Help!! Cash offer??

[mattdo]

Hi all.

I have been looking at a number of houses the last few months and I have come across a house which I am interested in from an investment potential point of view.

The house is close to amenties and services and the location is very good.

The house is currently on the market for €99k and when I viewed the house, the EA said that they had an offer of €74k on it.

I am a cash buyer however I am pretty much a novice in regards to property investment scene.

The house would rent for between €800 - €900 per month, however it needs a small bit of work, to bring it up to scratch...

The EA has said that the owner is willing to accept the offer on it at the moment and is looking to take a deposit.

Do you think that this is a good investment? How do you know?

If you were going to put in an offer, how would you do it and for how much?

What are the expenses that would be incurred in regards to buying a house and how much are they?

Thanks for all your help!!

 

[leonmahon]

Say you paid 85k for it (including the work to be done).

If it rents for say 850, multiply that by 11 to get your annual rent (allowing one month vacancy per year) = 9350.

That means your gross rental yield is 11%, an extremely good figure.

Of course you'll still have to consider tax, wear and tear, agent/management fees (f you're going to go down that road), etc on top of that. Still sounds like a good investment though. I would offer a grand more than the other bidder and explicitly let the EA know you are a cash buyer & are ready to move quickly.

As for expenses, you can probably expect to pay between 2-3k in stamp duty, solicitors and other fees.

If you've never bought before, consider investing in your own home first.

 

[Brendan Burgess]

If you've never bought before, consider investing in your own home first.

This seems to me to be the key point.

On the face of it, the investment looks ok, although property investment is a business and you need to manage it well to make it profitable.

But investing in your own home is much more tax efficient. Any gains will be free of CGT. You won't be taxed on the "return" on the investment i.e. the rent saved. If you ever need Social Welfare, your home is disregarded from the means test whereas your income from an investment property would not be disregarded.

And having €100k cash available to buy or deposit on a house would put you in a very comfortable position.

Brendan

 

[mattdo]

Thank you all for you detailed replies!!

I am seriously considering in putting in an offer....just before I do, could you tell me;

What are the typical expenses in buying a house?

How much are they approximately?

If I was renting the house, what the typical annual expenses?

How much are they approximately?

Thanks a million!!

 

[JohnJay]

What are the typical expenses in buying a house?

How much are they approximately?

Legal fees - €1000 aprox
Stamp Duty = €2000
Engineers report (optional, but worth it) 300?


[/QUOTE]
If I was renting the house, what the typical annual expenses?

How much are they approximately?

Thanks a million!![/QUOTE]

Insurance
General Maintenance
Agents/advertising fees for rental
tax on income
Household tax (100/200 per year now, but will be more after budget)

Still looks like a good buy though - but do you sums!

 

[JohnJay]

What are the typical expenses in buying a house?

How much are they approximately?

Legal fees - €1000 aprox
Stamp Duty = €2000
Engineers report (optional, but worth it) 300?


[/QUOTE]

If I was renting the house, what the typical annual expenses?

How much are they approximately?

Thanks a million!!

Insurance
General Maintenance
Agents/advertising fees for rental
tax on income
Household tax (100/200 per year now, but will be more after budget)

Still looks like a good buy though - but do you sums!

 

[mattdo]

Thanks JohnJay!!

Do you know what is the tax rate on rental income...is it 20% or 41%?

Thanks

 

[JohnJay]

Thanks JohnJay!!

Do you know what is the tax rate on rental income...is it 20% or 41%?

Thanks

I'm not an expert in this - some of the more "seasoned" landlords in here would know better.

But I'm guessing it would depend on what tax band you are on already. So if you are already in the upper band, then you will be paying it at the higher rate.

There are some (but not many) things that you can write off against tax as a landlord though, anual maintenance, agents fees, etc. You can also wite off the interest on money you have borrowed to buy the property, but that wont suit you if you are buying for cash

 

[mercman]

Do you know what is the tax rate on rental income...is it 20% or 41%?

With all the questions you have asked, which amounts to that you know very little about property Investment. Unless you have been asleep for the past three years, the amount of casualties in financial distress is huge. Personally I do not think the market is going to have a sound base for years. This should allow you plenty of time to learn the whereabouts of a market that is pretty well beat at the moment. 'A bargain isn't a bargain unless one really needs it.'

 

[mattdo]

Thanks Mercman for your reply!!

I am fully aware that I know very little about property investment, hence that is the reason why I am on this forum.

Is your recommendation for me not to invest in this property and why?

Based on the figures from other people on this forum, they suggest that this is a good buy??

thanks

 

[ryaner]

Property is very far from a set and forget investment. What is good on paper isn't always good in reality. There are many more costs than simply purchasing the property. It'll need to be kitted out before hand for instance.

Also I'd check the local area and find out if the actual rent is 800-900 for similar houses. Not all houses in the same area are identical even when built from the same plans. They tend to diverge over time.

I think what other posters are trying to say, and I agree, is that you need to read up more about what is actually involved in managing a rental before you go for it. And remember the old saying, if it seems too good to be true, to probably is.

 

[mercman]

And remember the old saying, if it seems too good to be true, to probably is.

OP, ryaner has spelt it out better than I did. What happens if you purchase the property and need to refinance it in a few years ?? As it now stands Banks are not refinancing for property and are unlikely to do so for quite some time. Many thousands of people in this country saw themselves as experts in property, Where are they now ?? Many are in the toilet.

But it's your money and one must do what they feel is best. You are talking about purchasing an illiquid asset which could cost you money, loads of tax and more then likely a massive headache or heartache.

Why don't you invest your money in an ETF linked to a specific sector of the stock market. You could see real growth from this and they are cashable more or less instantaneously. The best of luck whatever you choose.