Good Buy Or Not

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bricksguy

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there is a 3 storey building for sale in Limerick City Centre, ground floor retail unit and two x 1 bed apartments overhead, all let on a 4yr 9 mth lease to one person @ 35,000 per year since last august, asking price in excess of 700,000
 
Looks like a gross yield of c. 5% p.a. Is that good for investment property? It's not that much more than what's on offer on deposits (3.05% gross CAR).
 
bricksguy said:
there is a 3 storey building for sale in Limerick City Centre, ground floor retail unit and two x 1 bed apartments overhead, all let on a 4yr 9 mth lease to one person @ 35,000 per year since last august, asking price in excess of 700,000
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All depends on the "one person"; is he a bank
 
Not comparable with deposit rate unless buying for cash.
With loan you will leverage return to a multiple of deposit rate.
As per Gadaffi would be concerned with the "ONE" person.
Also why is it being sold with sitting tenant in place at the start of the tenancy?
Would make one smell for a rat!
 
markowitzman said:
Not comparable with deposit rate unless buying for cash.
With loan you will leverage return to a multiple of deposit rate.
As per Gadaffi would be concerned with the "ONE" person.
Also why is it being sold with sitting tenant in place at the start of the tenancy?
Would make one smell for a rat!
Click to expand...

If rates rise by more than 2% you would be leveraging your loss (based on current rates around 3% and thats before expenses are factored in).

On the other hand 5% is your rental yield, there may be potential for capital appreciation in the value of the property.
 
With 80% finance and interest only I would doubt it!
560K@ 5% Interest only.....28000 per annum
Insurance and other expenses (maintenance) 4000 approx
Tax on balance 1500
Profit after tax of 1500 which is a return of a measly 1% odd on your deposit of 140k.
But if rates go to 4% then return on deposit is of the order of 3%.
BUT
if there is any capital appreciation at all over the next 5 years which is anyone's call then it will be a winner (especially at five times leverage).
I think it wipes it's own face for 5 years even if interest rates rise 2% or if property values tank (provided solid tenant!!).
Is the price including stamp duty?
dam099 I think you are right that if rates are to rise by more than 2% then the investment is dodgy (as crudely shown with the figures above).
I feel sticking the money on deposit is a poor alternative because you are pretty much guarenteed underperformance due to effects of inflation. I think Clubman you do not necessarily advocate this for Bricksguy.
I am not getting 5% from my residential stuff (except abroad). Is anyone?
All things being equal bricksguy I would say go for it (especially if you know the area) after your due diligence.
 
thanks for replies guys, stamp duty of 63,000 is on top of price quoted, i have asked auctioneer to clarify tenant details etc, would need to put nearly 163k up front assuming 85% mortgage,also condition of building to be confirmed
 
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