Investment Property - Limerick

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Peadar

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Hello,

I just wonder if anyone might have an opinon on this. Looking at a house in a housing estate in Limerick city (Garryowen), know the area pretty well. It would have been built in the 1950's, and prices are relatively low. The house we are looking at is €100k and we'd be looking to put down a €10k deposit. Rental demand is strong in the area especially from single mothers, so we'd be looking at taking in someone on rent allowance, generally landlords charge a bit more for this, so the average rent allowance rent would be €650 to €750 per month.

The yield on this property would be over 7% and we'd be in this for the long term, not speculating on short term rises.

With all the speculation on property prices, do you think it's a bad time to invest in any property in Ireland?

Any opinons on whether this would be a good investment from the figures provided.

Thanks
Peadar
 
Hi Peadar,

That return looks very good. I don't believe you could get a better return in Ireland at the moment

I'm doing something similiar in Dublin and it's working out very well with my tenant. In Dublin you can buy a house for say 230k to 250k and get rent for €950 to €1100 by using health board tenants.

Are you sure you can get that type of return for a 100k house? Are you sure that the house is in a reasonable area that a single mother will be able to live in ok? (I'm thinking of these feuding families you here so much of in the media.).

I presume you've kept your eye on what the local estate agents are leasing out properties for in the area?
 
Hi Peadar,

Location Location Location .... never heard the phrase ?

-Ok - the thing about renting is that maybe it is a good idea to have a property that appeals to the wider market not just single mothers .....

- the prices are relatively low 100k ya I say that is low and did you ever wonder why..

- to get a better stats on limerick see the link (see the report !)

and don't just take my word for it that the rental market in limerick is saturated

Not trying to put you off just trying to help!!

Zar-debt.
 
Zardebt,

All advice appreciated, good or bad. Your right in the sense that their would not be much of a market in the area without people on rent allowance, single mothers or otherwise, that is one of the major risks. I would probably have to drop the rent to about €400-450 if I was looking to accept other tenants. I will also have to look at the fact the gov. might clamp down on a lot of these "single mothers" , many of whom will live with their boyfriends, or that the whole rent allowance thing will be reduced.
The main advantage as I see it is that you could pay twice that much for a house in Raheen and Castletroy and only get the same amount of rent.

Donking,
It is not in any of the feuding areas, I know the area very well and know a lot of people in the area, it would be locals themselves I would be looking to rent to. The area would be classed as working class alright, but it's an older estate with many of the grown up kids now looking to come back to it. Average property prices in the area would be in the region of €120k-135k. I am viewing the house soon and I expect that their will be work required to it.

The area that's it in has a limited demand (locals looking to return) and I don't expect much capital appreciation, I'm in it for the long haul. I'll have a better idea when I view the property and maybe put out an advertisement for tenants.

Thanks for all replies.
Peadar
 
i think it sounds like a good deal, provided that you can let it. you are well under the SD barrier so you could easily get out if it didnt work out and would probably not lose very much.
 
Hi Peadar,

As a native of Limerick and given your interest in investment property, would it be better to renovate and subsequently rent an oldish house near the Treaty Stone or just sell it off?

December
 
Hi December,

It depends on what you are looking for. If you are looking to make a quick profit, then selling it off would be good, presuming you have all your costings right and know that the market is there for the house. Renovating houses is notorious for running well over budget so you'll have to check out the costs first, my situation is that I am looking for a long term investment that will repay in 15 - 20 years time so I would be looking to rent it out, I know that beside the treaty stone there is an apartment block just being built so that might increase your competition in the rental market also there is a lot of student accomadation being built up by LIT so that would take your student market out of the equation as well.

On your location, I know the area and there is two questions that pop up, if you are on the main road near the treaty stone you are not too bad, however there is in my opinon a few rough estates there which might make it tough to rent or sell on and if the house is in one of these estates I think you'll find it hard to make a profit on a renovation project unless the figures are very good ie your getting the house way below market value and you can renovate it relatively cheaply.

If you are a local and well known in the area and you know there is a market there you can rent to people you know and avoid a lot of the trouble, but me being from the other part of town would be very nervous of getting involved in the area.

Peadar
 
Peader,

There is another saying that goes the higher the risk the higher the gains ...

However

1. When a market starts to saturate location is a big factor....!!!
2. You paid 110k for a rental property now alot of investors paid a 110k for a house in raheen 2 or 3 years ago .....
3. Have a look around the area is there a lot of for sale signs - if so why ?
4. If there good assess to public transport good commuting roads shops schools gyms ...both castletroy and raheen have theses.
5. Some area tend to have a poor resale value - this may well be the case in your area.
6. Also be sure that what you are doing is the most tax efficient option .....

