Should I do it?

Folks,
wonder if you think this is possible....

I'd like to buy a bigger place, but am debating whether I have to sell my existing place - or whether I should try to hold on to it...

My current pad is worth ~ 320k, mortgage remaining ~150k

New place advertised for ~ 630k, reckon can rent it for 1500 pm (assuming I stay in my current pad)

I have 40k cash..

If the mortgage for the new place is 3300 pm then it is an extra 1800 pm (which I reckon I can squeeze in)

What do you think, would a bank go for it? Would I be able to get a loan on top to pay the stamp duty? or am I stretching a bit too far?

all responses appreciated...

Reckon you're insane to be even considering it. The potential rent is less than half the mortgage payment and you intend subsidising that to the tune of €1800 a month! How do you plan to recover this not to mention the money required for stamp duty, furniture, etc?

You're obviously counting on capital appreciation alone to make a profit on this (and a massive gain is going to be required just for this to break even). In case you've missed it even the optimists in the property market will concede the days of double digit growth are long gone and the bears like myself reckon a crash is imminent.

This sounds like a very high risk strategy. Avoid.

Very high risk strategy. In my opinion for investments to work, and to reduce the risk you need at least a yeild of 5% on the purchase price.This would mean a yearly rental income of €31,500.

I would avoid it with a ten foot barge pole if I were you. In the current climate where prices are dropping this makes this a highly speculative investment IMO. Have you factored in where the ECB rates will go to in the new year. Have you got any professional advice on this?

Sounds a bit mad to be honest.

Rent of 18k a year on a 630k house is a yield of only 2.8%.

extopia said:

Sounds a bit mad to be honest.

Rent of 18k a year on a 630k house is a yield of only 2.8%.

Click to expand...

I agree. Not only is this yield bad but if the property is an apartment, there will be maintenance fees, insurance etc. All of this pales into insignificance when one realises that the repayments will be 3300 while rent expected is 1500 per month. An interest only mortgage would be the only way to go (not saying I think you should, the opposite in fact) and no bank will lend you extra for stamp duty etc. so your savings would have to go on the additional expenses. I'd leave it alone.

thanks for the replies.
I guess I kinda knew that it was v risky, I should be glad that nobody me that to go for it ;-)

I suppose I wasn't really looking at it as an investment, just wanted a bigger place that I could move into in a year or so when hopefully(!!) I could better afford the mortgage on the new place and sell my current place... ah well, better go buy a lotto ticket

cheers