Best option for cash to invest - considering purchasing a two bed apartment for rental to students?

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Ballina

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Hello,

wife and I both retired. early 60s. No mortgage for years. House worth €500,000 approx. Combined pensions around €62,000 net p.a. I have an ARF €178,000, and Matrix Bond with Zurich €45, 000, Comfortable lifestyle, not into new cars or expensive furniture or gadgets . The odd holiday ok. House insulated to the hilt. 2 single adult kids, both working away from home.

We have €270,00 languishing in a current account looking for a good home. I am not comfortable taking risks at this hour of our lives, A modest return would be better than inflation eating away at it slowly.

I was considering a two bed apartment for €120,000 in a regional University town. That price is low enough that even after 5 years with students, I might sell and make a return. and students move on when their Course is finished, so I would not have the hassle of dealing with a tenant who refused to leave if I wanted to sell. That would be a nightmare scenario for me. Is this a good idea or is there a better alternative? If this was an option, there would be €150,000 left . I`d keep €50,000 for easy access money, but what would be good to put the balance into?

Thanks in advance for your advice.
 
Have you children and if so could they do with some financial help or assistance? Just thinking outside the box a bit. We leave inheritance, etc, to our children/family when we're not able to use it anymore, but do we do it when it's really needed? Just a thought.
 
Ballina said:
That price is low enough that even after 5 years with students, I might sell and make a return. and students move on when their Course is finished, so I would not have the hassle of dealing with a tenant who refused to leave if I wanted to sell. That would be a nightmare scenario for me.
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Students have the same rights to security of tenure as anyone else. If you want the option to cash out after 5 years then property is probably not the right thing for you. Especially if not being able to do this is your nightmare scenario.

There are many students that rent year by year for the academic term only and go home for the summer but there are also lots of students that will continue to live in the same property.

There are many reasons why they would do this such as securing employment in the area or going on to further education (e.g.4/5 year PhD). Some might just float about for a year or two after finishing because of the social scene. They would be protected by part IV rights so you can't just evict them or expect that they will be leaving just because they are students.

It might even be working as you expect for the first 4 years with turnover of different students but you have to at least be prepared that the students you rent to in year 5 could be 1st/2nd years that stay for 4 years plus. If you are not prepared to be in it for at least 10 years then you should probably stay away from it
 
_OkGo_ said:
Students have the same rights to security of tenure as anyone else. If you want the option to cash out after 5 years then property is probably not the right thing for you. Especially if not being able to do this is your nightmare scenario.
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I think it could work in principle but I wouldn't do this with anything less than a ten-year investment horizon.


Rentals can be profitable but there are a lot of frictions and costs with buying, getting set up with your first tenant. And the same when it comes to sell.

Ballina said:
early 60s.
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Are you prepared for a call at 10pm on a Sunday about a broken dishwasher? If so, will you be able in ten years time?
 
Small landlords are fleeing the rental market in droves, it would be worth asking yourself what you know that they don't.

If you're inclined to do so you could start giving your children some of their inheritance now, starting with utilising the Small Gift Exemption each year but also some of their €335k lifetime CAT allowance, while they're younger and need it - help out with house deposits maybe? The money will grow in their names rather than yours (where it will attract further CAT when you pass it on).

If you'd prefer to hold on to the money in-case you need it, you should consider investing it in something passive. There are plenty of lower risk investment funds, though you could be looking at a 20+ year investment horizon so a straight investment in the stock market is what I would do in your scenario. Plenty of threads about this on AAM already.
 
Thank you for all the advice folks. Yes I had thought about the kids, in particular setting up a PRSA or some kind of pension that they could add to in years to come. Both got the travel bug after graduating, so they have missed out on 6 or 7 years of pension contributions and are at an age when retirement seems something in the far distant future. The future comes around quickly as I try to tell them.

I will check out this Small Gift Exemption, but I certainly do not want to waste my money financing other travel plans and then have to help with deposits etc in a few years time. The well isn't that deep.

Zenith, when you say a straight investment in the stock market, do you mean through a Broker? I do not know enough about it to make an informed decision on my own. I always thought property might be a good investment if bought at a good price. At least an apartment is capable of being sold on, with a site to sit on for a few years, there's no guarantee of planning permission the way things are going at the moment.
 
