In this blog post, I will give you an account of my experience buying an apartment in a regional city in Ireland, including all the costs and income that can be generated from such a property.
Many people are sick to their teeth of the housing crisis that is going on in Ireland at the moment, Dublin and other major cities around the world have become completely unlivable. If you are considering upping sticks and leaving the capital city for a regional city then this blog post might give you an idea of what to expect
How long it took me to get a property
I loves me county… I am a Waterford man and was determined to find a place to live in Waterford city whether it was an apartment or a small terrace house. I’m currently a single man so my budget and the total mortgage I could get were quite small compared to a married couple.
From the starting point of looking for a place to live to going sale agreed, the process took me 1 month. I ended up finding a place in Maritana Gate (pop in for tea sometime).
But before I managed to go sale agreed on this property, I went on approximately 10 viewings and took part in 4 bidding wars.
What I found was that due to there being pretty good returns for investors in a city like Waterford (upwards of 8% Gross Rental Yields in some cases), I often found myself competing against investors rather than first-time buyers like myself.
I was at a significant disadvantage in a lot of cases as these investors were coming in with 100% cash versus me and my 90% mortgage.
What I also found was the properties were snapped up extremely quick in the Waterford market. It was often less than a week between when a property was listed for sale and when it went sale agreed. For the property I eventually bought it was less than 48 hours which was so quick.
What I learned from the bidding wars
I learned a lot in my first few bidding wars. Here are some tips to keep in mind during a bidding process.
My first strategy was to go in low and then increase the bid in increments hoping to beat out the competition and still get a good price. Each time I set a limit that I did not what to exceed and if the price hit the limit I would walk away.
The flaw with this plan was the whole bidding process was dragged out a bit further and this invited more and more competition which led to the prices rising rapidly and way above my threshold.
After meeting a few auctioneers it became clear to me that they were up to their eyes in listings and wanted to get the deals closed as quickly as possible. Once they had 2 or 3 genuine interested buyers they would stop doing any further viewings on the property. So it is important to move fast if you want to put your name in the hat.
When it came time to the property I eventually bought, I knew straight away it was what I wanted and I didn’t dilly dally around. I went straight in with a very competitive offer, one which was spot on what the market rate at what similar properties in the area had sold for in weeks previous and €15k above the nearest bidder.
Check if the property is in a rent pressure zone
A good question to ask if the house has been rented out previously is how much was charged to the previous tenants. If the property is in a rent pressure zone, then the landlord will be limited in how much they can raise the rental price.
Based on the rental income, work out the gross rental yield (simply the annual rental income / purchase price). This will give you a good idea of that price an investor is likely to pass on the opportunity to buy the property.
I was quite lucky that the property was in a rent pressure zone and the previous tenant had been paying comparably low rent for the times we are in now. The rent was so low kept that investors did not take an interest in the property.
How much it all set me back
Now I’m going to give you an idea of all the costs involved. The property I purchased went sale agreed at €165,000.
Deposit: €16,500
Stamp Duty: €1,650
Valuation Report: €150
Other Legal Fees (inc VAT): €2,809 – this includes registering the mortgage, deed of transfer and professional fees for work carried out by the solicitors
Life cover: €32 p/m
The total cost was €21,141 before I received the keys to my apartment. The costs don’t stop there unfortunately, when you buy an apartment you will have to pay an annual management charge (€1,800 per annum in my case) for the upkeep of the common areas, and this will include insurance, bins, etc.
The net monthly cash flows
The whole mortgage process was relatively easy, I stuck with AIB, which I use for my everyday banking. As they knew me already, I didn’t have to jump through as many hoops to get Approved in Principle.
The Mortgage ended up being €148,500 and I signed up for a 25 year term. With the ECB raising interest rates this year I decided to fix my mortgage for 5 years which allowed me to get a slightly lower rate of 2.97% APRC. This leaves me with monthly repayments of €696.50.
To ease the burden and help me save for my dream home in a couple of years time I decided that I want to use the Rent-a-Room Scheme that allows you to earn up to €14,000 per annum tax free.
From looking at advertisements for other apartments in the same block as me I can see a room is currently fetching a rental income of €600 per month.
When I then take the rental income into account my net cash flows are just €246.50 before I take into account other expenses such as light and heat, broadband, etc.
| Detail | Cost |
|---|---|
| Monthly Repayment | €696.50 |
| Management charge (monthly) | €150 |
| Less Rent a Room Scheme | (€600) |
| Net monthly cash flow before other bills | €246.50 |
The beauty of this low monthly cash outflow is that it not only helps me build equity in my property but also it will give me plenty of space to save and build cash for what is next to come. The last thing I wanted was to be burdened by a mortgage and this way I feel like I am only paying off a small personal loan.
There really is a benefit to getting on the property ladder if you can afford to get a deposit together. Although salaries are lower in regional cities around Ireland, you can live far more comfortably.
Disclaimer: This blog post is for informational and educational purposes only and should not be construed as financial advice.