last year where it's worth contributing, so that probably should be your first priority.

If you do decide to invest in property, buying the property next door probably makes some sense as it would be easy to manage. Against that, if you have problem tenants, then you will see them every day, so it might be  a bit too close. 

The best way to assess a property investment is by its rental yield. My understanding is that the best rental yields are from apartments and not 3 bed houses.


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## Happy Girl (3 Sep 2011)

Thanks for that Brendan. Gives us a bit more food for thought. I have been looking at the idea of investing in shares alright but with 20k already in Quinn Freeway Funds (now worth 11,500) I am reluctant to put any more into stock markets. Also the general advice here on Askaboutmoney being given recently regarding shares is that now is not a good time to start buying. Already contributing 5k pa into PRSA. And I suppose given that this is also stock-market dependent I was reluctant to contribute any more. Am I a bit narrow-minded here?


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## Greta (3 Sep 2011)

Why do you want to buy this particular house? You are not at all mad to consider investing in property but have you looked around at other houses and considered which would make a good investment?

I'd suggest viewing many other properties and doing as much research as you can before buying. If you have already done that and think the house next door is a very good investment, then by all means buy it.


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## Slim (3 Sep 2011)

It's a renters market at the moment. It's also a lot of hassle. If I had 100k in savings and no mortgage there is no way I would go into rental. I have a rental property for the last 7 tears and it is nothing but a pain and a money pit. Slim


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## oldnick (4 Sep 2011)

If I had a 100k  and no debts then I actually would consider buying property.

The following is based on my own personal portfolio...

Reasonable two-bedroomed apts in Dublin city-centre (don't get a onebedroomed) are available for ca. 100k. they rent at ca. 12/13k p.a.

After insurance,maintenance and some fees they  get ca. 10k p.a. pre-tax.
this is ten percent - over twice more than the best bank interest.

Now, whether they'll continue to fall in value is another matter. But decent apts in city-centre locations have stablised in sales price in the last several months.

My 4 bedroom house in top condition D.20 is worth ca. 250k -but my rental income, after costs and before tax, is,again, 10k - a return of only 4%.
But one has to consider whether well located 3/4 bed houses will gain value .A speculative matter we can't discuss.

Having said all that - I am talking about 2011 returns.
The above mentioned properties in 2006 were worth over twice today's prices -so ,in truth for me, my actual percentage returns are half what I'm quoting. But for you Happy Girlthey hold true if you buy now.
I'm very jealous of those who have ready cash to snap up real bargains that can yield a return.

_I repeat -city centre, two bedroom_. _And I mean Dublin_. I've got a 2 bed in a small rural town I can't get rid of for a third of what i paid -like Slim's post it's a pain and a money drain.
..but maybe you should wait till the Budget.Everything may change.


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## Happy Girl (4 Sep 2011)

Thank you so much everybody for taking time to share opinions and experiences with me. I think we might hold out till after the budget as you recommend and see what happens.


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## z107 (4 Sep 2011)

If you have time to sort out someone else's problems (ie, broken washing machine, new cooker etc, etc..)
If you don't mind the compliance (tax returns every year, rent supplement forms for social welfare people etc) 
and the charges and taxes (property tax, USC, income tax and other charges coming soon)
and  don't mind not actually getting the rent because of an assortment of excuses
and maybe dealing with neighbours that don't like your tenants
and paying PTSB and filling in their forms
and mystery reports to environmental heath, or revenue
and finally dealing with actually getting someone to rent the property, and cleaning up and replacing busted stuff when they leave....

I can think of far, far better uses for the money. You're just buying heartache (you might have to change your username) IMHO.


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## z107 (4 Sep 2011)

Slim said:


> It's a renters market at the moment. It's also a lot of hassle. If I had 100k in savings and no mortgage there is no way I would go into rental. I have a rental property for the last 7 *tears* and it is nothing but a pain and a money pit. Slim



For the last seven tears! 
Says it all really.


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## Bronte (5 Sep 2011)

What would the rent be?

Rents will come down after the next budget when they slash the social welfare rent rates.  Not sure if they will decrease the landlord mortgage interest relief so that's 2 reasons to wait until after the budget.  

We're not allowed speculate on house prices, but the Nama properties are coming.  Also the next Allsops auction should be watched to see where things are heading.  According to an article I read at the weekend property is now six times averages earnings, which is apparently at the higher end still.  

Oldnicks advice on the 2 beds in Dublin have a good return.  You need a very good return to make it worthwhile.  Location is VERY imporant.

Being a landlord can be a lot of headache, look at the landlord and tenant section on here and also on landlords.ie and other such websites to get a feel for what you are getting into.


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## Hans (5 Sep 2011)

I have investment properties for the past 30 years (bought first one very young). I have let property through good times and bad but I have never seen things like they are now. If one of my children talked about buying property for letting I would be taking them aside to see if they were aware of the big mistake I think they would be making. Buy a house if you want a house to live in for at least 10 years but not for any other reason. Any return I receive now is very hard got I am just waiting for market to open again and I will probably sell at any price - I have enough and I am one of the lucky ones with propery in very letable areas.


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## oldnick (5 Sep 2011)

As a person living off rental income in Dublin city centre, two different Dublin suburbs and different properties, and a rural town , I agree with all comments about horrors of renting.

I am only talking about only buying at today's price, only in a reasonable Dublin city centre location (I dont know about rental yields in other main cities) and only a two bedroom (meaning two reasonable sized bedrooms).
And one should wait for Budget for final decision.
Earning a yield of twice what a bank gives means that one can withstand a drop in apt prices.

However if anyone of you has a guaranteed safe way of earning a high rate of return and keeping the initial sum of money safe I will gladly invest in your scheme.


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## Complainer (5 Sep 2011)

I'm not sure that many people would be mad keen on living next door to their landlord.


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