I’ve recently had enquiries from potential purchasers about apartments that are advertised for sale at extremely good prices. One particular purchaser remarked that it was ‘almost too good to be true!’, and so it begs the question, ‘is it too good to be true?’
Looking through Daft it appears that there are plenty of bargains for sale in Waterford at the moment and as I previously blogged I feel it’s a great time to buy. But when you see a 2 bedroom apartment available for under €50,000 your first thought should be why? Make sure you do your research, just because a property is cheap doesn’t make it a good investment.
Purchasing an apartment is different from purchasing a house in that there are additional things to consider.
Firstly; the management fees,
How much are they? A lot of potential investors don’t seem to take enough notice of these fees when comparing rental income between houses and apartments or different apartment complexes. I’ve seen this annual charge range from €700pa to almost €2000pa. This can make a huge difference in net return to the investor. For example, you could decide to purchase an apartment that rents for €500pm for €50,000 and by dividing the annual rental income of €6000 into €50,000 calculate that the investment will pay for itself in just over 8 years. However if this property has a management fee of nearly €2,000 then 33% of your gross rent goes to cover this charge (meaning it will actually take over 12 years to pay off) and that’s before the typical associated costs such as; maintenance of the apartment, tax, PRTB registration, letting agent fees, insurance etc. It might be wiser to find a more expensive property with a lower management fee in the long run.
Secondly; how is the management company operating?
You can tell a lot about the management company of a complex by how it looks; are the common areas clean? are the fire panels in working order? Is the complex safe and secure? etc. When you purchase a house you are solely responsible for how it looks, its state of repair, its grounds etc. However this is not the case with an apartment complex and so the way it is run becomes much more important. You should always ask as many questions as you can about the management company when considering a purchase. Don’t be afraid to ask to look at the books. See if there is a sinking fund in place. It’s best to purchase in a complex in which there are a high percentage of owner occupiers on the board of management, as they will be more inclined to keep the building in good order and in turn this will look after your investment.
Thirdly; who are the neighbours?
If the advertised apartment is much cheaper than other comparable apartments is it due to the neighbours? No matter how cheap an apartment is purchased for it’s not a good deal if you have neighbours from hell and no one will rent it. It sounds cliché but the saying ‘location, location, location’ applies to the desirability of a property and really matters when trying to attract quality tenants. If you purchase a budget apartment in a less desirable area of the city then your apartment will appeal to a tenant on a budget.
Property is no different from other products; sometimes the entry level price catches your eye but in the end after considering all the additional catches and costs it may be better to purchase a more mid-level product in the long run. Either way when coming to that decision it’s wise to ask the right questions of a reputable agent and be aware of the above factors when coming to a decision. You can call us at Bookaroom on 051 858182 or me personally on 0868271689 for honest advice on any property on the Waterford market. I look forward to talking to you
Auctioneer & Letting Agent at LibertyBlue.ie