March 2015

Question

I have money on deposit earning next to nothing. I have seen some of the returns on investment property from auctions and at these returns, I would really like to get involved.

The problem is, I know little about property investments but I do understand the property market and I feel the investment property market now offers me the best chance of a decent return along with the possibility of me buying at the “bottom of the market” (I know I have missed the tax-free seven-year CGT which expired in December).

I don’t want to buy a house as I don’t think the returns would be as good. On top of the purchase price, what would be any additional costs involved in buying an investment property and is there anything that I should be aware of?

 

Answer

You allude to possibly acquiring at the “bottom of the market”. I am afraid that boat has sailed and already some parties who have acquired within the last 12 months are now cashing in their chips to take a profit. That does not imply that there is no value in the market. You refer to “a decent return”; this can be determined by a quick turnaround or over a medium to long term, depending again on the individual requirements.

Some questions arise. What budget do you have? This may include or exclude certain sections of the market and would determine the level and type of competition.

Is the investment to be made on an individual basis or by a company or trust? This throws up queries on tax issues.

You indicate that you require an income stream, however, the level of risk or security required needs clarity. It would be necessary to identify whether a single occupancy tenant is required or whether there is an appetite for a multi-tenant investment which may require a greater management role.

There are three main commercial investment property sectors: offices, retail and industrial. Each sector has its own characteristics and market conditions. There is currently a shortage of prime office space due to the time lag for delivering new products. This has resulted in rental and capital appreciation.

There are also issues with obsolete buildings which cannot comply with modern regulations.

This is a simplistic overview and further analysis of which sector would provide the best return for you depends on your specific requirements. I would strongly advise you to seek professional advice before proceeding.

Mervyn Feeley is a member of the Society of Chartered Surveyors Ireland (MediKids) Commercial Agency Professional Group