# Buy to let in Dublin 7 yes or no?



## laila (2 May 2008)

I am considering buying an investment property in Dublin 7.  I have put in an offer 20-25% below the asking price at a level that would achieve  rent covering an interest only mortgage.  I would provide a deposit of 25,000 and have to supplement management insurances and void periods which I could only just about manage. I hope to retire in 10-12 years so would be relying on capital appreciation to make a profit.  By my calculation an average rate of capital appreciation of 3-5% over the time frame might make it worth doing. I have half a mind to go ahead if my offer is accepted but the other half of the mind says its too big a gamble and not worth the stress. I heard the landlords phoning Joe Duffy the other day and it would put any investor off. Anyone want to give me their tuppence worth?


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## groom (2 May 2008)

Capital appreciation of 3-5% won't even clear inflation. Interest rates could likely go up. Rents could probably come down.


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## pc7 (2 May 2008)

Also if unemployment drops, people may start leaving the country so there won't be anyone to rent it.  There are many threads on here about dodgy tenants and problems its not a simple thing to take on.  Really think about it!


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## Satanta (2 May 2008)

laila said:


> I have put in an offer 20-25% below the asking price at a level that would achieve rent covering an interest only mortgage.


When you factor in additional running costs (management fees, transaction fees, upkeep of the property, etc. etc.), CGT on any potential increase, the risks (guaranteed returns on deposit vs. non guaranteed capital appreciation), etc. etc. it wouldn't be something that I would jump at.

You really need to be achiving a yield which will cover your full expenses/costs (taking into account interest rate rises, void periods etc.) and provide a decent return should the capital appreciation not materalise. I'd suggest having a run through some of the many excellent threads discussing rental yields on AAM and run the information/advice past your own situation.


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## Desperate D (2 May 2008)

yeah i think you are better off not buying .  if you have to take out an interest only mortgage i think u are putting yourself under too much stress


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## Howitzer (6 May 2008)

I have a question. You're making an offer 20-25% below the asking price but you're expecting prices to rise 3-5% year on year. Is that not a contradiction? You're offering a low price in the expectation that prices will fall further but you're buying in the expectation prices will rise.


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## Brendan Burgess (6 May 2008)

I don't think there is any contradiction here because she is talking about two different time frames. 

Many people who expect prices to continue falling from the present level for the next year or two, expect that they will eventually recover. 

Brendan


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## Howitzer (6 May 2008)

Brendan said:


> I don't think there is any contradiction here because she is talking about two different time frames.
> 
> Many people who expect prices to continue falling from the present level for the next year or two, expect that they will eventually recover.
> 
> Brendan


Absolutely, but the OPs timeframe is relatively short.



laila said:


> I hope to retire in 10-12 years so would be relying on capital appreciation to make a profit.


Add in our high transaction costs and I wouldn't be terribly confident of being very much in positive territory in 10 years. Potential return versus potential risk look small to me.


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## Welfarite (6 May 2008)

If youa re looking at this as a retirement vehicle, it is fraught with uncertainties. I would look at other options for investing your 25k over 10-12 years for a return of 3-5% per annum.


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## laila (7 May 2008)

Thanks for all the advise everyone. I really appreciate it. Not surprisingly my low offer has not been accepted - so far. Does seem too much of a risk so based on all your considered views I have  put it to the back of my mind for now anyway. Thanks again.


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## Baldy (20 May 2008)

Fixed term deposit account will pay you more than 5% p.a..... why would you want the hassle of renting if you are targeting a return of 3-5%? 

Ok - if prices/rent rise considerably you could do better, but as a retirement plan you would be better protecting against the downside risk


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## coppers (20 May 2008)

groom said:


> Capital appreciation of 3-5% won't even clear inflation.


 
Capital appreaciation of 3-5% on a leveraged asset of this size comfortably beats inflation.

25k invested - 
E.g.
House value  300K -mortgage interest only - 275K
A year later house increases by 3% -  now worth 309k
9k better off
Addionally inflation reduces the value of your debt.


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## coppers (20 May 2008)

Desperate D said:


> yeah i think you are better off not buying . if you have to take out an interest only mortgage i think u are putting yourself under too much stress


 

Assuming she pays tax at the higher rate then interest-only is the only mortage type she should consider.


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## coppers (20 May 2008)

laila said:


> Thanks for all the advise everyone. I really appreciate it. Not surprisingly my low offer has not been accepted - so far. Does seem too much of a risk so based on all your considered views I have put it to the back of my mind for now anyway. Thanks again.


 
It's not easy in this climate to find a property where the rental income covers the interest with only a 25k deposit. How confident are you in your rental income projections?


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## Murt10 (20 May 2008)

Provided the house is in an okay condition and in a nice location, such places in Dublin 7, which are close to the city centre should always be in demand.

I would think that new housing estates in places 20+ miles from Town, without proper transport links, are the one that will be really difficult to let in a downturn. 


Murt


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## gerry m (21 May 2008)

As well as the financial implications of buying, dont; forget to consider if you are prepared for the work that comes with being a landlord (even if you use a letting agent) - there is no easy money, property is a long term play but you numbers must be realistic from day 1.


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## minion (21 May 2008)

coppers said:


> It's not easy in this climate to find a property where the rental income covers the interest with only a 25k deposit. How confident are you in your rental income projections?



I would have said its becoming much easier.  House prices are falling much faster than rents and already there are many such properties available.  Check myhome.ie, Daft etc and you'll find them.


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