My 3 options - which one would you go for???

hi everyone this is my first post (sorry its so long but I wanted to include as many factors as I could to inform any advice you might like to offer).

I came upon this site by accident but after browsing through a few threads I realise that there is a vast amount of knowledge and opinions out there and I would really appreciate some advice or thoughts about my situation.

I am a first time buyer and after renting for a couple of years I have been at home with my folks for for the last year .
With my savings and the rest I will have about €60000 saved. My annual salary is €38,000 gross but salary is scaled (about a grand a year up to 60,000). I am teaching on a temporary contract until next Sept. but confident of finding another post without too much trouble.

I am open to all suggestions as to what I might do. I want to stay in Dublin. The banks will give me a mortgage of €225,000 and they said I could get more if my dad went guarntor about (€50,000 I think). Another factor in all of this is that my dad is a carpenter and able to do a fair bit of handy work as well which means that places that need some work are attractive to me. Money wise it would mean I have available about €325,000 or €330,000. I would like a house as a opposed to apartment. The way i see it I have a number of options. :

  1. When I first thought about getting a house I thought of getting a small one bed house that might be in need of some renovation. (something like this . myhome.ie/residential/search … KRIK346231 A small house under €300,000 that would require some work but alot of which I could do myself.
  2. The other option is something like this - a two bed . It means stretching myself to the max and renting out a room to help with the repayments. I have thought about this since I have heard a fair bit of negativity about one bed places and thought I have also heard to stretch yourself at the start.
    myhome.ie/residential/search … LSDA346379
  3. But a little further out - get more square footage.

I am torn between these three options and they both have pros and cons as I see it. There are :
One bed (city)
Pros
can rent it out if decide to work abroad for a couple of years, mortgage lower, will have money to do other things in life (travel in summer)
Cons
may be hard to sell on, nice to have another bed for visitors.
Two bed (city)
Pros
its a two bed!, easier to sell than one bed.
cons
financially stretched for next couple of years. renting room could be a hassle. will restrict me doing other things in summer , travelling and so on.
House outside city
pros
More square footage
cons
More likely to be affected to greater degree if (when) bubble bursts.
Not as easy to rent out as ones close to city.

So there you have it - go small have more money - go bigger have less money but better investment? - or go further and get more??
I would really appreciate people to tell me what they wold do in my situation and if please point out some factors which I may have overlooked.
Thanks

There will be spending cuts across all departments this year if government revenues continue to decline. Not to make you worried about your job or anything, only you can decide how secure it is, but you need to stress where you would have to go to find another one if the temporary contract dries up.

So my advice would be:

  • Don’t do anything until you have a permanent contract where you want to work permanently (like 5-7 years, maybe 10). Then look around for where you might want to live.
  • Keep saving, you’re doing well.

There are three risks that I can see to not buying now:

  1. House prices will start to rise again faster than you can save.
  2. Rents will rise, decreasing the amount you can save.
  3. Inflation or bank failure will eat away at your savings.

The risks with buying now I would put as:

  1. Negative equity trapping you where you have bought.
  2. Rents will fall, so the sort of place you could have rented will be far better than the house you have bought - won’t make that much difference to you except to annoy the hell out of you.
  3. Prices will fall, so the sort of place you could have bought will be far better than the house you did buy - see above!
  4. You lose your job and the one you get is a country mile away so you spend a fortune commuting and lose your quality of life.
  5. You lose your job and don’t get another one for a while!

Sorry this doesn’t answer your post, but I think you need to be clear on some of the risks you are taking either way.

When making any decision, factor it in that you may not be able to rent it out as soon as you’d like, or for as much as you’d like. There is a growing availability in the rental market, which may also push down rents.

When I hear ‘financially stretched’ mentioned, I think its worth considering factors in any of your options that are out of your control, and hence may affect you ability to repay if they do not go as you’d hope.

No one can make the decision for you. Good luck.

If I was in your position I’d either stay at home or rent for another 12 months. There is too much uncertainty in the market and while it is unlikely prices will rise a lot, they could fall a lot. I absolutely would not get into a “stretched” position or need to rely on renting out a room, that’s far too dangerous with ballooning rental supply and anecdotal evidence of immigrants leaving.

Buying an apartment I wouldn’t buy anything smaller than a two bed. One beds in this country are typically not built for long term habitation with barely minimal storage space.

300k is nearly 10 times your salary. That would be a huge burden, don’t go there IMO.

Hi OP

First of all may I point out that most people on this site would take a fairly negative view of the prospects for the Irish property market - and your own opinions may be entirely different.

