Advice on Info re purchase of Rented Property

R

redmarker

Guest
Hi,

Im thinking of buying a rented property as an investment. I have done all of the research etc. Basically its a block of 4 small 500 sq. ft. apartments and there is tenants in them already. The estate agent is confirming that they are advised the rent is 400 per month per apartment from the seller(a reciever). However he says he dosent have any info on the payment history or tenancies and that this is not usually inspected until the sale goes to my solicitor??

Should i be concerned, im afraid that there may be arrears of rent or issues with the tenancies. What would you do? Im about to make an offer but this is holding me back...
 
Where is the apt that the rent is only 400 per month?

Your solicitor should be able to confirm all the info on the tenancies *before* you sign anything. Do NOT sign anything until this is done or you leave yourself liable to lots of things. NPPR may not be paid, the tenants could be long sitting ones which can be very hard to remove etc
 
Hi Ryaner, they are very small units/apartments only about 500 sq. ft. so thats why the rent is small - also in the west of ireland, not dublin etc.

Would you insist to see the rents/tenancies etc. before making an offer or make the offer and then check things out with my solicitor?

Also the estate agent wants proof of funds/loan sanction with the offer as its a recievers sale. He says there is an offer there already and has all this information to back up the offer, im a bit sceptical. Is this a ploy to see if im serious or commonplace these days? Would you give him this info or just make an offer?


Thanks
 
Personally I would think that apartments of that size would be more likely to see a greater turnover of tenants - 500sqm is tiny - there can't be much storage space in there, so tenants won't settle there.

I'd ask for details of how long each tenant has been there and try to do some google research on how often the apartments are advertised for rent (google cache).

You're going in at the deep end too, from no experience as a landlord to being a landlord with 4 properties, I'd start off with one.
 
At the solicitor stage you can safely pull out before signing things. Depending on the level of money involved and what you are thinking of offering, it might be easier to take the EAs word at the beginning but state that it is dependant on leases being as previously described.

dereko1969 is also correct, these is likely to be a high turn over in places like this.

There is also new minimum standards for rental properties coming online next year which affects lots of older units. I'm not too familiar with them but definitely something to check into.

As for proof of funds, do not under any circumstances show them the amount you are approved for. You can usually get a letter saying you are loan approved, or if really needed, you are approved for amount X where X is the amount you are currently offering.
 
Thanks guys for the informative replies. I do have experience as a landlord as i look after a house that my parents have rented out for them. Saying that its only one house and 5 tenants so this would be alot of extra work alrite.

Ill see what else information i can gather on the block. It may be a bit too much as a starting point alright... The sums all look good on paper just the reality of running it may be a bit too much...
 
Here is just a few things to consider. I'm not sure if it answers your question. You say rental income is 400pm. What are the management fees on the apartment. The reason I ask is if for example it's 1200 per year it immediately makes it a bad investment as you must recoup 3 months rent just to cover this. Also I am assured by a friend involved in property management that the cost of insurance (which is covered in the management fee usually is likely to increase considerably for apartments in the near future). Also factor in that in Dublin yields of 7% to 10% are achievable in very rentable areas. Why considering this would you want to buy in the west of Ireland as an investment? Apartments in smaller towns are quite hard to rent from what I hear at present. I'll put it this way. That apartment would have to be (and I don't even know where it is situated) would have to be available for about 30k to interest me. In my opinion there is also very little chance of capital appreciation in any small towns outside of the cities in the forseeable future. Sorry if this is not what you want to hear and again it's only my opinion.
 
johnmurf83 said:
In my opinion there is also very little chance of capital appreciation in any small towns outside of the cities in the forseeable future.
Click to expand...

A healthy property market is one that increasing inline or just above the inflation rate. You can see this pattern over long periods of time in every property market that long term indexes. This was forgotten in the boom years, and coincidently seems to be still forgotten by most people today.

Your only way of making real capital appriciation would be to time the market, ups and downs are normal in a standard economic model, but if you can correctly time the market, you may have better luck in Vegas :)

FYI, there are many other considerations for buying a rental property that can make it a good long term investment. Easy way used to be months rent x 11 x 15 to calculate a price for the property. Below this figure meant it'd give a high yield, above, not so much. However things have changed regarding interest rates getting lower, interest relief getting rolled back, nppr charges, and other charges on the way.

Lastly regarding the rent, I hear yesterday of a property with a Rent Assistance tenant having 200 Euro a month dropped from their rent. Equal to a near 25% drop. I'd definitely recommend reading up on the plans for rent relief/assistance in the coming years.
 
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