Buying Investment Property

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WorkingClass

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I've always wanted to buy an investment property. I'm completely unclear of how much real cash I would need to do this in the current climate.

So, I'm married with two kids and a home owner. Bought this house for 510k 2 years ago. Estimate current value to be at most 450k currently. Outstanding mortgage is about 300k.

So, let's say in 12 months time the house is worth 400k, and I owe 300k leaving me with 100k of equity. I've never had any other debts and have overpaid mortgage payments in the past for years, so credit rating should be very solid.

I hope to have a total of 100k cash saved in the next 12-18 months. Have approx 70k currently. Obviously, I'm hoping that house prices continue on their current trend for the next year or so.

So lets say I want to buy another property for between 300k and 400k in 12 - 18 months time. I'll have approx 75k for deposit and 25k to cover fees and stamp duty.

Does it sound reasonable that I could raise a 225 - 325k mortgage for this purchase?

Obviously I need to talk to banks about this. It's always pretty clear what you need in both cash and earnings to take out a mortgage for a family home. It's not nearly as clear how much you need for an investment property. Anyone have an idea of what guidelines they use?
 
You'd probably need about 30-40% deposit for an apartment and 20-30% for a house.

The reason banks are looking for such big deposits is because that is how much they expect property prices to fall by, and they want to insulate themselves from it in the event of loan default.

Maybe you should think about insulating yourself from it too. You've already seen 60k-110k go up in smoke on your PPR, makes me wonder why you want to plough another 100k into a crashing property market with over 20,000 vacant rental properties currently engaged in a death spiral of decreasing rents to attract one of a shrinking pool of private sector renters due to rising emigration and unemployment. But hey, you have your heart set on it.

This thread should probably be in the Property Investment forum.
 
Robin Banks said:
You'd probably need about 30-40% deposit for an apartment and 20-30% for a house.

Maybe you should think about insulating yourself from it too. You've already seen 60k-110k go up in smoke on your PPR, makes me wonder why you want to plough another 100k into a crashing property market with over 20,000 vacant rental properties currently engaged in a death spiral of decreasing rents to attract one of a shrinking pool of private sector renters due to rising emigration and unemployment. But hey, you have your heart set on it.
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Yes I have seen a drop in the value of my PPR. However, I spent several years watching the value of my previous PPR increase dramatically and sold it with an enormous profit. Yes I have lost some of this equity but it was cash I could neither spend nor use. At present I am not even close to negative equity, at least not yet. Given it would cost me as much to rent a house big enough for my family as it does to pay a mortgage on one, it's not something I worry about.

This is an option, and one which I intend to pursue when the time is right. Maybe that time will be in 12-18 months, maybe it will be later. I know the time to do this is certainly not now :)

It's a long term investment (10 - 20 year) and one which I choose when I believe the time is right. Which is

1. A property that is well suited for rental or potential resale at a later date
2. When the value of Irish property has declined significantly further than it has now, which will probably happen in the next year or two
 
there is an absolute glut of houses in Ireland and there will be for a long time, the number of rentals is rising by the day and if the economy continues to under perform, emigration and non-nationals leaving will mean this figure will continue to rise.
property is not the get rich quick scam that it was for the last 10 years, it will be a long time before it is again. If you put your 70k into a high interest deposit account you will get a better yield than any rental property.
Sorry to be blunt but, you timed the market completely wrong when you bought your PPR, what makes you think you can buy a rental property and make money out of it?
For the next few years not be leveraged to the hilt will be a huge bonus, plus your savings will make you financially secure should anything bad happen.
 
300-400k seems like a lot for a single residential property that you'd be hoping to rent out. Or is it commercial property?
 
loan to value ratios for investment property changes alot due to a number of factors,at present you may only get 70 percent ltv as rips are out of favour with banks because of falling rents/prices.In two years it could be different.As its your first rip the banks will assess your ability to pay both mortgages.Dont make the mistake of buying an expensive house to start with .If you have 100k to invest,a property value of 280k should give you a good return.
 
Senna said:
Sorry to be blunt but, you timed the market completely wrong when you bought your PPR, what makes you think you can buy a rental property and make money out of it?
For the next few years not be leveraged to the hilt will be a huge bonus, plus your savings will make you financially secure should anything bad happen.
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Sure, I'm happy to accept that I timed the market wrong to buy my current PPR, but I timed it exactly right to sell my previous PPR. In retrospect, it would have been better to sell then, rent for a few years and then buy again. I did consider this at the time, but it was simply too much upheaval with a young family to move twice in a few years. It also meant betting against a market which for the previous 10 years had only moved up. A downturn was inevitable but very few people knew exactly when it was going to happen.

It's much easier to see the past than the future. The only real downside is that I paid more stamp duty that I could have. The decline in value has affected my previous PPR to a similar amount to my current and I much prefer where I live now. The only loss really is the stamp duty I paid.

I currently am holding this cash in a high yield deposit account as a buffer because I have no idea exactly what will happen in the next year or two. I expect property prices to continue to decline for the moment. However, they will only decline to a certain point. I'm prepared to wait a year or two to see what happens and make the go or no-go decision then. I'm really just interested in the amount of hard cash I'll need if and when the time comes.

As for rental income, if I can cover the interest portion of the mortgage with rental income (700 - 800ish euro) I'll be happy as I view this as a very long term investment, not a get rich quick scheme. I would be in a position to cover the rest of the mortgage payment if needs be. I don't expect to cover the entire mortgage payment with rental income.

The reason for the higher purchase price is that I would want to buy a family home, not a crummy recently built apartment/townhouse in a crappy location. I'd only invest in a property that I would happily live in myself with my family.
 
I have just purchased a second property (my third purchase overall). It's right for me at this time. I consider myself lucky to get it as it wasn't an option a few years ago.

It's a long term investment as I would hope to downsize from my current property and retire there eventually.

I got it for €45k under the asking price and I'm happy with that.
 
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