Long time lurker first time poster and would be very interested to get the learned opinion of the pinsters!!
Perhaps I’ll set out my financial situation first to put things in context (forgive the length ):
Have as near safe as houses private sector job earning 50k currently with good promotion prospects & partner (not wife) the same on 50k (public sector). We are both 29.We have or will have by early 2012 a descent joint deposit (c.35-40k) or 15-20k on my own. My work will have an interesting 5yr assignment in Asia coming up mid-2012, whereby my income will significantly increase to 80k for the period and they will cover accommodation costs in the new location for 5 yrs for partner and I (i.e. rent free). My partner will also be able to avail of career break and work in Asia earning similar income to Ireland c.40k. Needless to say for these 5yrs our disposable income will greatly increase!!
My current thinking is that we’re not at the stage or income level whereby were ready to buy our forever and ever house nor decide on the location of the same but the opportunity to live rent free for 5 yrs opens up some interesting possibilities.
My inclination at this stage is to buy early 2012 in Dublin Central a modest 2-3 bed house or apartment max.250k over 25 years or whatever time period leaves breathing room on mortgage payment v rent @ stressed 6% Interest Rates, but that whatever the type it must meet a rental yield of minimum 7% (incl. vacancy/service charges/property tax est.) and be of a standard that we would also be happy to move into upon our return in 2017 (possibly with child(ren)). In this sense it will be a hybrid investment/principal residence home. While away I propose to pay over and above the mortgage payments perhaps even double thereby increasing the equity in the house and reducing the mortgage length. This home (with significant equity) could then be used as a deposit in conjunction with cash to go towards the forever and ever house deposit in 2017 or a couple of years thereafter. Leaving me with a good investment property and my forever and ever house.
Couple of Q’s:
Does the plan make sense?
Would I be better off just focusing on saving pure cash while away for the 5yrs (considering the state of Fiat currency)?
Would a bank (if there’re still around) in 2017 look on the first property with significant equity as collateral for another more significant property or in other words would this house help or hinder my ability to purchase our forever and ever house?
Are you mad? Spend the 5 years abroad saving away all the money you can. See where you are after a few years as a lot can change in your personal life. You could buy something outright if/when you return in Dublin.
Do you really need the stress? Focus on saving and enjoying what sounds like a tremendous opportunity. You’re still young. Who knows where your life will take you. Keep your options open. If you return to Dublin in 5 years, buy then.
I would see this as almost a savings plan. Not a bad idea. If the numbers work. Having said that I now people who did this 4 years ago and are crying into their buy-2-regrets.
IF ( a big if ) you can find relative value then why not.
Factor in the IMF lobbing 20% off your salaries though
I’m sure he can find a hassle free 5% savings plan somewhere for his money. The risk and hassle of managing a rental house from Asia is hardly worth it.
Cheeky Offer - thats what I was leaning towards, if the property is realtive value and can wash its own face and then I use some excess cash to paydown the mortgage quicker it could act as a prudent investment whether or not I return to Ireland. The main point would be that the property would not be a financial drag in its own right while abroad i.e rent > mortgage and that at the same time could also in the future be a principal residence which would have 5 years of the mortgage covered by rental income from someone else while I lived rent free elswhere
it should be noted through a friend I can basically have the property managed free of charge (he’s in that game anyway)
There will be plenty of houses at depressed prices in 5 years time. Wouldn’t worry about that.
Save your money and buy a nice family home when you get back.
Investment-wise why don’t you put your money into a diversified portfolio of stocks and shares or funds?
Watch your dividends rolling in and your equity rising from the comfort of your home while the rest of the property investors are fixing blocked toilets or calling the bailifs in because tenants haven’t paid their rent. Even for 10% yield its still not worth the hassle.
What you “gain” in paying off the price of the mortgage over the next 5 years might easily be usurped by the potential fall in value of the property while you are away.
Also, returning to Ireland at 34/35 you are possibly not going to want to be an apartment-dweller at all. At that point you might crave some outside space and a bit of a breather from city air.
As suggested elsewhere, find a nice long-term-rate home for your excess cash, and watch as both the market and your own life circumstances unfold.
Yep global inflation is gonna be a stinker. I figure if the place can comfortably wash its face, i.e. the rent comfortably pays the mortgage with room to spare, so that its unlikely to ever become a financial burden while at the same time I can use some excess income to paydown the principal I could with a fair wind have a serious chunk paid down on it.
So much so that it would act as 1> Collateral/Deposit on family home in the future (do banks accept this, anybody??? 2> once paid off a significant asset to be sold or left to generate revenue, unlike Celtic tiger days i’m assuming no appreciation above the inflation rate.
I think this plan makes sense. Buying a small property provides some hedge against future rises in Irish property prices. It’s also a form of enforced saving. Nobody knows where property prices will be in 2017.
You would want to consider buying the most hands-off hassle free property. You will need a local management agent.
I would suggest a high end 2 bed apt in a rentable location such as the Gasworks in Barrow Street.
We should see a bottom DURING 2012 - 2017 but as to when exactly ??
Meanwhile save and lurk on the Pin waiting for the consensus on bottom. I cannot see it happening for years now, only €2bn of mortgages likely to be given out in 2011 and possibly as low as €1bn next year. Even if house prices dropped to €100k that means only 2000 mortgages to make up €2bn.
It will be a cash only market and players will be able to enter at around €150k in Dublin…for a house. There will be some action between 150k and 200k for rentable apartments as Mr Agent pointed out.
Save what you can 5 years will be great, especially if you move around a bit. We have been away for a bit over 2 years and while the first year is “ok” for saving money, after that it gets better. Surprising the expenses you run into even with everything paid (I’m not bitching just giving you a heads up) My only pisser is coming back end of this month.
Buying on the property ladder is the least of your worries, GTFO and make as much as ye can, while enjoying yourselves as much as you can. Maybe think about property in 2013 ish. It will never take off like it did before. At least not for another 20 years.
Pay particular and close attention to that post - it’s deadly accurate.
No. Do not underestimate the problems of managing a property you own here while living abroad. That’s not an Investment - it’s a noose. You will have to nominate an ‘Agent’ anyway - for tax purposes - do not use a family member. You will have to pay property taxes from Jan 2012 on per annum in advance, so factor that into your yield calculaton. You’re always just one dodgy tenant away from serious trouble - and you will not be able to resolve a problem like that quickly …
Yes, but be careful where you store it. A balanced mix of - Cash($€£KRWCHFetc)/Gold/Deposit(short term)/Liquid stocks/Jewels/tins o beans/Rare earths - should see your nestegg safe.
No. The Bank will regard it as a noose and worry about you … at that stage, the [ALL] Banks will be German or French. Which brings lending standards that we have not seen since 1970. Save your money and store it well. You will have zero equity from a standing start now on a 25 year mortgage in 2017.
Go, travel, enjoy, spend, save & return … then consider buying. There’s no boat that you’re going to miss …
Had to check the date and address bar. This was a dumb idea on AAM in 2006, it’s a stupendously dumb idea on the PP in 2011.
You want to make a high risk geared investment in Dublin real estate in 2012. You expect it to make 7% yield risk free. You don’t intend to manage or invest in it. You don’t expect to use it.
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