Buying Investment Property in Kerry

Shauna

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Hi, I'm a new poster. Thanks for taking the time to read this! My query is: I'm interested in buying a 'fixer upper' in my locality. Owner is looking for around 80k for it. I have nearly 100k in savings, have a husband and two small kids and am mortgage free (we paid off this mortgage about 8 years ago). a) Should I use my savings to buy the fixer upper and take out a loan to do it up or b) should I try to get a mortgage for the full amount and use my savings to do it up? (P.S. I'm 54 years young!). Many thanks for your help
 
You need to run through all the numbers carefully. Are you planning on renting it out or flipping it?

If you're planning to renovate and flip, how much will it cost to do the work? What would the value be after the renovation? I've no knowledge of the Kerry market, but so look at the prices being achieved in for similar properties in a range of conditions.

In the Dublin market at least, the price increase achievable after renovations will in many cases not be enough to cover the cost of work. Add in all the legal & estate agent costs in the buying & selling stages and you could be looking at a significant loss.
 
A 'fixer upper' will cost you more than €20k to renovate. Renovation always runs in the thousands not the hundreds.

Unless you're in a marketable area in Kerry I can't see it returning a yield.

You need to give more information - general area, what needs to be done to the house, type of tenants - long-term, holiday rental etc.
 
Thank you all for replying. Really appreciate it. I'm hoping to do it up and rent it out. Rentals in my area (i.e. just outside Killarney) for a 4 bedroom house would achieve between €650 - €700 per calendar month. I'm looking to long term rent - even though I think I would get more if I did holiday rentals but with two young kids I just don't have the time to be cleaning another house (but it's a consideration when the kids are older)! I'm thinking down the line to when the kids go to college, (first one will be 18 in about 12 years time) and the income would be really handy then. The house needs a new roof, rewiring, replumbing, new kitchen and bathroom - I'm guestimating around 40/50k to make it habitable. When finished it would be worth 180/190k. So to buy it would cost 80k plus legal costs (no estate agent involved) and to do it up would cost maximum 50k. I'm not going to flip it. It's quite close to my own house, so I can keep an eye on it, but I'd also like to be able to leave it to my kids when I pop my clogsl Or should I put my savings into an investment account and save myself the headache!!
 
I have nearly 100k in savings, have a husband and two small kids and am mortgage free (we paid off this mortgage about 8 years ago). a) Should I use my savings to buy the fixer upper and take out a loan to do it up or b) should I try to get a mortgage for the full amount and use my savings to do it up?

Get the mortgage to buy the property and use your savings to do it up.

The reason for this is that you might buy the property and then find that you can't get a mortgage to do it up.

So while it makes better financial sense to do it the other way around, it's worth paying a bit more to get the security of knowing that you will have enough to do it up.

When you finish doing it up, if you have money left over, then pay down the mortgage.

Brendan
 
I'd agree @Brendan Burgess except I can't see a bank giving a mortgage in an investment property that needs a new roof. Sounds like a site. Bank might need engineers report and QS estimates of costs before they lend. I haven't tried anything like this so it might be easier.

OP, I know your question was which way to borriw the money, but my thoughts on the venture:

You need something firmer than a guesstimate to embark on this.

Say you buy for 80k. Plus 50k for renovation. Plus let's say 10k for legal and unforeseen costs.

So total cost 140k.

Then rent for 650.

Gross yield is just 5.5% if no vacant periods. that'd be fine if you're a outright cash buyer. But, if you're borrowing it makes less sense.

Say you get away with borrowing 50k at 4.5% over 10 years. After tax, this will be cashflow negative by about 100 per month (assuming you're a higher rate tax payer), before any costs outside of mortgage.
 
I would think that 50k for the refurb you're talking about is a little on the low side - especially with a new roof! Could you get a builder to walk through the house with you before you bid?
 
Thank you Brendan and thank you RedOnion for your guidance. (This is why this website is invaluable). I might have to look into it further. I wonder would I get a better return if I invested the money instead? I'm thinking more of the kids down the line. It's hard to get on the property market down here as well.
 
It is a difficult property market in Kerry and if that would cost that little to do up I'm surprised some builder/developer hasn't snapped it up to do themselves. You would want to get very detailed costings, you won't do much with 50k in a house that needs wiring, plumbing and a new roof before you even start on the kitchen and cosmetics.

Even with a shortage of rental properties people are very choosy and want a high standard these days.
 
I did up a two up two down farmhouse in Kerry; gutted it, new roof etc. and I kept the budget tight but it still cost me the bones of €100k to do it up.

I think you'd be better off investing your €100k and forgetting about buying the house to do up. You'll be buying a money pit, have a mortgage, have spent a lot of your €100k savings and still have the hassle of finding tenants, registering with the PTRB, property taxes and so on (not to mind talking about maintenance).

I think you'd be mad to take it on.
 
Thank you Brendan and thank you RedOnion for your guidance. (This is why this website is invaluable). I might have to look into it further. I wonder would I get a better return if I invested the money instead? I'm thinking more of the kids down the line. It's hard to get on the property market down here as well.

Personally I wouldn't touch the property as an investment. You're saying 40/50k to get it right and then saying it needs a new roof and basically new everything else too. Windows, plastering, flooring, decor and everything else you've mentioned as well plus what you don't know will turn up when you start gutting it. Then rent it and all the problems that brings. Walk away now my friend before you've the best part of €200/250k spent, there's nothing to be made out of it.
 
You know. I think you're all right. It would be a headache for sure. I need to finish my own house anyway so I think I'll do that and get some enjoyment out of it. Can anyone direct me to what page/forum I should go to look for investment advice? Thanks again everyone.
 
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