Hope this helps ,

Zardebt
 
Zardebt,

More good and relevant points raised, thank you. I must admit I'm only just after looking at that daft report now, didn't realise they covered limerick as well, and the drop in rent in limerick looks scary alright.

1. When you talk about saturation your talking about rental market saturation, I couldn't imagine anyone from outside the area moving into the area it would be a local looking to return, which reduces my market I know, but at the moment that's my target.

2. Nothing I can do about that
3. There is a lot of For Sale signs up alright, I think it is because people want to cash in on the boom and get value for their houses which would have been worth very little 7-8 years ago, another area I should examine more closely
4. Area is actually very central, 10 minutes walk to limerick city centre, 5 minutes walk to local primary school, 5 minutes walk to Dublin road and bus link and 2 minutes walk from shop, chipper and pub.
5. Yes I can't see the area going through the roof in the next 5 years, but again my main concern is the rental demand and will that be sustained over the long term. The saturation of properties for rent and the fall of rents in limerick shown in the daft report would be my main concerns.
6. Yes I should get good advice on that.

Thanks again.

Peadar
 
Killkee, Lahinch , Spanish Point

No December, I don't know enough about the areas, can't comment definitively whether they are good or bad. However from gossip and word of mouth I have heard that they are expensive and the yield isn't great, but maybe you should do a bit of your own research and see what regular holiday goers and buyers in that area think.

Also I'd say they are a bit out of my price range. There is a good reason why I am looking at the lower end of the market :)

Peadar
 
Peadar said:
I will also have to look at the fact the gov. might clamp down on a lot of these "single mothers" , many of whom will live with their boyfriends,
Click to expand...
Do I understand this right? Are you saying that success of your investment is largely dependant on ongoing social welfare fraud by your tenants?
 
No you misunderstand,

The fact is at the moment in this area there is a lot of single mothers who under current legislation are entitled to rent allowance. The issue I was weighing up was whether this current goverment support would last indefinitely and also the fact that a lot of these women claim to be single mothers but move their boyfriends in with them, which means if department of social welfare moves in they won't be able to afford the rent.

This practise is widespread around the working class areas of limerick(can't comment about anywhere about else), my belief is that Dept of Social Welfare will soon be clamping down on this behaviour, which I don't condone, however I must admit I don't have the moral backbone to report people I know who are acting this way.

The success of my investment is not dependant on social welfare fraud, but rather finding out if there is a market there of people who want to move back to the area, who through rent allowance will be able to pay me a decent rent which will make my investment worthwile.
 
It does appear to me that the success of your investment is largely dependant on SW fraud. You state that "also the fact that a lot of these women claim to be single mothers but move their boyfriends in with them, which means if department of social welfare moves in they won't be able to afford the rent". If the boyfriend moves in, then (as you clearly understand given your concerns about SW 'moving in') the tenant is carrying out SW fraud.

And it appears that you are planning an investment which is going to be largely dependant on ongoing SW fraud for its success?
 
Seems to me that sufficient information has been posted about the area/property in question for the relevant authorities to investigate further should they read this thread or get tipped off by somebody else who does and they decide that it's worth their while to do so.
 
Thanks for all opinons offered, I will be viewing the property next week, so imagine I will be able to make an informed judgement then.

I don't see how I am engaging in social welfare fraud. The ideal situation for me is someone on rent allowance who is legally entitled to get it, then I have no worries about the dept. of social welfare moving in.

Thanks
Peadar
 
From reading Peadars previous posts I did not get the impression he was condoning or relying on social welfare fraud to make his investment. From my reading, he was simply thinking of purchasing an investment property in an area where his rental market would consist of tenants in receipt of rental allowance from the department. He happened to comment on the belief that some single mothers may be defrauding the dept by lying about their circumstances and wondered if this would decrease the amount of people in receipt of this allowance- thus there would be fewer legitimate would be renters. I didnt see any thing in his posts to suggest that he was hoping such a defrauder would rent from him! I imagine his speculation relates to whether such a clampdown will affect what had previously been a strong market. As far as I can see he is entitled to and should bear this in mind when deciding on whether to make the investment.

Wrote the above before reading your last post Peadar, in which you proved me totally wrong!
 
Peadar just want to wish you luck ,,,, there are a lot of links on AAM about investing in property

http://www.askaboutmoney.com/showthread.php?t=5996
http://www.askaboutmoney.com/guide/ch14.htm


also this link may be of use to you :

[broken link removed]

and I suppose the best advice is to be informed as much as possible..

- You know a large number of landlords seems to have NRA on their requirements for letting ....(I wonder why ?)
its different to see someone with an open mind to this....

Zar-debt
 
Thanks Zardebt, your advice was appreciated and is being acted on.

Just a quick question, what does NRA mean?

Non Rental Appreciation??
 
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