Property investment in Dublin 4/6/8

D

dm101

Guest
Hi, Im new to this forum and would greatly appreciate some advice on investing in dublin.

My job is in the west of ireland and so im renting there (very reasonable at 200 euro/month) and have my principle private residence in dublin which is valued at 1 million euro and I have it rented for 40k euro per year. I currently owe 500k on it which i have on interest-only at 3.1% costing me approx 15k euro per yr thereby giving a surplus of 25k euro per/yr.

I have released equity of 160k from my 2 investment properties (both of which are maxed out at 80% loan to value and have been fully let for the past few yrs). Im looking at increasing my 500k mortgage to 700k and putting this 200k with the 160k would give me a total of 360k to reinvest in dublin 4/6/8.

This would allow me to buy a property for 1.25 million (possibly 4/5 bed semi with extension). I can borrow 1 million euros (80% of the value) and put in 250k (20% deposit) plus approx 110k in stamp duty. My projected rental return on this new property is approx 25k per yr (a poor 2% rental yield). I plan to get a 5 yr fixed rate of 3.8% interest-only loan on 1.7 million it would cost approx 65k per year which would be serviced by the rental income of 40k + 25k. I would hope to achieve at least 6-8% yearly capital increase. Obviously there are extras (insurance, maintenance, void periods etc) which have also to be accounted for.

I accept that the figures Im investing are high and there is certainly a moderate amount of risk involved but the more cast-iron rental areas of dublin should be the last to feel it if there is a property crash...

I reckon that this strategy of buying one large residential property in a good area is more manageable than buying several units across ireland and europe...

Is this strategy too risky with the current over-priced dublin market or is it better to hold the cash and look for alternative investments. Would appreciate any feedback...
 
I think you're putting too many eggs in one basket (Dublin residential property). Consider diversifying to other investment options.
 
In a slow down the top end of the market can often suffer quite badly.

1) Part of this rental market is corporations for employees they have seconded to Dublin etc. In an dowturn they tend not to be so active. I believe in 2001/2002 there were a lot of unoccupied higher end rentals.

2) The high prices of these properties mean in a downturn they can sit for long periods of time awaiting a buyer.

I would personally be wary of investing in either the very top end or for that matter the very low end, but would instead favour mid range properties in well chosen areas. That said you seem very heavily invested in one asset class i.e. property and should maybe consider other assets e.g. shares.
 
Was badly burned in the early nineties in shares... anybody remember Cambridge??
Bought them at 40p on a wednesday, the next day they were at 32p! a month later they folded... have been cautious since

Im looking at 4/5 bed red-bricker in ranelagh that id eventually live in and rent couple of rooms. massive local student/working rental market and at a fixed rate id know my rental income target. I could suffer up to 30% vacancy/yr over the next 5 yrs and
Would anybody suggest putting this kind of money abroad??
 
dm101 said:
Was badly burned in the early nineties in shares... anybody remember Cambridge??
Bought them at 40p on a wednesday, the next day they were at 32p! a month later they folded... have been cautious since
Click to expand...

Thats unfortunate but experience like this is actually more of a testimony for diversifying than ignoring shares. Buy low cost funds which track some of the major euro and global indices and hold for the long term and your risk will much much lower than buying one tech share.
 
Ranelagh prices have increased hugely over the last 5 or 6 years - anecdotally I'd say a lot faster than the Dublin market as a whole. For a 4/5 bed redbrick in Ranelagh you're looking at an absolute minimum of €900k, and even then you'd be doing well...

You'd want a lot of rental income to cover that mortgage!
 
Im not familiar with the Dublin housing market as I live near Cork.

I have a few properties in Cork but have since bought in a town in Tipperary.A 3 bed semi costs 155- 165k ish and it took me one day to rent it out.
The yield is a whopping 6%.
Maybe look at something like this to secure the future of supplement your pension.

D
 
Hi Diddles.

Which town in Tipperary did you purchase in? Are you calculating yield by using the rental figure and purchase price only? - I presume you are not taking tax and other associated costs into account? Sounds like you got a pretty good deal. Did you purchase the house recently?
 
