new_buyer said:Which is pretty poor when you can get around the same in a deposit account with zero risk
bacchus said:Have you ever approached a bank to get say €250k loan to invest in a deposit account?
webtax said:but gearing has a very negative effect in a falling market:
if you have €50k and invest in shares that fall 10% you are down €5k
but if you mortgage to invest in a €500k house that drops 10% you are down €50k
i don't get your point in the context in the above context....
So to summarise, many properties bought within the last 2/3 years are now bringing in 6%-8% after expenses. This is a fact.
So to summarise, many properties bought within the last 2/3 years are now bringing in 6%-8% after expenses. This is a fact. If people dont want to believe it - fine. All my mortgages are at 4.75%. So every month the properties are generating free cash.
First of all there is INCREDIBLE demand at the moment for rented accomodation in Dublin at the moment. Take it from me I have personal experience of renting 11 rental properties around the city centre. I could rent each one 20 times over. Each time one is advertised i get about 20 replies of people wanting to view it THAT day with half saying they want the apartment on spec.
Secondly, there ARE no vacent periods. The VAST majority of apartments are rented solid for many years. In fact its a myth that people move apartment every year, from my experience most people stay in the same apartment for 2/3 years and are then re-rented within one week.
Regarding expenses, yes there are expenses but they are usually limited to managment fees ( which incidentally include insurance by the way).
With most of my apartments i havent heard from my tenants in one or two years. And thats not because im being neglectful, its simply because most apartments are essentially maintenence free. Most have been built in the last 10 years anyway. My tenants have my phone number but they never have the need to call.
So to summarise, many properties bought within the last 2/3 years are now bringing in 6%-8% after expenses. This is a fact. If people dont want to believe it - fine. All my mortgages are at 4.75%. So every month the properties are generating free cash.
What many people dont understand is that many investors dont care if the property values fall a bit in the short term. It makes no difference unless you sell. The transaction costs associated with property are so high that it is unwise to sell just because the market has slowed a little.
Any astute investor is in it for the long run - 10 years plus. Indeed, many investor will NEVER sell and will have their properties for 40+ years and will pass them to their children when they die.
So while the asset values gos up and down in the short term, in the long term it ALWAYS goes up, and all the while the rental yield from the properties are exceeding the cost of borrowings.
And that my friends is a short explaination of why property investing is so popular.
ps Try finding a commentator or economist who will tell you that house prices will be lower in 20 years time.........you wont find one believe me.
I doubt you would have found anyone in 1980's Tokyo who would have predicted property would be lower in value today than it was then, yet low and behold 15 years of falling prices later ......ps Try finding a commentator or economist who will tell you that house prices will be lower in 20 years time.........you wont find one believe me.
So as a counter to the PS point that you won't find anybody who will say that prices wiull be lower in 20 years time. You won't find anyone who would gurrantee that they will be higher (taking inflation into acount of course.)
Try this. After adjusting for inflation house prices in the UK were lower in 1997 than they were in 1977. There's 20 years for you. You would have made a better return by leaving money on deposit.
I disagree with teh above
I've had this tussle before with members in this web site and i was dismissed. However I am certain that it was them that wre wrong and not me.
The reason I disagree is because it is not real terms that apply but nominal terms.
That is assuming of course money was borowed to buy the property and the rent pays the mortgage interest which in most cases it will assuming for arguments sake an 80% LTV maortgage.
(Had the property been bought outright then it would indeed be real terms that are rlevant and not nominal terms - this is very rare though)
So to take your example above in which you say that a person would have made a better return by putting their money on deposit - this is simply wrong.
Lerts look at an example - if someone had put £100k on deposit at an average interest rate of 7.2% per year over the 20 years then that would be worth £400k after 20 years.
Had that person gotten an 80% mortgage instead they would have been able to buy £500k worth of property 20 years ago.
Lets also assume that this someone had the smarts to buy in a good area where thee will always be rental demand then the rent received would have paid for their mortgage interest.
That property portfolio would now be worth millions - not to mention the opportunity they would have to remortgage to reinvest further in property over the years to compound their returns even more.
Again - I stress - that assuming the properties are let then iis nominal terms that apply and not real terms.
Getting back to the min point of whether propeties will be more or less expensive in 20 years time inevitably the answer is more expensive.
Some poster gave the example of Japan. I don't know average prices over the last 20 years there but if that was the case then fair point.
However in teh overwhelming majority of times,property will be worth more in 20 years time in pretty much all places.
It's as safe as houses !!
.........
Any property investor i know prices in 2 months vacancy a year into their calculations.
They also do extensive research, and make sure they invest in a popular area.
Havent heard of anyone whos had more than 2 weeks vacancy yet though who has done this.
But havin said that. It is possible that a bomb could hit the property and its empty for 6 months. Unlikey though, i think.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?