Investment property in Galway - advice please

K

kaskade

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My Fiancé and I are thinking about buying an investment property in Galway and we would like to get some options as to whether it is a good decision or not. We own a house in Galway at the moment and rent out the other 3 rooms in the rent a room scheme. The house we are looking at buying is in the same housing estate and it is ideal because the bedrooms are all double and it is a good location for renting. We have never had any trouble renting rooms in our current house and see this as a good opportunity to invest.

So here are the facts and figures:
Combined earnings of €62k
No car loans, personal loans, credit card bills etc.
2 cars worth €20k+ (these can be sold if necessary)
SSIA maturing in 07 of €30k (some of this will be used for a wedding though!)

Current house value €275k (€150k owing on the mortgage at 3.2%)
New house value €275k(€290k at 3.4%)
Solicitor charges €1200
Stamp Duty €13750

Rental income at present €888pm
Proposed rental income on new house €1322pm
Combined rental income €2210
Mortgage repayments €2301 - can be reduced to €2080 be extending terms.

So the 2 houses are worth €550k and we would have mortgages for €440k. Personally I feel that even if the houses decline in value and the rental marked drops and the interest rate rises, worst case scenario we sell one of the house and we are not going to end up in debt no matter what because owe have this €110k cushion.

Also if the rental market goes belly up and we can only rent 4 of our 7 rooms at €50 a week instead of the usual €70-85 that would mean we would be taking in 866pm meaning that if we extended the term we would have to pay about €1200pm ourselves into the mortgage. On the salaries we are on and the fact that this is not likely to happen tomorrow and when it does happen we will be earning considerable more it just really leaves us in the same boat as most couples with regards to their mortgage payments?

Maybe I am totally wrong but I would really appreciate any opinions people have given the details.
 
Sorry cant give much advice, but the rental market is and has been very strong due to the number of students (need to factor in that demand is high from them for only most of the year), the hospital etc.

Depends what part of town you are in but I wouldnt worry about rental demand decreasing for a long long time in Galway city.
 
some quick thoughts:
- you're not taking into account tax on rental income
- you're putting all your eggs in one basket.
 
@Tiger - Putting all my eggs in one basket was a concern alright but from looking at the houses in Galway for sale the estate we are in is just the best value when it comes to the amount of rent you get compared to the cost of the house. 2 bedroom apartments closer to town are more expensive than this 4 bed house adn the rental income isn't that much more, plus they dont have parking and people like parking.

Yes the tax on the rental income is something I need to work out - thanks

@SteelBlue05 - you are right, students are a big contributing factor to the market. In the 2 years where we have been renting rooms we have never had to rely on students though. I suppose the fact that the house is furnished well and has luxuries like TV and Wireless broadband for every room makes a big difference. We have never had any trouble renting the rooms and I am not too worried about that, my main concern is whether we are getting in over our heads at such a young age by having a mortgage of €440k when we are not "high" earners yet.
 
kaskade said:
worst case scenario we sell one of the house and we are not going to end up in debt no matter what because owe have this €110k cushion.
Click to expand...

- How much of your cushion are you prepared to lose?
- How would you feel if you lost €50K or more, having been forced to sell a house?
- Factor in interest rate rises of 2% - would you still be able to manage?
- Do you feel secure in your jobs, are there opportunities in your field if you lose your current job?
- Have you worked out the yield on the investment property?
- Are you being too optimistic, not factoring in vacant periods, maintenance costs etc?

I rented a 3-bed house in 2004 in Galway, Ros Caoin estate, for €780 pm, €1322pm sounds like a lot, is it a 5 bed?

I'm from Galway, don't live there now, but find me a "city" of comparable size anywhere where prices are as high. I personally think the market is well overvalued. Best of luck whatever you do.
 
tiroileain said:
- I rented a 3-bed house in 2004 in Galway, Ros Caoin estate, for €780 pm, €1322pm sounds like a lot, is it a 5 bed?

I'm from Galway, don't live there now, but find me a "city" of comparable size anywhere where prices are as high. I personally think the market is well overvalued. Best of luck whatever you do.
Click to expand...

Yeah, I moved away a few years ago and I cant believe the prices now, they are more expensive than most parts of Dublin.

3 bed house in Galway would easily get 900 pm now, you wouldnt see too many priced at 1300 + for a 3 bed unless the location is something special.
 
its a 4 bed, one ensuite and all the rooms are double. I am looking after the rooms in a neighbours house while they are on holidays and they get 70, 70 80 and 85 for the rooms per week. Per calendar month that is 1322 - obviously if you rent the house as a whole you will get less but I have no problem renting rooms individually.

Obviously I dont want to loose any of our cushion but I am using that as a worst worst case scenario. I dont see the value of the houses decreasing beyond what they are now and I dont see there being much change in the rental market. Fair enough an interest rate increase would hit us but we will also be earning more by the time it gets to 2%.
 
kaskade said:
We own a house in Galway at the moment and rent out the other 3 rooms in the rent a room scheme.

So here are the facts and figures:
Rental income at present €888pm
Click to expand...
Maybe I've read your post wrong, but I hope you realise that the "rent a room" scheme threshold is €7,620 p.a.
 
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