90k windfall -Buying rental property Dublin City Centre? Reading "Rich Dad Poor Dad".

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paperclip

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Hi guys.

I'm looking for some feedback on buying a property in Dublin City centre.

I'm already a joint owner in a house that's in negative equity... but we're going to hang on to it.

I'm coming into a bit of a win fall... in the region of 80 - 90k.

I'm reading rich dad poor dad, and I've come to the chapter where he's talking about buying up property in a deflated economy.... so I had a quick look on daft.

There are properties in the city centre that are between 80 and 90k... and I'm sure you could get them cheaper with a cash offer.

Renting shouldn't be a problem, as long as you undercut the competition... so if someone's renting one next door for 500pm, rent it out for 450.

I have a few questions though, that I'm sure someone on here can help me with.

a) what are the tax implications on the rent? am I allowed to earn 10k per year before tax?

b) if I'm looking at a 10 year investment, does this sound ok?
 
paperclip said:
a) what are the tax implications on the rent? am I allowed to earn 10k per year before tax?
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You would be liable for the NPPR charge (currently €200) which is not tax deductible.

Tax is on ALL income less allowable deductions for wear and tear on fixtures and fittings, insurance and any maintenance expenses/management fees/letting fees. As you don't plan to have a mortgage you would not qualify for tax relief on mortgage interest which generally significantly reduces tax liability.

The 10k only applies to rented rooms in an owner occupied building, it's not applicable where whole dwellings are rented out. You also have to register each tenancy with the PRTB which is another expense.
 
Property is a long term investment, location and proximity to both population/employments are very important factors,the big one though is yield,in particular net yield ie your yield after all expenses have been deducted incl voids/management fees/repairs etc.

If your net yield is not above at least 9% after all deductions its just is not worth your while.
If more people had bothered looking at net yields or indeed any type of yield in the last decade then we would perhaps not be in the mess we are in.

Do your homework and I mean research everything from the management company to the health of the sinking fund.

http://www.irishlandlord.com/forum/showthread.php?t=1049
http://www.irishlandlord.com/forum/showthread.php?t=36
 
shesells said:
You would be liable for the NPPR charge (currently €200) which is not tax deductible.

Tax is on ALL income less allowable deductions for wear and tear on fixtures and fittings, insurance and any maintenance expenses/management fees/letting fees. As you don't plan to have a mortgage you would not qualify for tax relief on mortgage interest which generally significantly reduces tax liability.

The 10k only applies to rented rooms in an owner occupied building, it's not applicable where whole dwellings are rented out. You also have to register each tenancy with the PRTB which is another expense.
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NPPR? is this a new property tax? annual I take it?

Do any of these taxes apply to foreign property investment?
 
Knuttell said:
Property is a long term investment, location and proximity to both population/employments are very important factors,the big one though is yield,in particular net yield ie your yield after all expenses have been deducted incl voids/management fees/repairs etc.

If your net yield is not above at least 9% after all deductions its just is not worth your while.
If more people had bothered looking at net yields or indeed any type of yield in the last decade then we would perhaps not be in the mess we are in.

Do your homework and I mean research everything from the management company to the health of the sinking fund.

http://www.irishlandlord.com/forum/showthread.php?t=1049
http://www.irishlandlord.com/forum/showthread.php?t=36
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Thanks for the feedback, I'll give em a read... and agree... lots of people didn't do their homework.
 
Paperclip

I really don't think you should be looking at investing in property. It's more like a business than a passive investment. The fact that you know so little about it, suggests that it will not be a successful business for you.

Renting shouldn't be a problem, as long as you undercut the competition... so if someone's renting one next door for 500pm, rent it out for 450.
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This is very simplistic stuff.

Rich Dad, Poor Dad is based on American property, tax and legal issues. I don't think it should be the basis for your investment strategy.

I haven't read the book but from reports, it recommended borrowing up to the hilt and continuously remortgaging properties. In this way, you would own a property empire and wouldn't have to work. A lot of people who took this advice are now in a negative equity hole so deep, that they may not recover.

Rich Dad, Poor Dad has been discussed before on Askaboutmoney
http://www.askaboutmoney.com/showthread.php?t=8125

I'm already a joint owner in a house that's in negative equity... but we're going to hang on to it.
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In general, you should spread your money around. If you already have property, then you probably should not be increasing your exposure. Negative equity and large loans will limit your flexibility. Can you use the cash to get rid of your negative equity? If you have a tracker mortgage, can you negotiate a deal with the lender to get additional credit for repaying the mortgage early?
 
paperclip said:
I'm looking at both options Paddy.
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Hi Paperclip. It's clear from looking at the posts last night that you are investigating quite a few options for your windfall - and fair play to you! I invested in a rental property 7 years ago. I am well away from Dublin so rents are about half Dublin rates. Anyway, for the first few years there were no problems. Local workers rented the house. They moved out two years ago and took a lot of my stuff with them. A lot of what was left was not working. The house had to be cleaned up and re-painted. To be expected of course. Since then I have had a couple of quite short rentals. Damage, dirt and theft seem to be the standard approach from tenants nowadays. Deposits are a joke, they set the final month's rent against it! I have always had to subsidise the mortage payments - interest only which expired this year but I got it extended for two years.