Hi Lotus,
Nenagh.Bought the house in February.
The 6% is based on rental figure v purchase price.All appliances ,showers etc included in purchase price so furnished it for a few grand.However Bertie took his few grand as well.It probably paid for Billy Kellehers wedding present!!
Its an up and coming town and soon there will be a motorway all the way to Limerick so journey will only take 15-20 mins.Presently about half an hour to UL.
D
 
However Bertie took his few grand as well.
Click to expand...
What do you mean by this. Is it the stamp duty.
You are not liable to pay tax on this investment until the year end.

You will be liable to pay tax on the profit of the investment each year

Not that I doubt your figures but
Assuming you took out a mortgage to fund the investment

Purchase Property 160,000
Stamp Duty 4,800
Legal Fees say 1,000
Furniture say 4,000
Total Outlay 169,800

Rental Income 9,600 per annumn assuming 12 months occupancy (unlikely)
Capital Allowances 500
Mortgage Allowance 4,800
Other costs say 1,000 6,300

Profit before tax taxable 3,300
@42% 1,386
Profit after tax 1,914
Return on investment approx 1.2 %

If no mortgage taken out

Rental Income 9,600 per annumn assuming 12 months occupancy (unlikely)
Capital Allowances 500
Other costs say 1,000 1,500

Profit before tax taxable 8,100
@42% 3,400
Profit after tax 4,700
Return on investment approx 2.8 %

This does not take into account the interest foregone that you could have earned by simply intesting the 170,000 elsewhere i.e. in a bank account

Maybe I'm doing something wrong here
 
However Bertie took his few grand as well.
Click to expand...
What do you mean by this. Is it the stamp duty.
You are not liable to pay tax on this investment until the year end.

You will be liable to pay tax on the profit of the investment each year

Not that I doubt your figures but
Assuming you took out a mortgage to fund the investment

Purchase Property 160,000
Stamp Duty 4,800
Legal Fees say 1,000
Furniture say 4,000
Total Outlay 169,800

Rental Income 9,600 per annumn assuming 12 months occupancy (unlikely)
Capital Allowances 500
Mortgage Allowance 4,800
Other costs say 1,000
Total Costs 6,300

Profit before tax taxable 3,300
@42% 1,386
Profit after tax 1,914
Return on investment approx 1.2 %

If no mortgage taken out

Rental Income 9,600 per annumn assuming 12 months occupancy (unlikely)
Capital Allowances 500
Other costs say 1,000
Total Costs 1,500

Profit before tax taxable 8,100
@42% 3,400
Profit after tax 4,700
Return on investment approx 2.8 %

This does not take into account the interest foregone that you could have earned by simply intesting the 170,000 elsewhere i.e. in a bank account

Maybe I'm doing something wrong here

Anyone know how to put text so that it appears in column order
 
Holy Cow asdfg.
I've made a terrible mistake.lol
Ya the stamp duty has to be paid or so my solicitor said within 44 days.
As I understand I dont have to pay tax on this house until my returns for 2005 which have to be in by Oct 06.
As I am a simple being I divided the annual rent 9.7k by the purchase price 160k and came up with 6.06%.It s basically to supplement my pension.Nice maths tho!!!!!
 
dm101 just because you have been burned once is no reason to avoid the asset class completely. In fact by concentrating on property you are under diversified and increasing your risk.....you should look beyond the question of the dublin property market and the whys and wherefores and instead look at your total asset allocation. If you do so you are too narrow in allocation (namely proerty). Diversify.....shares.......bonds.......commodities.....global commercial real estate.....blah blah etc etc to reduce risk and increase return due to lack of covariance of returns from the different asset classes. Get a good financial advisor would be my tuppence worth to be honest.
 
Cheers for that advice re diversifying. The reason that id reinvest in D 4/6/8 is that this new purchase will ultimately end up as my PPR when i move back to Dublin in 3-4 yrs time and I see the 40k i am returning from the other dublin property as 20k subsidy to pay interest on the new property (in addition to the 25-30k rental income from it). My job dictates that i dont have the time to manage a portfolio of several properties unfortunately...
 
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