Madach Gardens, Budapest

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kathryn

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Budapest.Godzsu-court (Madach Gardens)


Hi . Some weeks ago I was looking for advice on purchasing an apartment in the above development. I took the advice on board and went to Budapest to see the development. I was impressed with the general area and the location of "my" apartment within the scheme. I'd just like to ask for some opinions on where I stand at the minute.

I have an apartment in Ballina(Mayo) bought for 95k in 2002 now worth 180k approx. the rental income doesn't meet all running costs. I am releasing equity on our home to purchase the apartment in Budapest. This will cost 500@mth over 20yrs. From what I've read on this site I don't expect the rent to be much more than 350/400. I have also paid a deposit on a Leaseback near Montpellier in France. I got a mortgage in France for this. I estimate that the overall shortfall in income v expenditure re. mortgages will be approx 4k@yr, which I intend to cover with my childrens' allowance of 5.6k @yr.

Sorry for the preamble but the crux of my dilemma is this.
With rising interest rates, (all 3 mortgages are on tracker rate) am I overstretching myself? I realise the leaseback may not appreciate as well as a " straight" buy but the low risk factor suits at the minute.
The apartment in Budapest was originally bought in 2003 I would be taking over the contract and It's due to complete early 2007. I'd hope to hold onto it for say 5/10 yrs and then sell with hopefully a decent profit.

Would I be better to sell the apartment in Ballina and put the profit from it into Budapest? Or should I hold my breath and hope for the best.

We have two SSIAs maturing next Mar & April worth about 40k in total we could put these back into the mortgages?

Any advice appreciated.
Thanks.
 
Re: Kathryn. (Madach Gardens)

kathryn said:
Budapest.Godzsu-court (Madach Gardens)

With rising interest rates, (all 3 mortgages are on tracker rate) am I overstretching myself? I.
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How could anybody answer this? You have given no indication of your disposable income.


kathryn said:
Budapest.Godzsu-court (Madach Gardens)

I estimate that the overall shortfall in income v expenditure re. mortgages will be approx 4k@yr, which I intend to cover with my childrens' allowance of 5.6k @yr.
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Well, if you need to use your CHILDREN'S allowance money to fund a shortfall in investment property rental income then perhaps yes you are overstreching yourself.

If you do see yourself having a cashflow problem, then I think selling your apartment in Ballina may be the best solution as it is probably the only one which would have a profit after tax.

I would then suggest that you use the profit to reduce the mortgage(if any) used to purchase your principle private residence, as you will able to offset foreign rental profits against the mortgage(part ot mortgage used to purchase the foreign properties) interest when calculating your tax due in Ireland.

You would need to make sure that you understand the tax implications of whatever route you decide to take.
 
Re: Kathryn. (Madach Gardens)

Thanks for the input.

My disposible income is approx 750@week after expenses (mortgages, household etc..)

I don't necessarily need to use the children's allowance. It's just that I never actually draw it out of the account and I thought putting it into an investment property would be a better option than just letting it sit in an EBS account making very little interest, just banking on demutualisation in 5/10/15.....yrs.
 
selling property in Ballina is very difficult at the moment - lots on the market and few going sale agreed. Don't know which development your apt is in but have seen two for sale in Ridgepool for a very long time.
 
are you sure that property is the best investment option available to you? despite several years of great returns property is still a risky asset. from your perspective this is especially true as you do not seem to be generating any income from your properties so if prices stop going up then you will be saddled with a number of 'investments' that are generating neither income nor return (but the mortgages will still have to be paid).

if we get the soft-landing in Ireland that all the vested interests are predicting then your Ballina property will be underperforming a saving account.

can you afford this? stress test your repayments using an ECB base rate of 3.5% & 4.5%.
 
Thanks for the imput. JohnBoy I realise I should probably know this but how do I actually stress test my income as you suggested?
 
