primary goal of investment property

I have just a simple question but I can’t seem to find the answer…hope you can help!

What is the primary goal of investment property?

Make money on a monthly / yearly basis?
And /or
Make money by selling the property after a period of time where the value of the property has increased?

I think it is the second option, due to interest only mortgages… but unsure!!

Re: primary goal

I have never purchased an investment property but I would see it as a long term investment. A lot of people use it as their "Pension Fund", basically when they retire they sell the house for hopefully a large profit (less taxes) that will see them through their "Golden years"!!

Re: primary goal

thanks,

What should you do if your rental income does not cover the interest on the mortgage on the property?
should you pay off some of the mortgage to reduce the interest?

Re: primary goal

my point of view is that its to generate an income from the property in the long trerm.
Capital appreciation is the 'enemy' of someone in property for the long term - for example you buy a place for €100k, and it brings in €8k per annum, so this covers your mortgage and brings in a little more than you need, so you decide to invest in the neighbouring place, if its now valued at €120k, you will still only get €8k per year... your actual yield is dropping.

I think a lot of your confusion is that over the past 5-10 years people saw, and came to expect huge growth in the value of property so could see a quick buck to be made.
In real terms you should look at yields around the 6-9%, so do your sums, and then do them again!

Personally I can see some value appearing back in the irish market in the past month, in the areas I'm looking, after 4-5. I just wish now that I had some spare dosh.

Re: primary goal

mell61 said:

- for example you buy a place for €100k, and it brings in €8k per annum, so this covers your mortgage and brings in a little more than you need,

Click to expand...

But does it cover the mortgage? or just the mortgage interest?

Also if house prices go up to €120K, can you not charge more rent?
Is that not why rents are currently falling?

my personal point of view is that you take a short term mortgage, not an interest only... If you can buy a place with a 15-20 year mortgage every cent of rent afterwards is yours (ok less what revenue will want).
Why should someone pay you €9k per annum for the same apt that is rented out for €8k elsewhere... rent really isn't dependent on what mortgage you have set up. After all the bank doesn't expect your tenant to pay your mortgage, they expect you to... so if you overprice your place and can't get a tenant you are the payee...
As for the dropping rents at the moment, I heard a statistic a year or so back, that something like 60% of the renters in dublin worked in construction (ie a lot of the english, polish contractors), so if we are now in an economical downturn, a lot of these worker are very mobile and can just move out to go to the next construction hot spot... so many places seem to have an oversupply of rental properties.
If you have done your research, and the sums make sense you would can come out ahead in the buy to let business, but research, researchy, research...

In what particular areas do you think there is investment value now?

I think you would be mad to go into this type of investment now. I have a few properties I bought back in the 90's before property took off and there was a good rental market out there for the first time since I bought these properties the rental market has dried up and I am in good areas for rental demand. I wouldn't dream of buying at the moment unless it was to put a roof over my head as I believe anything you'll buy now you will buy cheaper this time next year. Unless you have a very large deposit for your house dont expect the rent to pay off your mortgage and make sure you are able to cover it when there are no tenants in your house.