City Living: Plan to make your fortune investing in houses or apartments? Edel Morgan has some advice
Could you be an FOP and not realise it? The symptoms include only missing Channel 4's Property Ladder if death or serious illness is an obstacle and dodging traffic to get home in time for Relocation Relocation on the same channel.
Have you read property bibles like Rich Dad, Poor Dad, Millionaire Real Estate Mentor, The Million Pound Property Experiment and Multiple Streams of Income?
Are you convinced you are going to make a killing on the property market, spending a disproportionate chunk of your waking hours plotting how you will go about it?
If the answer is yes to all or most of these questions then you are an FOP - Fanatically Obsessed about Property. I know of FOPs who hold text parties with friends during Property Ladder, where at the last commercial break each guesses via text message how much the property will sell for.
Whoever is the farthest out has to buy the winner drinks on their next night out. These nights out almost invariably involve a post mortem on the most recent Property Ladder as well as a critique of presenter Sarah Beeny - who has attained FOP cult status - and her take-no-prisoners presenting style and her ever-changing hairstyle. This is followed by a group lament on why-oh-why do the people featured on Property Ladder never heed Ms Beeny's invaluable advice?
One of this group is already well on his way to becoming a serial investor. He bought an apartment last year which is ticking over very nicely thank you and has already appreciated in value by €20,000. He is now seriously considering raising equity from his Dublin abode to buy two more investment properties.
Books like The Million Pound Property Experiment and Property Ladder (both based on the TV series of the same name) are piled high on the cistern in his bathroom.
Like all FOPs he refuses to entertain any suggestion that anything could go wrong - even in the current market where property prices and rental yields have softened. Anyone who advises caution is a doomsayer.
But is he right? After all, such bullishness has paid off handsomely for investors in the past?
He reckons that although the market has slowed there is still potential for a good investment in emerging areas near the city centre. He is currently looking at East Wall, North Strand, Kilmainham, and Crumlin - all areas where you can buy properties for under €300,000 and which are close enough to town to be attractive to tenants.
Ian Mitchell, managing director of Deloitte Pensions & Investment Limited, believes prudence rather than caution is crucial when investing in property.
As well as offering advice to a portfolio of wealthy clients with corporate and professional backgrounds, Deloitte Pension & Investment Ltd advises some younger investors who according to Mitchell "are seeking to mirror what they see as the successful investment patterns of their older colleagues".
He advises clients to be conservative in their capital growth expectations. "Assume that for a property held for the next 20 years, you will obtain an average annual capital growth factor of 2 to 3 per cent per annum. The double digit growth figures of the last few years have been deceptive."
The first rule of thumb is the location rule.
"Even if rental interest dies down, it will always survive in a good location. Key to this is the transport infrastructure.
"For instance, an apartment beside the DART in Clontarf, whilst more expensive than one in an area not serviced by the DART or Luas, will almost certainly enjoy a much higher percentage occupancy rate no matter what the prevailing rental market climate in the future."
Always take into account that interest rates are at an all time low when doing your sums . "If you can just afford the deal now, then you can't afford it. Add 35 per cent to your current projected mortgage costs and, if you can still afford it, then you can afford it."
You should also allow for 15 per cent non-occupancy over the time that you own the property. "If this would put your budget under severe strain then you can't afford the deal.
"Likewise, if any four-month period of non-occupancy would put your budget under this strain, you can't afford the deal.
"It's better to own two properties that are profitable for you, than to buy four through excessive gearing. The tortoise got to the finish line long before the hare."
He says it is essential to explore the implications of all types of repayment options - pension backed and annuity repayment.
"The tax-efficiency of the former may outweigh the certainty of the latter - or it may not, depending on a range of issues, not least of which is your overall risk profile and other investment vehicles."
Don't forget to account for set-up costs. These should be regarded as a capital expense that may well last for the first 10 years of the investment.
"It is also crucial to remember that it is very difficult to go liquid in a hurry if your investments are in property and so adequate cash reserves to meet all of life's contingencies should be maintained.
"Having said that, it is my firm belief that even assuming 2 per cent capital growth per annum for 20 years, 20 per cent non-occupied time and interest rates doubling before the next possible rent rise, the prudent investor can do very well for themselves over the long term. It's still a great way to invest."