I am in a similar situation to yourself. I work in Dublin, I’m living at home - well aware of how annoying and frustrating it can be :wink:
Only difference is I’ve been doing it for 2.5 years and have a 160 mile round commute, so as you can imagine it is beginning to wear on me just a tad.

I’ve been saving for quite some time and have a budget of €300K approx. This is based on a mortgage of 4.5x salary from a mainstream bank - I’d be very interested to know where you’re getting 6x salary from!!

Personally I think anyone buying in the current slowing market needs to take a long-term view.
Will you be happy to live in this house for the next ten years at least?
Does it offer you the flexibility to cope with future changes in your life?
Imagine you decide to start a family. Is there sufficient room in the house, are there good schools nearby?
What if you have to move job. Are there quality transport options to get you to most parts of the city?
Imagine you are out of work temporarily or have problems with your finances. Can you rent out a room to raise extra money? Will people want to rent there?
Is the area generally “desirable” in terms of leisure facilities, shopping facilities, low crime levels?
If, in three years’ time, will it bother you if the property has not risen in value, or has even fallen?
First-time buyers are exempt from stamp duty. Are you putting this benefit to good use?

I would also seriously advise securing a permanent job before you do anything.
Without wanting to be over-negative, there are signs the government are going to cut back public spending - they recently reneged on their election promise to cut class sizes, for instance.
Make sure you have money left aside after the purchase to tide you over - six months’ salary is recommended.

You also need to think about how comfortable you are with your mortgage repayments. The loan as a multiple of your salary seems very high.
Be particularly wary of any “low-start” options, if you don’t expect your income to grow much before the special offer ends.

Global and economic indicators suggest that we’re heading into a recession and no-one knows what the next few years hold. However in the medium-term most people agree that we’re unlikely to see the kind of property price growth witnessed during the Celtic Tiger era. Therefore I think anyone buying in the hope of selling on at a substantial profit in several years is not thinking the right way.
If buying, you need to be buying for the long haul and thinking of what makes a property a desirable place to live in, rather than viewing it as a revenue generator.

Myself - I am holding off buying for the short-term. Most of the places I can afford in Dublin are either one-bed apartments or two-beds in less than desirable locations. They don’t satisfy the criteria above, by a long shot. Commuter towns have become more affordable, but when I did up the figures, it would be cheaper to rent the house than to pay off an interest-only mortgage.
My own view is that I’ll be in at least as good a position to buy this time next year. I’ll try to stick it out at home or otherwise look into renting.

Of course you may think entirely differently.

Anyway - best of luck with your decision!

thanks everybody for giving me your thoughts / advice - It was EBS who are offering me a mortgage of €225000 - as my salary is scaled they base your ability to pay 3 points further up the scale (IIB is the other bank who do this also) - I think perhaps I shall wait okay - its annoying sure living at home at this stage of my life but …

If youre planning on travelling abroad for an extended period then you not buy until you come back. You would need someone to manage the tenants for you when youre away. A letting agent will take 15% of the rent for that service.

Prices will be lower when you return, just as they are lower now than they were last year. Don rush, time is on your side.

What’s wrong with option 4 … RENT? I’m not trying to be an a55 but if living with parents sucks then you can either rent or buy. Buying isn’t the only option. Swat up on the various pros / cons of renting versus buying and be open to the idea that it is possible to be financially better off by renting. Check this out and play with the calculator courtesy of the NY Times. I know there seems to be some form of bizarre social stigma attached to renting here in Ireland but I suspect the social stigma attached to being bankrupt or having your home repossessed will be worse.

I’ve said this on another thread but I believe prices are going to fall a lot more. Even if I’m wrong and prices don’t continue to fall sharply, nobody (correct me if I’m wrong) is predicting the “get on the ladder quick before it’s too late” panic buying is about to start any time soon. Nobody is predicting a return to rapidly increasing house prices in the near future. So really you’ve got nothing to lose from taking your time over the decision.

Thanks for the heads up on not saving with EBS or IIB :laughing:

Good luck

I echo what Yogan said. The primary reason for you not to buy is that you’re not on a permanent contract. If you bought, the worst-case scenario is that you won’t be able to find a position close to your house. That would then mean a several hour commute to work. Yuck! At worst, you would have to move, that means you’ve lost your first time buyer status.

Hang on until you’re made permanant. Your job will be secure, you’ll have an extra few thousand for a deposit and you should be able to buy a place close to work. When you do buy, try to get a house in the best location you can afford. Only consider an apartment if it’s a small development with things like secure parking and a good management company.

Also, remember, losing your first time buyer status is like losing your virginity, you should save it for somewhere special.