Buying Property to Rent.

Hi Folks

Was wondering if anyone would be able to provide some advice to me.
i am trying to make a decision on whether to buy a house to rent or to leave my money in a deposit account.

At present i have approx 160K+ in a deposit a/c. I deposited it in Permanent/TSB for 9 month period which is finished in March 2010. As interest rates are pretty low at the moment, i was wondering would i be better off buying some property and renting it out.

I would not need much if/any of a mortgage as with other savings i could possible get together 200K. i have read here previously the dangers regarding buying a house to rent especially if you have to get a mortgage.

I have no mortage on my own home and have money going into pension. Also have small amount of money in Shares (20K).

My understanding would be that if i buy a house and rent it out, it would probably be more finanically benefically to me than leaving in a deposit a/c. The fact that i would'nt be paying money back to the bank and that all rent (except tax payment) would be my own.
The fact that i don't need a mortgage would indicate to me that this is a good idea for me.

Just wondering what people here thought as i am not sure if i am correct in thinking that it is as straight forward a decision as it seems. I'm pretty cautious by nature and looking for some people opinions whom are more experienced in this.

I would not touch the property investment market until the market settles down unless you are very very confident that rock-bottom prices have been reached.

Just my opinion mind!

PDCAT said:

My understanding would be that if i buy a house and rent it out, it would probably be more finanically benefically to me than leaving in a deposit a/c. The fact that i would'nt be paying money back to the bank and that all rent (except tax payment) would be my own.
The fact that i don't need a mortgage would indicate to me that this is a good idea for me.

Click to expand...

You would have to be 100% sure that the house that you purchase for €160,000 would be rentable first. Don't forget maintenance, agent fees, taxes, insurance etc.

Location, location, location. If I had the money I'd maybe look at the London commuter belt tbh. I like property as an investment but it's not for everyone. It costs a lot of money to get into it (taxes and transaction costs) and it costs money to maintain it and then it costs money to sell it, and that's if everything goes to plan. You can invest in property without actually buying one of course, maybe seek independent financial advice here-200k is a lot of money.

The whole idea of investment in property is that you put down a deposit and then get someone else to pay your mortgage. So you don't actually spend your own money.

That is the difference between investment property and just buying a house outright with nearly your entire savings.

If you put your 200k on deposit at 5% (there must be some fixed term rates around that still) you would realise 10k a year in interest (before DIRT). That's around €600 per month after DIRT. AND you get to keep your lovely large wad of savings hassle free. So you'd have to make sure that any rent you could get (minus months without tenants, minus repairs, insurance, 2nd house tax etc) would be more than this over the year.

If you plough all your nest egg into a house, great - you are mortgage free but if you fancied a nice new car you'd have to get a car loan to pay for it. Or if you suddenly wanted an expensive holiday - same again put some on on the credit card because the savings are tied up in the house.

Being a landlord means hassle, house repairs, finding tenants, arranging cleaning, etc. etc. worry. And worrying about your investment.
However, if you were thinking of doing it, I would get a mortgage and get the tenants to pay it.

leave your money in a deposit account. Dont think you'd get 5% (at the moment), but you'd definitely get 3.5% to 3.75%, still not bad for doing nothing. It wouldn't be worth the hassle for what rent you'd make compared to a gauranteed return from a deposit account. Have a look at Irish Nationwide before your account matures. They have a good 6 month term deposit rate, perfect for you as the government gaurauntee runs out at the end of sept 10, but thats only my opinion....

leave your money in a deposit account. Dont think you'd get 5% (at the moment), but you'd definitely get 3.5% to 3.75%, still not bad for doing nothing. It wouldn't be worth the hassle for what rent you'd make compared to a gauranteed return from a deposit account. Have a look at Irish Nationwide before your account matures. They have a good 6 month term deposit rate, perfect for you as the government gaurauntee runs out at the end of sept 10, but thats only my opinion....

sadie said:

The whole idea of investment in property is that you put down a deposit and then get someone else to pay your mortgage. So you don't actually spend your own money.

Click to expand...

Sorry, but I disagree with this part. The idea of investment in anything is to generate an income flow and/or capital gain. Leveraging the investment with debt can increase the return, but there is a downside risk to that (as many investors who purchased apartments with borrowed money have found out).

OP, consider leaving the money on deposit and borrowing part of the purchase price, because the tax treatment of mortgage interest is better than for residential property. Bear in mind that this can change at the slip of the Minister for Finance's pen, so retain the money that you can pay off the mortgage if needs be. Do the sums and see which is the better option.

Do the research on costs - maintenance, depreciation of contents, PRTB registration, tax implications. Research the rental market in the area around any house you're thinking of - rents, number of available properties, type of people who are likely to be attracted to it etc. Allow for void periods between tenants where no rental income is coming in.




I'm not going to call the market, but if you believe the housing market is at or near the point of turning, then it is a good time to invest cash in a house - you'd get an income flow as long as you own it, and the prospect of decent capital gains. If you believe the market has a lot further to go, then don't do it.