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  • Expert Advice

    “Why is a multi-family home a better buy to let investment than a single-family home”

    “Why is a multi-family home a better buy to let investment than a single-family home” If you're looking to actively invest in residential property, most investors will consider two types: single-family home or multi-family home. With single-family, you'd be buying traditional homes built for one family or household. On the multi-family side, you’d be buying apartment buildings. Both are very attractive and popular but investors need to consider there are significant differences in terms of cashflow, risks, maintenance and returns on investment. We have explored some of these points below.   In single-family homes there is not a strong cash flow (unless you own several properties). Fewer units means less cash. You're only getting a handful of rent payments per month, and a large chunk of those are going toward your mortgage, maintenance costs, and admin fees. However in multi-family homes you have a better cash flow and a bigger financial cushion. The extra cash that comes with multi-family real estate can help safeguard you from loss. There's more room for error, and you may have more capital to further grow your investing business if you do it right.   “Buying a multi-family home means an instant real estate portfolio”   If you’re looking to build a big real estate portfolio single-family homes are not the way to go. A portfolio of 10 units would mean 10 negotiations, 10 mortgage applications, and 10 closings, and it would take much more time compared to multi-family properties which let you scale up with just one purchase. Buying a multi-family home means an instant real estate portfolio. You'll have at least several units on your hands, and having the cash flow and profits that come with it isn’t such a bad thing either!   “If a tenant moves out of a single-family rental, it is 100% vacant”   Yes single-family homes are a lot easier to acquire but when it comes to growth this would be slower than the multi-family homes. Also one of the disadvantages of a single-family homes is that if the property is vacant you would have zero income until the management company replaces the tenants whereas with a multi-family home they can lose a tenant but can still produce an income with the other occupied units. It is rare to see a multi-family home totally vacant. Multi-family rental owners are also far less likely to have zero rental income. If a tenant moves out of a single-family rental, it is 100% vacant. On the other hand, if a multi-family rental owner loses a tenant, its only 10% vacant. Even after that reduction in cash flow, you’ll still have 90% of your regular monthly rental income to cover the property’s mortgage and operating costs. In single-family homes, if you want to make repairs or improvements to the building it only increases the value of that one property as opposed to many in a multi-family property. Financing the purchase of multi-family homes is much easier than of single-family investment properties. The return on investment received by investing in single-family rentals tends to be higher than from other rental types; however, banks are more easily persuaded to give a mortgage to real estate investors for multi-family properties due to the risks being lower.   When you base it on a per-unit basis, the cost of constructing a multifamily property is more affordable than other types of real estate properties. It is, therefore, a more cost-efficient investment and relatively risk-free for first-time investors. If you choose to apply for a mortgage loan to build or purchase this type of property, you can expect lower mortgage financing rates.   The foreclosure rate on apartment buildings or other types of multifamily properties is lower as compared to a single-family unit. This explains why mortgage lenders can offer competitive rates for investors of this type of property. This reduces operating costs which will bring more revenue in the long run.   If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Author: Deirbhile Finn-Healy
    Author: Deirbhile Finn-Healy
    Read Time: 4 mins
  • Market News

