Which property can I buy in 2007 for 40,000 when my SSIA arrives ?

Z

z108

Guest
Hallo folks ,

There seems to be a good group of knowledgeable people here so I want to tap into that knowledge and am looking for advice.

Next year in march 2007 my SSIA matures and I will have around 40000 in cash and would like to buy a property if such exists for such a low price (low by irish standards).

Does anyone have any recommendations ? I was thinking eastern europe I might find some bargains. I set my budget at 40 grand and will be reluctant to go much above it. I would be happy to stay below this figure. is it possible ?
 
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For that amount you'd need to think outside the box, especially when you remember to add on (to the sale price) 10% to cover taxes, commissions etc. It's very possible to pick something good up, or have you thought about a site in Ireland? Though I haven't looked this year, there should be some decent locations for the money you're talking about.
 
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why property? there is an enormous range of investment options available to you - how do you know that property is the most suitable for you?

from reading other threads here on overseas investment i don't know of anyplace where you can buy a property for €40k unless it is a wreck and you plan to renovate it.
 
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Sorry Johnboy, not true, there's plenty of places, but like I said, you've to think outside of the box. Here in Croatia you can pick up either an apartment or house that is immediately ready to move into for €15-30,000, some are inland but others are less than 1/2 an hour from the sea.

You are right to point out that there are other options, EBS are offering some top up scheme or other, I'm waiting for the details in the post.
 
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ok then in Croatia and any number of former (or even current) war-torn, economically undeveloped, and potentially risky destinations you might find a property for €40k. But would this be a wise investment for someone who sounds like they only have the €40k?
 
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why property ? good question. I feel safer with property than equities and I'm not sure if I want an investment or somewhere fun I can go to for a weekend where the beer is cheap

I acknowledge and thank you for your replies and am considering them carefully. Where in Ireland can I get a site for 40 grand ?

What about Berlin? I heard there were studio apartments there going for around 40000 . If I can find one maybe . . .
I can speak very good German from my college erasmus days and I could easily get a flight there for 50 euro during the world cup which isnt bad in terms of accessibility.
As I said before, Im not sure if I want an investment or somewhere fun I can go to for a weekend where the beer is cheap.Either way Berlin seems acceptable to me as I ve been there before and have lived in Germany for a year and in fact travel to Germany a lot.So I was thinking somewhere like Berlin or Leipzig maybe its possible.

About Croatia I will need to read more and find out more, thanks Almo

About the budget of 40 grand . I dont want to go much above this. Im a value investor and dont want to pay a premium.

admin : i will try to write better subject lines in future



thanks all ,
 
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Last I knew, Johnboy, Varazdin was relatively untouched by the war, or maybe you're referring to Dubrovnik? You should visit or find out more baout some of the regions, the economically developing ones, and you'd be less pessimistic, the infrastructure is far superior to some areas in Ireland, and certainly to areas at a similiar stage of development.

Also Romania has a number of areas with well priced property, I'd baulk a little at Bulgaria though. But as mentioned there are other areas to invest in, long term schemes, or in one of the funds being touted by AIB. Could be interesting too.
 
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ok now i am a big emerging market property bull.

sign, could you provide some more details on exactly what you want from your investment beyond the lifestyle benefits?

I think that you would have to work hard to find a property that fits your criteria. You say that you are a value investor - how would you define that exactly? Residential property as an asset class is not particularly good value anywhere that I can see at the moment. You will find yourself competing with lots of other investors who are happy to sacrifice income in the expectation of capital gains. If you really are a value investor you should be looking for a property that yields at least your financing rate + 50%.

I would stick to what you know. Your German ought to come in handy but I understand that the fees for buying there can amount to 10%+ of the property value. Go to Germany and have a good look around. You ought to be able to talk directly to agents there rather relying upon on Irish based middleman.

Would you intend to rent this property out or just use it for weekend breaks?
 
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Yep, solicitor and land registry fees: 1.5%
Stamp duty: 3.5%
Estate Agent commission in Berlin: 6.98% (paid by purchaser)
So in Berlin you're looking at 12% transaction costs

It is sometimes possible to negotiate down the estate agent commission, but this is by no means guaranteed. The seller doesn't have to pay the EA anything, so he's under no incentive to go down the route of a private sale.

Note also that EA fees are different in each Bundesland (Federal State). I know it's typically 3% for the purchaser in Bavaria (the seller may also pay something - not sure about this). Not sure what it is in Sachsen-Anhalt or Sachsen (where Dresden and Leipzig are if my geography is correct)
 
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Persius are you sure about those costs? They seem so high! Years ago I bought, and later sold, in Hesse, but I distinctly remember it was only 5 or 6%, though admittedly the estate agent wasn't involved (government-private sale).
 
