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 Post subject: Are Decent Rental Yields Available?
PostPosted: Fri Nov 10, 2017 4:10 pm 
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Neo Landlord

Joined: Feb 12, 2010
Posts: 200
I have some money to invest and would consider buying a rental property if I thought I could get a return that would cover my costs, allow for a maintenance sinking fund and leave me with a fairly consistent net yield of 5% or thereabouts. Do you think this is a sensible target and, if so, is it achievable in Ireland at present?


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Fri Nov 10, 2017 10:49 pm 
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Under CAB Investigation

Joined: May 12, 2012
Posts: 2030
Yes.

Look at apartments in cities outside Dublin.

A small mortgage might be tax efficient.


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Sat Nov 11, 2017 7:31 pm 
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comstock wrote:
I have some money to invest and would consider buying a rental property if I thought I could get a return that would cover my costs, allow for a maintenance sinking fund and leave me with a fairly consistent net yield of 5% or thereabouts. Do you think this is a sensible target and, if so, is it achievable in Ireland at present?

When you say 5% net do you mean net of tax and expenses? Or just expenses?


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Sat Nov 11, 2017 8:02 pm 
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Old Time Landlord

Joined: Sep 6, 2008
Posts: 384
The rent a room scheme whereby you can have up to 14,000. Tax free is a good scheme brought in by Fine Gael. Everyone should avail of this if their property can be programmed. Investments need to be managed by yourself, and most people have different needs. The pension investments need to be managed also by yourself. How much you want in Irish property, foreign property, equities and cash when things are volatile. Perhaps, it may be wise to sit back and enjoy your money and make a proper cup of tea or coffee and enjoy yourself. All investments are a risk.


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Mon Nov 13, 2017 12:51 pm 
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I went mixed commercial. Took a lot of work with renovations etc. Currently on 12.5% gross.

Net is a completely different story, I'll let the accountant figure that out. at year end.


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Sun Nov 19, 2017 8:38 pm 
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Neo Landlord

Joined: Feb 12, 2010
Posts: 200
Thanks for your comments. My congratulations to Braighni for getting over 12% gross. Even with hefty expenses and a few voids he must be netting about 7%.
The 5% I mentioned was net of expenses, not tax.


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Mon Nov 20, 2017 11:03 am 
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Property Magnate

Joined: Jan 7, 2008
Posts: 502
Do you mind if I ask - why would someone chase yield in a property investment when there are more liquid investments with better yields out there. This is something I could never get my head around. In the last Celtic tiger, the spectacle of property investors jetting off to place they had never even heard of to invest vast sums to get a few extra % yield was really disturbing. What was their thought process - why did they chose property ? Why not stock market, coins, art?

Also, could anyone recommend the definitive report/article on investing in the Irish property market?


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Mon Nov 20, 2017 12:47 pm 
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TipsyMcStagger wrote:
Do you mind if I ask - why would someone chase yield in a property investment when there are more liquid investments with better yields out there.

What investments? What's the risk profile like?


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Mon Nov 20, 2017 1:10 pm 
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Property Magnate

Joined: Jan 7, 2008
Posts: 502
What about Irish, UK, US stock markets? Of course there is risk, but how well did the various measures of risk predict the real estate market collapse?

I am just asking the question, not advocating for stock markets per se. The question being - why the fascination with the housing market if the investor is chasing better yields?


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Mon Nov 20, 2017 3:03 pm 
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Old Time Landlord

Joined: Sep 6, 2008
Posts: 384
Property is a very Tangible asset, particularly if you own it outright. Land appears to be a very strong asset, particularly with all the benefits, such as greening and the CAP it is not easy to go wrong with it even in a recession. It only becomes a liability if you can't manage it or transfer it properly or if you have very large borrowings. All other investments other than commercial property are risky. The banks just seem to be using money to exploit people every which way. There is such a thing as the asset classes or merchant princes. Some politicians own more than 25 properties, why would that be!


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 Post subject: Re: Are Decent Rental Yields Available?
PostPosted: Sat Nov 25, 2017 1:26 pm 
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Migrant

Joined: Sep 16, 2016
Posts: 3
There are attractive yields still available in the current market. The rents less expenses yield of 5% that you are seeking is easily achievable. You might even achieve much more than that, but it depends what you are comfortable investing in.

Residential buy-to-lets (BTLs) tend to be the investment that most first-time landlords are drawn to. There's an evident demand for rentals across the country, many people have experience at some stage in life having been a tenant themselves, and it is relatively easy to establish what any given property will rent for as we have an active market and a good availability of comparable information on online portals such as Daft.ie.

Residential BTLs have their fair share of issues too. Good, law-abiding landlords are at the mercy of their tenants and a bad one can cost you a small fortune in unpaid rent, damage to your property, legal costs, etc. The government meddles with the market on a regular basis, leading to uncertainty and the inability to charge market rents in Rent Pressure Zones, not to mention tax anomalies such the restriction on mortgage interest relief (although interest will be fully deductible in the foreseeable future) and inability to deduct LPT expenses.

Landlords of Residential BTLs have considerable expenses if they do not let and manage the property themselves. For example, if you purchased an apartment in a regional town or city, as rents are low your annual service charges may be the equivalent of 2 month's rent, letting fee 1 month's rent and another month's rent for ongoing tenant management fee. That's four months of rent gone before you even take void periods, mortgage interest, maintenance and other expenses into consideration - and then you have the pleasure of paying 48.75-52% income tax, USC and PRSI on anything left, assuming you are subject to the higher rates of tax. Capital appreciation is an added benefit, but any BTL should still wash its own face and return a good yield year on year.

It's not all doom and gloom, there are certainly great opportunities out there and in spite of the high level of expenses, self-managing and letting or buying a larger-scale investment, such as a small apartment complex, can help to deliver very good yields and limit the impact of having a bad tenant every now and again. Three years ago there were opportunities for 20%+ yields with evident room for strong capital growth (buying at 80-90% discounts to peak prices). Such opportunities are for the most part long gone, but there are still good properties popping up around the country every month. Most of these opportunities are now in regional towns and cities, as yields in Dublin have contracted massively and the market is extremely competitive.

Commercial investments do not have the same appeal to first-time BTL investors as residential property, as most people have little or no experience with commercial buildings. They have their own limitations and risks, but a building let to a good tenant on a full repairing and insuring (FRI) lease, it can be a lot more profitable than a residential investment as leases tend to be for periods such as 4 years 9 months or 10 / 15 years. In an analysis I carried out on the most recent November BidX1 auction (formerly Allsop) of commercial investment properties with tenants in situ, the average initial yield for the 28 properties sold was 9.2%. Even if you remove the clear outliers (one at 2.01%, one at 21.65%), the average was 9%. The full break-down of prices achieved and yields is available here on PropertyPortal.ie: http://propertyportal.ie/2017/11/25/bid ... mber-2017/

Each property has its own benefits and risks, it's worth getting some form of advice from someone who understands commercial property if you plan to invest. A 15 year lease from 2006 to 2021 at a rent greater than current market rents ("over rented") may sound great, but when they vacate at the end of the lease you will take a big hit and, depending what you paid, might find it's worth less than you paid if you placed too high a value on that over rented lease. You may have been better off taking, say, a property with a 10 year lease from 2013 at a very low rent, which has a rent review in 2018. There are so many various considerations, but also plenty of good opportunities as evidenced by the recent BidX1 results.

Good luck with your investment, whatever it may be!

_________________
PropertyPortal.ie - Free & Independent Property Investment News


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