Should I continue bidding on an apartment I think is overvalued?

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captbf

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I’m a 36 year old man, single, renting in a town in Ireland where my work is. I’d struggle to get work elsewhere as my job is quite niche, and work requires my presence in town. I make 56k per year.

My rental is cheap at €854 per month for a 2 bed, but the apartment is a little dingy, not easy to clean, and noisy at weekends (on the same street as a pub).

I’m mortgage approved for 225k, and have been trying to buy for a year, my criteria simply being somewhere I can afford that doesn’t lower my quality of life. Due to extreme supply constraints, I’ve not been able to find anywhere. I’ve bid on several places, but always been outbid. At a stretch I could probably afford a place for €295k accounting for my savings.

Currently I’m involved in bidding on a 60m 1 bed apartment with a D3 rating. The bidding is likely to go over 200k (from an artificially low €165k asking price). The place is actually quite nice, but I consider it to be overvalued at that price, management fees are €1895 per year, not sure about LPT. But it's probably better, quality of life wise, than my current situation, mainly because of the noise factor. A 2 bed recently went in the same complex for €210k which might be a reasonable guide for this one since it has some advantages despite being small. Its rare for 1 beds to come up at all in my area.

Should I go ahead and continue bidding up to that price? I can easily see this place struggling to sell at this price in the future. On the other hand, supply is so bad here I could be waiting weeks for a place I’d even consider visiting- being cautious and conservative has turned out to be a costly mistake, so far.

I’d appreciate just any feedback and thoughts/ questions, it can be tough trying to think through decisions like this by yourself. I’m a first time buyer, and I worry that I’m not considering all the angles. I'm wary of apartments having heard some stories of regret
 
captbf said:
At a stretch I could probably afford a place for €295k accounting for my savings.
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captbf said:
A 2 bed recently went in the same complex for €210k which might be a reasonable guide for this one since it has some advantages despite being small. Its rare for 1 beds to come up at all in my area.
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captbf said:
On the other hand, supply is so bad here I could be waiting weeks for a place I’d even consider visiting-
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Just to be clear, we do not allow speculation about house prices on askaboutmoney so any replies telling you with full confidence that prices are due to fall will be deleted as will any replies telling you with equal confidence that prices will rise.

If this meets 70% of your requirements, you should just go for it. It seems you can well afford it. And maybe you can trade up later.

You appear to have €75k cash, so you will be borrowing about €140k. @3% interest, this will cost you about €4,000 a year compared to the €10,000 you are paying in rent per year. Maybe add the €2,000 management fees, but it's still €4,000 a year cheaper.

There is so little property on the market that you may have no other choice. If you had a choice between this at €210k and a bigger two bed at €280k, then go for the two bed, but you don't seem to have that choice.
 
Thanks for your reply!

You appear to have €75k cash, so you will be borrowing about €140k. @3% interest, this will cost you about €4,000 a year compared to the €10,000 you are paying in rent per year. Maybe add the €2,000 management fees, but it's still €4,000 a year cheaper.
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This scenario assumes I put all the cash into the apartment- do you think that's advisable? Also re: 140k @ 3%= 4k per year, repayment calculators suggest I'd be paying a bit more than that, am I getting that wrong or was it just meant as a rough ballpark? Cheers!
 
captbf said:
Should I go ahead and continue bidding up to that price? I can easily see this place struggling to sell at this price in the future.
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The market appears to be at the price you're arriving at, so another apartment of similar quality will go at that price too, if and when it becomes available. Your caution appears to be based around worry that the price will fall if you decide to sell. However, Brendan has given you an excellent base for estimating the cost of caution: you now know how much paying rent will cost above and beyond paying for a mortgage. I would submit that moving up in living standard and paying less overall as you go would be the better option.

Re: Should you put all your cash into the apartment? Not every last cent I think. You mention a niche job - perhaps a few (3? 6? Only you can answer) months contingency money is advisable. However, for the rest, why not? You would otherwise effectively be paying mortgage rates to hold onto savings that earn you at best half that if stashed into savings/investments.
 
captbf said:
Also re: 140k @ 3%= 4k per year, repayment calculators suggest I'd be paying a bit more than that, am I getting that wrong or was it just meant as a rough ballpark?
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@Brendan Burgess is pointing out the interest costs of the loan. You will be making capital plus interest repayments. €140K @ 3% over 20 years would be about €776 p.m. not including mortgage protection life insurance or c. €9,312 but you're incrementally buying more and more equity in the property via the capital portion of your repayment.
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Could you consider going for a 2 bed and avail of the rent the room scheme. What would a room rent for in the area if it's say 400 a month then that would just under 5k a year tax free.
 