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Yes, I'm pretty sure about them.
The 5% you mention is basically the 1.5% legal fees plus the 3.5% stamp duty.

The EA fees are very high in Berlin. I read a series in one of the Berlin papers online recently (either morgenpost.de or tagespiegel.de - forget exactly which) where a local FTB outlined his almost year long hunt for a property there.
He said that the standard EA comission there is 6.98% and is paid by the purchaser. The vendor doesn't have to pay any commission. So there is no saving to be made by the vendor in trying to make a private sale, so they practically always sell via an EA.
Basically when he quizzed the EAs about the level of the commission, they just replied that 6.98% was "Marktueblich" (standard market rate) in Berlin. He did mention that sometimes the EAs could be bargained down to lower commissions (e.g. 4%). Alternativly, some people try to negotiate a private sale with the vendor once they've met him via an initial contact organised by the EA. However EAs are well wise to this trick and will go to court to get their commission, and they often win their cases in court.

Now in Hessen, it may be that the vendor also has to pay the EA a commission, which may explain why the vendor decided to go the route of a private sale. As mentioned before, it varies across the Bundeslaender.

Also new developments are often sold directly by the builder, so there would be no EA fees. But I very much doubt you'd be able to buy anything in a new development for €40k (even in the depths of Sachsen).

Alternativly a management company for an entire block may be trying to sell individual appartments which are already let out (and it's practically impossible to evict the tennants in such purchases). In these cases, there is often no EA commission.
Finally, you could try repo sales. Think the banks sometimes sell without any EA commission. Obviously alot of research would be required.
 
Re: Advice Sought

In Hesse the place I bought was a renovated old baracks that was sold off privately, I believe, I still have the papers somewhere, the Lande sold it off.

One place that does have some nice props, and relatively cheap, is up in Osnabruck, like Marburg it has good rental returns due to the large student and worker populations.
 
Sign, you never mentioned if you are prepared to borrow more than the €40k. With €40k in cash, you could borrow and buy a property worth up to €200k (80% loan).

I am not suggesting you do that. You do need to ask some fundamental questions:
1) If you don't believe in borrowing, then don't invest in property. Stats show equities provide better long term returns than property ... without the use of biooring. if you borrow, its a different story ...
2) How much of your €40k are you prepared to risk? All of it? (you just spent 5 years saving it up). 50% of it? any of it? The more risk averse you are, the less you should think about investment property (holiday or second home property is a different concept)
3) When do you want the money back? Are you flexible in this timing? Because property is more illiquid than other asset types ...
4) What returns are you looking for? Same as SSIAs? More? Or less? Decide - and then marry your required returns to the amount of risk you are prepared to take.

If still in doubt, go see a financial advisor, who will help you through the plannign process ...
 


Investment property markets change quickly so it is impossible to recomend something a year or so down the line. Agree with comment thinking outside the box, this is true. With your 40 grand cash you have this to play with as a deposit. Seek advice nearer the time. Depedning on your attitude to risk you could buy a property for 40 grand or use this money as a deposit to buy something of greater value. i.e. your 40k could be a deposit of 30% on a property at 150,000k and finance the rest. There are regions that are perfect for this type of approach now but there are also many which dont allow this down to the fact there is no finance avaiable. i.e. Cape Verde and Brazil.
 
How about the 3 bed mid-terrace in Limerick going for €30k?? Apparently the owner was willing to accept €25k to get rid of it a few weeks ago....
 
It was in the Sunday World at the weekend as well I think, it's in one of those really rough parts of Limerick as far as I could see. Mid terrace ex-council house
 
I figured the Limerick house would be ina rough part. But not so rough I couldnt go there on the booze for weekends with 6 big friends ? or is it like afghanistan there or what ?

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About financing to buy a property larger than 40,000 Euro, Im considering doing a masters full time next year and if I do, then I dont want the additional headache of any more loans unless it was really small.

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About estate agent fees in Germany , thanks for the heads up.

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About my level of expected returns. I'm ambitious but not greedy and if I can match inflation,then I wont be an unhappy man. My main worry is of getting hugely stung like when I bought a lot of Eircom Shares at its flotation.... UGH
But being of a hopeful nature, I would expect to have a chance of doing a lot better. The last thing that dies is hope they say ;-)


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When I will want the money back ? Im prepared to leave it there for 5 to 10 years. I dont see myself needing the money for the next 5 years by which time I will have other more liquid investments I can cash in if need be.
If I can get a stable revenue stream (a yield) from the property I would be happy)
Otherwise if I used it as a place to visit for weekends (or slightly longer holidays) and it kept pace with Inflation I'd be equally happy.
But ultimately common sense (although people have different internal concepts of this) should rule.

