to buy or not to buy

I had an offered accepted on an apartment in Limerick city.

I am buying it for €135k outlay wil be about €10,000 (stamp duty, legal fees and work to be done on apartment)

Getting an interest only mortgage for first year.

Rental income between €500 - 600 per month

Apartment is large two bed with en suite and bathroom, own front door and small garden to front. Its on the outskirts of Garryowen near town. An ok area I believe.

Question: I am wondering if the risk is too high? should I Put my €10k outlay plus deposit €20250 into something else? a foreign property?

Not asking you to tell me what to do just your views. Due to sign contracts next week and getting cold feet.

I'm not so sure its a good time to get an interest only mortgage with interest rates on the up? Especially if you didn't get a regular mortgage due to financial issues?

It was me that opted for the interest only mortgage for the frist 12 months. There are no other finacial issues.

ahh ok, to be honest, I'm a bit of a crash monger so I reckon the market is in for a shake up soon. That beeing said that seems like a nice low price.

I really think the thing to do is see if you can meet mortgage repayments up to 6% and that should have you covered for the first few years. Aside form that make sure it is a qualty build in a quality area and you reduce your risk a lot.

Good luck, but I'm not buying until prices get less silly!

at 600pm pushing 5% gross,
is not too shabby compared to elsewhere in the country

if it's on the city side of garryowen, I'd say rentability shouldn't be a problem.

capital appreciation doesn't seem to happen in Limerick as much as elsewhere, but on the other hand, mightn't fall as much either.

take out all the costs and see what the net is.
estimate your maintenance, empty periods etc,
also get the management charge and charge history to gauge how much it's going up.
I presume it doesn't have capital allowances.
what's your net yield after above charges,
what's your mortgage rate?
I think this should make the choice easier,
you might find for the effort of renting a property and all that entails, you're actually just covering interest, but could see it as guaranteeing yourself an apt at todays prices for the term.
add into your mix of other investment assets, and your tolerance for risk, here it's interest rate mainly.(use karls calc and add 1.5/2%)
and make your mind up.

Thank you for your thoughts.

I agree about not buying while prices are as they are, but this apartment is a bit of a bargain in today's prices.

The low cost means I can cover the mortgage in the event of a down turn in rent or no tennants at all. Although I believe you can rent anything at the right price.

I have someone looking at it for me tomorrow from a structural and building point of view.

Not sure why I am still nervous maybe its because its time to hand over my hard earned cash!

Thanks again for your thoughts ....

Resident

Thank you for your post, you have laid out what I need to look at and given me a start.

Yes it is the city side of Garryowen and I am looking at this as a long term investment not for sale in the next 5 years.

Thanks again for that. .

Hi Zarkov,

Have you included a cost for furniture? What have you assumed for annual upkeep / other costs - insurance etc?

Also - I assume this is your first rental property, therefore the losses you incur cannot be offset to reduce taxable profits on other investments.

In my calculations I work out that you need the be able to sell the apartment after 5 years for about €175k to break even - how reasistic do you think that is? I also calculate that once the interest only period passes you will need to contribute more than €3k a year to keep this investment going - I assume you can cover this cost?

Finally - are you borrowing the deposit or have you any existing loans - such as a car loan or credit card debt? These are important facts because if you do then you need to factor these into the above calculations.

John.

thanks for the feedback Zarkov,

the private sector in that area is v rentable, so if the numbers make sense for you, good luck with it

I've a townhouse in the irishtown, and it's been 100% occupied for the last couple of years at about 5%.

just make sure tenants know what they're responsible for and check main tasks completed. eg DD of rent, transfer of bills, sign up for waste collection, tv license, mowing etc.

if this is your first one, don't forget the PRTB too


R