Hi all,
Below I am trying to do a costing of buy-to-let of a prop in Christchurch.
Buy 290k Bertram Court 1 bed Christchurch...assume it goes for 317k
[broken link removed]=
One for rent : Bertram Court 1 bed Christchurch - asking 1,050 - say they only get 950 per month
http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=3647&s[mnp]=&s[mxp]=&s[bd_no]=&s[search_type]=rental&s[refreshmap]=1&limit=10&search_type=rental&id=422013
I appreciate that it will be quite easy to pick holes in it (this is not exactly a thesis), but it's a shot nevertheless.
Assumptions
The Opp Cost = initial outlay costs (SD, Legal, Fit out) plus the annual subsidising costs, as the ave "investor" will not be able to walk into the bank and borrow 317k for anything other than property,
I have added these subsidising costs to the initial costs at the beginning of the year before adding interest which will boost the overall opp cost fig per year.
Ignoring interest rate movements...we can't say for certain what the average interest rate will be over the next 30 years. I accept they are low at the moment by historical standards.
Ignoring inflation - higher inflation will do nothing to affect the loan repayments, but could have effects on rental incomes going up along with expenses such as Maint costs, repairs etc. We could argue all day about future rental prices going uo/down...incidentally I owned a prop near Christchurch and feel rent here has gone up in the last 2 years byt approx 100 pm for above prop.
Reducing balance - I am ignoring the falling interest element as maturity approaches, meaning that more and more of the repayments will be repaying the actual pur price and not interest.
Taxation - as there will be subsidising occuring for many years I am ignoring the tax due when income is greater than expenses (all profits on other investments are taxed also diff rates though). I am also ignoring subtracting Dep Retention Tax on deposits (which will boost the opp cost)
Prop Cost 317,000
Initial Transaction Costs
Stamp Duty 5% (assume non-ftb) 15,850
Legal 3,000
Furnishings 6,000
Total initial Outlay 24,850
Monthly Expenses
Mortgage 1,427
Less Mtg Int Relief -100
1,327
Insurance 80
Maintenance Co. 117
Upkeep (repairs etc) 83
Monthly Cost 1,607
Less Income
10 months rent PY @950pm 792
Shortfall Per month 815
Shortfall Per Year 9,778
Year Principal + Yearly Shortfall 3.5% Int Total
0 24,850.00 9,778.00 34,628.00 1.035 35,839.98
1 35,839.98 9,778.00 45,617.98 1.035 37,094.38
2 37,094.38 9,778.00 46,872.38 1.035 38,392.68
3 38,392.68 9,778.00 48,170.68 1.035 39,736.43
4 39,736.43 9,778.00 49,514.43 1.035 41,127.20
5 41,127.20 9,778.00 50,905.20 1.035 42,566.65
6 42,566.65 9,778.00 52,344.65 1.035 44,056.49
7 44,056.49 9,778.00 53,834.49 1.035 45,598.46
8 45,598.46 9,778.00 55,376.46 1.035 47,194.41
9 47,194.41 9,778.00 56,972.41 1.035 48,846.21
10 48,846.21 9,778.00 58,624.21 1.035 50,555.83
11 50,555.83 9,778.00 60,333.83 1.035 52,325.29
12 52,325.29 9,778.00 62,103.29 1.035 54,156.67
13 54,156.67 9,778.00 63,934.67 1.035 56,052.15
14 56,052.15 9,778.00 65,830.15 1.035 58,013.98
15 58,013.98 9,778.00 67,791.98 1.035 60,044.47
16 60,044.47 9,778.00 69,822.47 1.035 62,146.02
17 62,146.02 9,778.00 71,924.02 1.035 64,321.14
18 64,321.14 9,778.00 74,099.14 1.035 66,572.38
19 66,572.38 9,778.00 76,350.38 1.035 68,902.41
20 68,902.41 9,778.00 78,680.41 1.035 71,313.99
21 71,313.99 9,778.00 81,091.99 1.035 73,809.98
22 73,809.98 9,778.00 83,587.98 1.035 76,393.33
23 76,393.33 9,778.00 86,171.33 1.035 79,067.10
24 79,067.10 9,778.00 88,845.10 1.035 81,834.45
25 81,834.45 9,778.00 91,612.45 1.035 84,698.65
26 84,698.65 9,778.00 94,476.65 1.035 87,663.11
27 87,663.11 9,778.00 97,441.11 1.035 90,731.31
28 90,731.31 9,778.00 100,509.31 1.035 93,906.91
29 93,906.91 9,778.00 103,684.91 1.035 97,193.65
30 97,193.65 9,778.00 106,971.65 1.035 100,595.43
So, by putting the initial outlay costs in the bank and adding the annual subsidy costs to it and getting 3.5% on it, after 30 years you'd have only 100k.