Hi Kathryn,

ECB rates are currently 2.75% and are expected to hit 3.5% by mid next year. Obviously any combination of events could cause this estimate to be revised higher or lower but for argument's sake lets assume that the forecasters are correct. Just find a mortgage calculator and plug in your equity, your borrowings and see what your monthly repayments will be under various interest rates. Here is one;



Also remember that as rates increase the return from simply holding onto cash increases so the return from any risky asset (such as property) ought to be significantly better than what you can get from simply leaving your money on deposit.
 
Hi Kathryn, you ought to bear in mind that I am not a big fan of property investment in the current climate - for me the numbers to not add up but many others beg to differ and these others have made a lot of money of late. So be aware of my bias against this type of investment when reading my posts.
 
Hi JohnBoy

I had kinda got that vibe. However I'd just like to ask.What alternative investment options would you suggest I take a look at? I have €450/600 @month to play with?


Thanks
 
kathryn said:
Hi JohnBoy

I had kinda got that vibe. However I'd just like to ask.What alternative investment options would you suggest I take a look at? I have €450/600 @month to play with?


Thanks
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Got a pension?? Consider a PRSA. Alternatively buy into a diversified fund every couple of months to minimise charges.
 
kathryn said:
Hi JohnBoy

I had kinda got that vibe. However I'd just like to ask.What alternative investment options would you suggest I take a look at? I have €450/600 @month to play with?


you could try reducing your mortgage debts with some of the cash - never a bad move in an environment of rising interest rates.

I would also pursue bearishbull's suggestion of a range of diversified funds. You need a counterweight to your property exposure.
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Has anyone else invested here? We were promised handover this month but now the developer has apparently said that they would not allow snagging till the final instalment has been paid. Anyone else with a similar experience? Any advice?

Tara01
 
This project is well-behind schedule at this stage and chances are, corners will be cut to get it finished as soon as possible. Some apartments have been handed over but the development is still a long way from being complete. You (or your management company) should be able to arrange an appointment with Autoker to snag your apartment before the final installment is paid. If not, then at least present a list of problems to them before handover. In such a large development, it's likely that a lot of things will need to be snagged. In Marina Part, another huge Autoker development, major snagging needed to take place in the case of several owners I've spoken to. Autoker don't have a great record in this respect and having seen some apartments quite recently in Madach Gardens, I think it would be a good idea to be cautious.
 
Hi Budapest,

I have heard similar anecdotal evidence recently about their approach to snagging.

Do you know of a reliable Management Company in Budapest who you think could deal with this situation effectively on someone's behalf? Thanks.
 
Taking up a few of the issues raised here, I would not dare to give Kathryn financial advice, but I think that property investment is a very good use of her childrens allowance money, given that she is probably investing for her children anyway and that property, like children, is a long term proposition.

We have bought in Gozsdu/Hollo and signed up with the managing agents attached to the developer. I was happy about the delays because it gives us a chance to get more money together. I have asked that agent to organise snagging - yes, I can see that there might be a conflict.

I think you should ask your lawyer whether the developer is entitled to take that attitude to snagging.

I also think that the Irish investors should keep in touch with one another as we go forward.
 
Murrisk, I think it's an excellent idea that any buyers in this development keep in contact and ensure that snagging of everyone's apartment is completed successfully. Don't trust the management company to do it for you. At the very least, drop over and check the apartment yourself. This is much easier if different members of a group of buyers visit the development periodically and keep a record of problems and solutions to them.

650,000HUF/sqm is very much at the higher end for this development, so hopefully you got one of the best apartments there. At that price, what rate of return do you envisage? Assuming it was a one bed property of e.g. 55sqm, you'd need to be getting 180,000HUF/month exclusive of parking to get even a 6% return.
 
The agent said 6%, but that remains to be seen. The agency fees are one months rent plus v.a.t. on the letting and 10% management fees plus v.a.t. We bought two apartments, both one beds, and two parking space for 5,000,000 each.

I note from the price list which we chose from that the lowest price per sqm was 485, but that was on the first floor without a balcony. Ours are on the 6th floor and one of them has a balcony.

I will most definitely be posting with information as to whether we get them let, how long it takes and for how much when the time comes.

We have a friend in Budapest and might prevail on him to take a look. I think he will be curious anyhow. If the Irish buyers could get together, it would be great too.
 
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