Overall between maintenance, vacancies, damage, calls from neighbours etc it has been a bit of a money pit. I hope to sell within the two years interest only periodd. I HOPE to get my equity back!! It is a pain in the arnotts and I will never buy investment property again. It is not worth the worry. People do not look after other people's property. Add to that the reduction in interest relief, NPPR charges, PRTB etc, it's not worth it here anyway. I also think that rental of foreign property is very hard to achieve and manage. There is also a lot of competition out there. Of course, there are lots of opportunities to get what seems like good value in the market now. Also, see my post re Turkey in Overseas Investment thread.

For the medium to long term, I would look at 5 - 10 year investments in commodities, stocks and government gilts etc. I do not hold any except An Post Savings Bond and (haha) bank of Ireland shares. As Brendan posted, maybe spread it around a bit. Less worry than property which is no longer a "guaranteed" one way bet.

Incidentally, I invested against much advice here on AAM Doh! Slim
 
Slim said:
Hi Paperclip. It's clear from looking at the posts last night that you are investigating quite a few options for your windfall - and fair play to you! I invested in a rental property 7 years ago. I am well away from Dublin so rents are about half Dublin rates. Anyway, for the first few years there were no problems. Local workers rented the house. They moved out two years ago and took a lot of my stuff with them. A lot of what was left was not working. The house had to be cleaned up and re-painted. To be expected of course. Since then I have had a couple of quite short rentals. Damage, dirt and theft seem to be the standard approach from tenants nowadays. Deposits are a joke, they set the final month's rent against it! I have always had to subsidise the mortage payments - interest only which expired this year but I got it extended for two years.

Overall between maintenance, vacancies, damage, calls from neighbours etc it has been a bit of a money pit. I hope to sell within the two years interest only periodd. I HOPE to get my equity back!! It is a pain in the arnotts and I will never buy investment property again. It is not worth the worry. People do not look after other people's property. Add to that the reduction in interest relief, NPPR charges, PRTB etc, it's not worth it here anyway. I also think that rental of foreign property is very hard to achieve and manage. There is also a lot of competition out there. Of course, there are lots of opportunities to get what seems like good value in the market now. Also, see my post re Turkey in Overseas Investment thread.

For the medium to long term, I would look at 5 - 10 year investments in commodities, stocks and government gilts etc. I do not hold any except An Post Savings Bond and (haha) bank of Ireland shares. As Brendan posted, maybe spread it around a bit. Less worry than property which is no longer a "guaranteed" one way bet.

Incidentally, I invested against much advice here on AAM Doh! Slim
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Cheers for the feedback Slim... yes, I'm looking into many options :D

I'm joint owner in a separate property, and have never had any trouble with the tennants... well one drunk Welch dude, but we gave him the boot.

Where was your property if you don't mind me asking, sounds like you had some real scum... We keep our rent super low, so I guess this could make them appreciate it a little more.

I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%.... does this mean that if you buy a property for 100k, the annual rent will be 7k?

Anyway, yes it could be a real headache... Did you use a management company?

I've no problem taking a hit on the rent if it means having happy, long term tennants...

What did they steal by the way?
 
paperclip said:
I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%.... does this mean that if you buy a property for 100k, the annual rent will be 7k?
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No, it means that once things get tough, the developers/promoters put the company that is behind the guarantee into liquidation, and your annual rent will be €0.
 
Complainer said:
No, it means that once things get tough, the developers/promoters put the company that is behind the guarantee into liquidation, and your annual rent will be €0.
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+1
Don't buy property in a neighbouring town that you don't know inside out. Buying in a foreign country you haven't lived in is gambling.
 
paperclip said:
I'm looking at a site that has properties in Istanbul that has 5 year guaranteed rental income, at 7%
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If you cant find it on the map without scratching your head then it aint for you,as for guaranteed rental income over 5 years..paper never refused ink.

If I were you I would pay a few hundred euro for advice from an independent Financial adviser...and follow it.
 
Topic reminder: Buying rental property Dublin City Centre?

If anyone wants to discuss over seas property then do so on that subforum.
 
ajapale said:
Topic reminder: Buying rental property Dublin City Centre?

If anyone wants to discuss over seas property then do so on that subforum.
Click to expand...

You're right, mod, you can close thread now... the Dublin option doesn't look possible, cheers.
 
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