Frien recently came into some money, thinking of buying 3 bed , 1 bath mid terrace in Charlemont (tiny but lovely estate), or two bed large duplex in Beaumont to rent out. Rent Charlemont, hopefully €1500, price €435.00. Duplex Beaumont, rent €1200 to €1350, price €340,000. He will have no mortgage. Wants long-term rental income. Concerned that Duplex wouldn't be such good resale value as house in Charlemont. Opinions greatly appreciated.
Beaumont or Charlemont
- Thread starter elainem
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GeneralZod
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If he buys it outright as an investment property he won't be able to take advantage of being allowed to write mortgage interest payments off against rental income.
3 bed house is a better bet than a 2 bed apartment.
3 bed house is a better bet than a 2 bed apartment.
Thanks, General Zod. I don't think he is even considering this. He had to retire on ill-health grounds. Money for buying the house is from car accident. He doesn't want to fritter the money away, and wants to put it into property, so that long-term the rental income (taking into account maintenance costs, can supplement his pension). I suggested buying an apartment in town, and thought it would would rent more easily, but he feels the return on properties in town (Dublin 2 area) is not as good as North of the City.
SidTheDweeb
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I don't think it's the wisest idea in the current climate.
Yields of 4.1% and 4.6% gross respectively.
That's before periods where it isn't let, and before associated expenditure.
The income will also be fully taxable, obviously.
On top of this it could be validly suggested that the rental market may suffer some decline, with increased emigration due to faltering economy and an increased availability of rental accommodation.
Then there is the prospect of the capital being depreciated by falling house prices. However, this isn't as important if it is an income stream he seeks.
Could he not consider alternative investments.
Good yielding stocks, with historically predictable dividend payments.
Of course the stock market has taken a bath recently, but some might argue that there are some attractive stocks out there.
Personally, I would leave the money in a high yield deposit account and get some independent advice.
My ultimate goal would be for my financial advisor giving me a list of 15-20 stocks that typically had good dividend yields.
I would review each of the stocks, hopefully make a call that they will survive this economic downturn, choose 10 or so, and throw my money into them.
Hi! SidtheDweeb, thanks for your reply. You set things out very clearly. I think he feels that house prices won't drop much further, but I'm not sure. He has around €600k to invest, so I don't know why he hasn't thought about stocks and shares with dividends. I also pointed out to him that there has been roumours of a property tax for investors, and although it might be only a roumour now, it could become more likely if the government needs the money. Thanks again for your comments, I will show them to him.
SidTheDweeb
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Hi Elainem,
Just a quick follow up;
If he is risk averse and afraid of investing in stocks he should probably be equally as afraid to invest in property right now
he could dump the money in a savings account for a year or two
After DIRT he'd probably get about 4.X% giving him interest of about €24k a year. halifax had a nice offer mentioned in the sunday papers yesterday (also look at the savings forum here for high value deposits)
Obviously with inflation this isn't exactly great but, he really really should be careful about jumping into property.
At the very least, take his time about it.
Hi! SidtheDweeb, thanks for your advice. I am going to encourage him to hold off buying for a bit. I think property will be cheaper in a year's time. Just listening to the news this p.m. with tax take well below what was expected, and more job losses on the way - I agree that investing now is a risksy business.