Thanks for the great answers, I get it now re: interest costs. And the net cost of the mortgage VS keeping it in savings. Looks like LPT Charge (including Local Authority Increase) is €258
Wouldn't be too keen on renting a room, just a personal preference to live alone. Two bed more practical but scarce in my price range unfortunately
 
captbf said:
This scenario assumes I put all the cash into the apartment- do you think that's advisable?
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Think of paying off your mortgage as a guaranteed/risk-free return on your savings for putting them to work for you. That return is your mortgage rate. If you can get a higher risk-free return (after tax) on your money elsewhere then the alternative is probably a better return. But in most cases higher return means (more) risk. Paying down debt is often the best option.

However, I wouldn't rush into using all my funds on day 1 for a number of reasons:

As already pointed out by other posters it's useful to have a rainy day fund to cover unexpected outgoings life might throw at you.

From a leaky roof to poor insulation, issues may arise with the property that you didn't spot on your viewing. I'd be inclined to hold some of my savings back as insurance for these things, in the short term at least. If you've used up all your savings in the purchase then you may find it difficult to deal with these issues quickly. You could always ask your lender for another loan but there's no guarantee that will provide it. Holding money back will mean a larger interest bill but think of that as a short term insurance premium. Though remember once you're satisfied there are no (more) issues you should put that money to work.

If your mortgage provider offers a percentage cashback on mortgage drawdowns then it can make financial sense to borrow as much as possible for a short period of time. I think most cash inducements are paid out within a month or 2 but are based off initial drawdown amount rather than outstanding amount so this could be as simple as waiting a day/month to use your funds you've held in reserve. A word of caution on this one, cashback offers usually mean higher rates so it can be a juggling act between short term benefits and long term costs.
 
Individual properties cannot be over or undervalued.

Only the markets can be over or under valued with respect to fundamentals.

And even over or undervaluation depends on what your timeframe is. If you are in a stable job, settled in the area, and want to remain so long-term then there probably isn’t a good time or a hard time to buy.

Buying is just structurally cheaper than renting in Ireland and I don’t see signs of this changing.
 
You’ve been looking for a year and this is the first suitable one that is vaguely in your budget?

I’d say you have sussed out the market at this stage. Have you looked slightly further afield? Next town over for instance or villages not too far away? I know that would mean a commute and would add to the costs as well as eat into your free time. But you might be just restricting yourself unnecessarily to a small area.

You mentioned a 2 bed one in the same development, have you tried asking around to see if there are any coming on the market? When we sold our house the EA had 4 potential buyers lined up before we even advertised it. They literally had a waiting list for that estate.
 
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captbf said:
I’m a 36 year old man, single, renting in a town in Ireland where my work is. I’d struggle to get work elsewhere as my job is quite niche, and work requires my presence in town. I make 56k per year.

My rental is cheap at €854 per month for a 2 bed, but the apartment is a little dingy, not easy to clean, and noisy at weekends (on the same street as a pub).

I’m mortgage approved for 225k, and have been trying to buy for a year, my criteria simply being somewhere I can afford that doesn’t lower my quality of life. Due to extreme supply constraints, I’ve not been able to find anywhere. I’ve bid on several places, but always been outbid. At a stretch I could probably afford a place for €295k accounting for my savings.

Currently I’m involved in bidding on a 60m 1 bed apartment with a D3 rating. The bidding is likely to go over 200k (from an artificially low €165k asking price). The place is actually quite nice, but I consider it to be overvalued at that price, management fees are €1895 per year, not sure about LPT. But it's probably better, quality of life wise, than my current situation, mainly because of the noise factor. A 2 bed recently went in the same complex for €210k which might be a reasonable guide for this one since it has some advantages despite being small. Its rare for 1 beds to come up at all in my area.

Should I go ahead and continue bidding up to that price? I can easily see this place struggling to sell at this price in the future. On the other hand, supply is so bad here I could be waiting weeks for a place I’d even consider visiting- being cautious and conservative has turned out to be a costly mistake, so far.

I’d appreciate just any feedback and thoughts/ questions, it can be tough trying to think through decisions like this by yourself. I’m a first time buyer, and I worry that I’m not considering all the angles. I'm wary of apartments having heard some stories of regret
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can i ask why you arent looking at 2 bed apartments given you can afford one and it would be much more saleable in the future.
 
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To be clear, I am looking at anything I can afford including 2 beds and 3 beds. I think people need to understand how low supply has gotten even vs 6 months ago, my notifications on daft are few and far between. so this is the only one that fits the bill as of this moment
 
Hi captbf
Did you check with your local Est Agent from time to time they may have property that not on there property list
For sale, or they may approach someone who is thinking of selling,
From time to time sellers may go with a lower bid if the bidder is a cash Buyer,
no harm at this stage in rechecking that your mortgage approval is up to date and making it known you have extra cash along with the required % and make your final offer and see what they say,

It is tough out there when buying at present some people you are bidding against will be using every leaver they have to close a deal when they can go no higher,

Annieindublin
Very good point making it known no Chain and may be in a position to help seller with a fast or slower time frame to close deal now,
You can be sure some bidders from time to time will use all kinds of levers to close deals coming to the end of a bidding war,
 
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