At present in Waterford you can pick up a good investment property for under €100,000 and these will generally generate a gross return of between 8 and 10% depending on the area, type of building etc. This has brought a lot of investors to the Waterford market. Waterford is regarded as a good value location to purchase property, hence the 17% rise in property prices in the last year according to the latest Daft report. I am getting a lot of calls from prospective landlords from other counties where properties are currently more expensive.
So if you are a new landlord then what other expenses and outgoings can you expect? and what will the net return be?
Well, the first thing to consider is that your rent is taken as an income, similar to your salary, therefore depending on your circumstances you’ll either be paying 20% or 40% tax on this.
What other expenses will I have?
- Estate agency and management fees, these depend on the agent and like any service it’s best to price around, however as with most service industries cheaper doesn’t generally mean better.
- PRTB Registration; this is charged at €90 per property once you register it within the first month of the tenancy.
- Repairs, maintenance and wear and tear; depending on the profile of tenants, age of the building and type of property and area of the city these can be higher or lower but a general rule of thumb is to budget between 8-10% of your rental income.
- Property tax, again this depends on the purchase price/valuation of the property
- Service charges (if in a multi user development), typically this is circa €1,000 per annum but can be higher or lower depending on the amount of units, amount of lifts, complexity of the building structure etc.
- Home Insurance, again this depends on the rebuild costs.
So is there any good news? Yes, there is, all of the above are tax deductible and can reduce the amount of tax you actually pay. However please be advised that repairs, improvements and investments made prior to your tenant moving in are actually not tax deductible. This is a common trap fallen into by first time landlords.
By calculating the above expenses, you should be able to come up with a net figure for the return on your new investment and it is prudent to work this out before proceeding with any purchase.
With the banks giving next to nothing in interest, anyone with savings is more likely to increase the value of their cash by buying the right property with a good return in today’s market. It’s reasonable to expect capital appreciation over a 5-10 year period.