I am looking at buying rental property with a view to generating monthly income and hopefully some long term capital gains. I expect to hold the property well into the future. I have a property management and maintenance background but am unsure of the best way to finance a purchase. Having viewed several properties we have narrowed it down to a house selling for E100,000. The monthly rental income should be about E600. Having read the boards it seems that interest only mortgages are recommended. We own our home which is worth about E350k and has a mortgage of E75k. We have substantial other savings from a recent property sale but would rather invest our own money in equities and use the banks for the property. In theory we could buy outright with no mortgage and receive about 7% annual return but from a tax point of view this makes little sense even though the rate of return is good. Our income is relatively low at 35k a year but the whole deal should be self financing and allow us to go on and buy a similar second property when it is complete. any ideas/advise on the best way to finance would be much appreciated.
Longford
Do you have pension etc etc?...........high yield/high risk?........makes me concerned about putting all eggs in this basket........is property in longford?........reason I ask is we have modern 3bed semi (worth 160k) let at 550pcm on 12 month lease.........took 3-4 months to get suitable tenant.......a large numberof undesirable tenants....our experience was that rental market very soft.........sorry to be cautious on this but in Longford vacancy rates are high
Markowitzman, thanks for the reply. Both my wife and I have well funded pension plans. We carry no debt except for our mortgage. Having looked at the Longford property market over the last few months there seems to be an upper limit on rents of about 600-650pcm for a typical 3 bed. Where I see an opportunity is not in the new developments that have sprung up on the edge of town but in the older houses nearer to the town centre. The new houses sell for 160k to 225k but you can pick up the older ones for 90k to 125k and still get the same 600pcm rent. I suspect that there may also be a potential for greater capital gains on the houses closer to town. Many of the new houses are bought for tax breaks and are rented out as social housing. The trend seems to be to move the social problems/people to these estates and out of the town centre. We can afford several months without rent and plan to spread the risk by buying several such properties. What do you think of the overall strategy and the idea of going with an interest only mortgage? The high rent yields ought to allow some margin for error also.
Not from longford myself........house rented is my wife's former house........yes looked at centre of town older properties.......water st. impressed me as especially close to the battery road (best road in town) and close to commercial centre.
We used letting agent (normally never do) in longford let and boy am I relieved.......
Have nothing against rent allowance etc.......but we found rent allowance clientele in longford dodgy.
Letting agent saved our bacon on a few occasions.
I think your summation of the longford market is very accurate........outlying estates getting some of town centre problems.
At your purchase price I would acccept 5% yield in return for greater occupancy.
Would throw in free utilities if I could get 6-7% yield on my other properties!.......seriously.......have done this to get one particular property let and could write off the utilities as tax expense.
Interest only with the savings over capital and interest or excess rent in quinn life or something of this ilk...........or ........more aggressive approach is go interest only .........and once let on 12 month lease go to the bank and say you want ot buy another one.
Am getting ready to eat my hat if you can get 600 per month though on the property!!
best of luck!
Thanks for the responses and encouragement guys. Markowitzman, I understand your issue with rent allowance tenants. The local council seems to want to move these tenants to new houses and they are being replaced by immigrants who work in the local factories. Who would you rather have as tenants - locals who have been problems for generations or hard working Poles? As the tenant profile gradual changes I would expect some capital appreciation to kick in. And the real kicker is the location close to the town center. Remember the Celtic Tiger came late to Longford and most of the big price gains were only in the last year or two. Longford is only now seeing any large scale development - residential and commercial- that has been going on in the rest of Leinster for years.