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Persius, how could I find out about repo sales in Germany ? Is it as simple as asking the bank staff directly? Or is there a special department in each bank which its better to contact?

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Johnboy , by calling myself a value investor, I mean Im looking for value such as yield or lifestyle benefit. I want to stick with something I can understand or something I can obtain enouggh information about to understand
To me it defies logic that properties in ireland are at values which give such low % rental yields. To my mind a high rental yield is the only tangible real sign of the inherent value of a property. The smaller yields in Ireland become the more our property market seems like a pyramid scheme and god help those who pay to get in last because theyre paying for the ones who got in first. Am I wrong ? Ok investors in some places are sacrificing yields for a story of potential return but I need to be convinced about where this return can come from. Its not that anyone is forcing me into property but I can see the value of a yield which produces a fairly stable cashflow if I choose the right property. After being burnt in the stock market bubble of 2000 I realise now that cash is King.
Johnboy , why do you describe yourself as a big emerging market property bull? Which markets are emerging property and which countries? And why are you bullish?

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Almo, why would you in your own words, 'baulk a little at Bulgaria' ?

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if the place needs a little renovation I can do itt myyself as long as its liveable .

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I believe thats most of the questions answered. I really appreciate all feedback I ve been getting on this thread. Thankyou all.

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Why I had Germany in mind was (off the top of my mind). And I'm in no way claiming to be professional or anything near it. I'm looking for and expecting criticism )


1, I could fly to Berlin with only a few days notice and at only 50 euro return
This was in the middle of the world cup so its very accesible if theres a
problem and if I want to visit.Once at the airport the transport system
was impressive. Taxis are not necessary to get anywhere.


2, Germany is a very stable country. Everyone knows that Germans are very
solid and law abiding. Speaking the language as I do there will be no
problems with mafia or gangsters or problems with the title of the
property (tales of which abound from eastern europe)

3, Every educated German delights in showing off what wonderful english
they speak.Its a paradox of my learning the German language that I
usually do not need it . ( this would be helpful when dealing with
officials eg.. tax)


3, Inflation is very low there. I can buy a case of 20 beers for 5 euro in
Germany. Long Live the EU. Its always a pleasant surprise on my wallet
when I visit. I also bought a kebab for 2 euro compared to 6 or 7 euro
here for an inferior product. [I dont binge very often ]

4, In Berlin I keep reading statistics that 70% of the people living there
rent so if I choose the right location then I should be able to get a
stream of yield easily.

5, I couldnt help noticing that its also a play on eastern europe and a nice
base from which to visit the rest of eastern europe ( Berlin airport seems
to be a hub with flights to everywhere). I dont think the Germans will let their capital be eclipsed in that region the long term.And look how well Germany
rebuilt itself after the world wars. This time its rebuilding an ex-communist east Germany. Their economy actually produces something.


Does anyone know about Leipzig? Apparently Its an hour on the train from Berlin.


Ok I hope that wasnt too long a reply but I did leave it for a long time before writing. I may have appeared naive as an investor many times but I hope that if others see what I cant see then they can point it out.


Thanks again ,


Sign*
 
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When I was living in Germany, I used to see the adds in the papers for the repo sales (or whatever they're officially called). Also saw some documentaries on them - they're often auctions and the family who are losing their home are often in attendance. However othertimes they're direct sales by the banks.

From here, best to check the property websites - it should be obvious which are bank sales, often by the low price.
The main property websites that I know are
http://www.immobilienscout24.de/
http://www.immowelt.de/

Try also the Berliner Morgenpost (http://www.morgenpost.de/) who have their own property section ([broken link removed]) or the Tagesspiegel (http://www.tagesspiegel.de/) or the Berliner Zeitung ([broken link removed]).

With only a few days notice, you're probably looking at €200 for a return flight to Berlin (including taxes etc). If you book a month or so in advance, you'll get it for around €100 (including taxes etc). I've never seen a flight that actually works out at €50 after taxes. I'd say they're very rare.

AFAIR Leipzig is one of the most successful cities in the former East Germany. According to Deutsche Bahn (www.bahn.de) it takes 1 hr 13 mins with an ICE express train and costs €36 single (2.5 hrs on regional trains for €26). If I remember correctly Infineon and BMW have plants there and they've attracted quite a bit of investment in the IT and electronics area. However there was a lot of appartment building throughout East Germany in the early 90s, so there may be oversupply there. You'd need to research it more carefully.
 
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