Yields reach 10-13pc for houses converted into numbers of flats

May 27 2011 04:45 AM

Coleman Connor

With some cash-rich investors showing greater interest in blocks of apartments, one of the less costly options is to buy houses which have been converted into a number of flats.

A new investor moving into

this sector can secure much better yields than were available four years ago with gross yields of between 10pc and 13pc available to those with cash.

During the boom such

investors had to compete with house hunters looking to restore period houses from flats into family homes.

Nowadays there are fewer

of these families seeking to compete with investors. Furthermore values have fallen 60pc from their peak and even more in some cases.

Current market activity is

low and limited to the few investors who have large cash reserves. Banks are reluctant to lend for investment purposes and subject to very strict criteria will only lend approx 50pc of current market value.

On the positive side these

flats are holding their own when it comes to attracting tenants at a comparable rate to newer apartment block units. We haven't seen any greater slippage in rents in this sector other than what is evident in the overall residential market.

With values so low, one

thing is for sure today's multi-unit purchaser stands a much better chance of making a profit than anyone who might have ventured down this road over the previous 10 years.

However this type of

investment is a hands on project which requires the active involvement of the landlord or his agent on a daily basis. Furthermore there are a number of factors which act as a deterrent to anyone other than the experienced buyer.

Rents have tumbled about

32pc since 2007 and landlords have to deal with more vacancies and substantial rent arrears. Tenant expectations have also increased. Units need to be in ship shape condition in order to attract tenants.

The 25pc cut in mortgage

interest tax relief has caused mayhem at a time when interest rates are on the increase. In addition, interest-only periods have run out for many investors with banks applying increasing pressure to make repayments on capital.

The €200 NPPR annual

second home levy is not a tax deductible business expense and for landlords with an eight unit house the annual NPPR of €1600 represents a huge bill.

PRTB fees apply at a flat

rate of €90 each time a new tenant moves in and with tenants moving in for shorter periods, these fees have multiplied.

Universal social charges

have disproportionately affected landlords in comparison with other sole trader businesses resulting in the higher rates of tax applying in each case. Landlord's rental income tax is greatly inflated due to their inability to claim deductible expenses similar to other small businesses.

Multi-unit properties cur-

rently on the market include:

33 Lr Rathmines Rd, Dub-

lin 6, (above) is a large investment set out in seven units. It needs refurbishment but has potential to produce a rent of about €60,000 per annum. Price €500,000.

1 Richmond Place, Rath-

mines, Dublin 6, (below) is a double fronted Pre'63 house recently refurbished to a quality standard. Divided in five units, it has a large sunny garden to the rear. Price €560,000. 13 Heytesbury St, Portobello, Dublin 8 is a large refurbished Pre '63 investment in eight units. Price €1.05m.