Ballina said:
At least an apartment is capable of being sold on
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Potentially not if you have a hold over tenant, if some of the wilder tenancy rights are implemented by the next government, management company issues, or it's caught up in the wave of fire safety issues that are coming down the tracks to a very high proportion of Irish apartment complexes. Just some of the reasons landlords are currently exiting the market.

By straight investment in the stock market I meant an investment in equities only, so no property/bonds/cash which tend to reduce risk but also returns. You could buy shares directly through a broker, plenty of online ones like DeGIRO, but if you're not comfortable with that you could buy through one of the life companies like Zurich who would look after the whole thing including taxes for you, for an annual price. For example this Zurich fund would invest you in many of the world's biggest companies across 20+ countries - https://www.zurich.ie/funds/fund-products/equity-funds/global-equity-funds/indexed-global-equity. The risk rating of '6' should understood in context; buying shares in such a broad basket of the worlds' largest companies across so many countries is generally considered the safest equity investment you can make, but a much bigger risk of your investment losing value than say cash or gold. Again there are a bunch of threads on this topic already with commenters better informed than me.
 
Ballina said:
I was considering a two bed apartment for €120,000 in a regional University town
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Rather you than me to be dealing with renting to students. I know that there are plenty who won't cause you any problems but there can be problems with some. Speaking from experience having lived next door to different ones for many years.
NoRegretsCoyote said:
Are you prepared for a call at 10pm on a Sunday about a broken dishwasher? If so, will you be able in ten years time?
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If it is also in a town some distance from you it may take up a lot of your time as quoted above.
 
Thanks Sue Ellen, Its not too far away and I`m handy with fixing things, and it might be an excuse occasionally to get in for a look around. I worked in the Health Service for years administering rent allowance before it evolved into HAP. I`m well aware of the issues with troublesome tenants, and certainly would not dream of putting tenants or students into an expensive property. You don`t know what they will be like until they`re well embedded. On the other hand, I`ve met exemplary tenants too.

I thought landlords were fleeing the market to cash in on abnormally high house prices at the moment. I hadn't thought about changing Fire Regs and Sinn Fein's attitude to landlords. I would be a reasonable landlord to the right tenant. I'm not out to screw anyone with rent. Basically I wanted someone who would treat a place with respect for 5 or 6 years, maybe longer until the time was right to sell. A pie in the sky notion I`m beginning to think now.
 
Ballina said:
I would be a reasonable landlord to the right tenant. I'm not out to screw anyone with rent.
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As long as the current rent control legislation stays in place, if you charge less than market rent, you'll suffer a semi-permanent or perhaps permanent diminution in the resale value of your property as a rental property (as opposed to a sale to an owner-occupier which may not be feasible for a property targeted at students.)
 
Hi Ballina,

I know right now you are only sounding things out but you call out above that you are handy at fixing things.

The way health and safety is going that skill/ability is becoming less and less of an advantage. Like myself, you are comfortable to do things in your own home but I view it is now different for a rental property. I would actually not factor that into your final decision. Anything that breaks and which needs to be repaired or replaced will most likely need to be done by a registered and insured person. Anything less and you are exposed if anything goes wrong. At a minimum you are giving the tenant a stick to beat you with, especially if the relationship between the two of you sours.

As an example, if you get a new electric cooker a registered electrician must install it. It is a very straightforward thing to install but we are not suppose to do it. At best you will be allowed to install a microwave without having to pay through the nose for a tradesman :).
 
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I know that Slippers, and despite being handy, I know my limitations and know how serious health and safety is these days. But these would be minor considerations compared to the other obstacles thrown up in the preceding comments. I`m just looking for somewhere to place money for between 5 and 10 years max, and not have it fall in value and preferably make some return. When I say I would be a reasonable landlord, I mean I`m not driven to accumulate as much money as possible and the stress that involves. I know I cant take it with me, so once I have enough to be comfortable I would be happy. But it seems there are more cons than pros to property now from what I`ve read. I think passive investing might be the best option now, as someone advised. Or maybe an ARF in my wifes name. I`ll look into that option too I think.
 
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