Hi,
I've come across this board in the past 6 months and am an avid reader. I've read a few different posts from people asking is the investment worthwhile in their case. The general idea I get from replies is that "if it's too good to be true, it probably is" and my scenario does actually seem to good to be true so I thought I'd post it in the hope of finding out if I'm missing something.
Basically, it is a self-build house. Me and my brother are have come to an agreement with a landowner to buy a site (subject to planning permission) - we've already got plans drawn up and submitted to the planning authority.
The site cost €60,000 and is big enough to build 2 detached houses (one each). The reason we got the site so cheap (about 65% of market value) was that a relative of mines owned a two-foot-wide strip of land between the site and the "good access road". Therefore, other bidders had to take the fact that their access to the site would be down a narrow road behind 2 other houses.
Anyway, we've got an estimated cost from a contracter (also a relative) of €97,500 to build each house. Each house will be split into 2 two-bedroom apartments.
This gives a total cost of €127,500 (€97,500 + €60,000/2) - below the lower stamp duty limit so there will be no stamp duty.
Typical rent in the area is €110 per apartment per week giving a total of €950 per month for 2 apartments.
So the cash-flow I'm considering is as follows:
Income:
Annual Rent €11,400
-2 months voids € 1,900
Total Rent € 9,500
Expenses:
Insurance €600 - no idea of what it actually costs
Annual Maintenance €750 - (fixtures and fittings, etc.)
Mortgage €7,100 - 25 year repayment (€590 p/m)
Total Expenses €8,450
Surplus €1,050
Obviously, I must then consider tax. So lets take the average interest on the mortgage for the first 5 years as a ballpark figure (€3,750)
Rental Income €9,500
-Insurance € 600
-Maintenance € 750
-Mortgage Interest €3,750
Taxable Income €4,400
Tax at 20% €880
This leaves a surplus after tax of €170 per year (with my mortgage being paid of). Also, I have read that rents tend to rise with inflation while my mortgage will stay the same. This will be cancelled out by the fact that my tax bill will increase as the years go on (due to less mortgage interest to claim relief against) but all-in-all, I can't see any disadvantages to this investment.
As an added advantage, typical rent is actually €125 per week but my figures have been conservative. I was also thinking of renting them as part of the RAS scheme, i.e. LOWER RENT, NO VOIDS.
As I am only 22 and don't even have a PPR of my own yet, I'm kinda thinking - "what the hell are you doing ya mad eejit taking on a mortgage of €120,000 (I have a €7,500 deposit as I've always been careful about taking on debt)". I'm kinda getting cold feet even though it seems like a dream investment.
Have I missed something???
I've come across this board in the past 6 months and am an avid reader. I've read a few different posts from people asking is the investment worthwhile in their case. The general idea I get from replies is that "if it's too good to be true, it probably is" and my scenario does actually seem to good to be true so I thought I'd post it in the hope of finding out if I'm missing something.
Basically, it is a self-build house. Me and my brother are have come to an agreement with a landowner to buy a site (subject to planning permission) - we've already got plans drawn up and submitted to the planning authority.
The site cost €60,000 and is big enough to build 2 detached houses (one each). The reason we got the site so cheap (about 65% of market value) was that a relative of mines owned a two-foot-wide strip of land between the site and the "good access road". Therefore, other bidders had to take the fact that their access to the site would be down a narrow road behind 2 other houses.
Anyway, we've got an estimated cost from a contracter (also a relative) of €97,500 to build each house. Each house will be split into 2 two-bedroom apartments.
This gives a total cost of €127,500 (€97,500 + €60,000/2) - below the lower stamp duty limit so there will be no stamp duty.
Typical rent in the area is €110 per apartment per week giving a total of €950 per month for 2 apartments.
So the cash-flow I'm considering is as follows:
Income:
Annual Rent €11,400
-2 months voids € 1,900
Total Rent € 9,500
Expenses:
Insurance €600 - no idea of what it actually costs
Annual Maintenance €750 - (fixtures and fittings, etc.)
Mortgage €7,100 - 25 year repayment (€590 p/m)
Total Expenses €8,450
Surplus €1,050
Obviously, I must then consider tax. So lets take the average interest on the mortgage for the first 5 years as a ballpark figure (€3,750)
Rental Income €9,500
-Insurance € 600
-Maintenance € 750
-Mortgage Interest €3,750
Taxable Income €4,400
Tax at 20% €880
This leaves a surplus after tax of €170 per year (with my mortgage being paid of). Also, I have read that rents tend to rise with inflation while my mortgage will stay the same. This will be cancelled out by the fact that my tax bill will increase as the years go on (due to less mortgage interest to claim relief against) but all-in-all, I can't see any disadvantages to this investment.
As an added advantage, typical rent is actually €125 per week but my figures have been conservative. I was also thinking of renting them as part of the RAS scheme, i.e. LOWER RENT, NO VOIDS.
As I am only 22 and don't even have a PPR of my own yet, I'm kinda thinking - "what the hell are you doing ya mad eejit taking on a mortgage of €120,000 (I have a €7,500 deposit as I've always been careful about taking on debt)". I'm kinda getting cold feet even though it seems like a dream investment.
Have I missed something???