    Investment in Dublin private rented sector remains robust in face of Covid-19

    Investment in Dublin private rented sector remains robust in face of Covid-19 Three sales totalling €391m among deals signed since lifting of lockdown, report finds A new report on the private rented sector (PRS) shows that investment remains buoyant notwithstanding the uncertainty created by the Covid-19 pandemic in the wider commercial property sector and economy.   While the imposition of the coronavirus lockdown last March resulted in the delay or postponement of a number of residential investment transactions, the latest analysis by agent Hooke & MacDonald shows that six significant PRS deals still took place in Dublin in the first half of this year. Some 440 such units with an overall value of €163 million changed hands in the period. New builds accounted for 225 of the units sold, while the remaining 215 units were drawn from existing stock.   The recent easing of Covid-19 restrictions has seen an uptick in investment activity, with a number of transactions which had been put on hold either signed already or expected to transact in this quarter.   The largest deal to have concluded in the post-lockdown period is the sale by the Cosgrave Property Group of 368 apartments at its Cualanor scheme in Dún Laoghaire to Deutsche Bank subsidiary DWS for about €200 million.   DWS was involved also in the second-largest residential transaction to have been completed since the lifting of restrictions, paying €145 million for a portfolio of 317 residential units the MKN Property Group is developing in the capital. This Prestige portfolio comprises a mix of existing and new-build apartments and houses distributed across four schemes in the north Dublin areas of Swords, Raheny, Clontarf and Killester.   Other notable deals which closed recently include the sale by developer Pat Crean’s Marlet Property Group of the 56 apartments at its Ropemaker Place scheme in Dublin 2 to German fund Real IS AG for about €46 million.   With the level of transactional activity once again accelerating, Hooke & MacDonald says it expects PRS to be Ireland’s largest investment sector in 2020. A record €2.36 billion was invested in PRS here last year – a massive 150 per cent increase on the €930 million spent on the sector in 2018. Covid-19 costs While the suspension of construction activity between March 27th and May 18th had an immediate impact on the delivery of new residential accommodation, Hooke & MacDonald says it also expects Covid-19 to compound existing difficulties relating to the cost and viability of schemes.   Commenting on this, the report says: “The immediate impact comes from the costs associated with specific Covid-19 safety measures. The recent construction lockdown has added to the problem.   “While planning permissions have increased significantly, most of these are incapable of being commenced in the foreseeable future due to a combination of reasons, most notably viability and in some cases the inability of stakeholders to bring projects forward. Viability is being impacted by a number of factors, including increasing construction costs, Government taxes and levies on new construction, costs of delays to planning and infrastructure, the cost of finance, the cost and supply of zoned land and other costs such as compliance and water charges.”   But while developers are facing a variety of challenges, the report notes that investor appetite for the forward sale and forward funding of PRS schemes remains robust.   On this, Hooke & MacDonald says: “The long-term and stable nature of the asset class, with low vacancy and voids, is ideal for investor entities with long-term investment requirements, including pension funds and sovereign wealth investors. The multi-family/PRS sector is now seen as a mainstream asset class and the increasing activity and level of transactions in it in Ireland and on a pan-European basis in recent years is witness to this.”   The attractiveness of the Irish PRS market for institutional investors is borne out by the strength and consistency of the investment yields. An examination of the transactions that have gone through in 2020 shows that they have, for the most part, come in above the guide prices for the original offerings. And when yields are compared to those generated in transactions in 2019, the yields are found to be broadly in line.   In the case of the Cosgrave Property Group’s sale of 368 apartments at Cualanor to DWS for €200 million, for example, the net yield was approximately 3.75 per cent. The Cosgraves’ sale of the 214 units in the adjoining Fairways block to DWS for €108 million in 2019 produced a similar net yield.   Commenting on the oft-repeated suggestion that big investors have been acquiring residential properties that would otherwise have been made available for sale to the traditional owner-occupier market, Hooke & MacDonald says that the majority of this new stock would not have been built in the absence of institutional forward purchase or funding. Some 5,500 new residential apartments and houses have been built in Dublin since 2016 using funding from these investors, the report notes. Future growth While Dublin and the greater Dublin area has accounted for most of the investment in Ireland’s fast-growing PRS market to date, the report says the conditions are now right for increased transactional activity in other cities.   On this, it says: “There is a significant shortage of high-quality residential accommodation in Galway for the sale and rental markets to meet the needs of its expanding population and dedicated workforce. There is good potential for the PRS sector also in Cork and Limerick.” If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Source: The Irish Times  – Ronald Quinlan.
    Author: Conor Fitzpatrick
    Read Time: 5 mins
  • Property Market

    TikTok looks at Dublin office space for 5,000 workers

    TikTok looks at Dublin office space for 5,000 workers TikTok is weighing plans to take on up to 500,000sq ft of office space in Dublin to facilitate a major expansion of its Irish-based operations.   The Chinese-headquartered social media company issued a request for proposal (RFP) to several commercial real estate advisers last week, with a view to securing office space in the capital capable of accommodating up to 5,000 workers.   While news of the move will be welcomed by the property sector and wider business community, coming as it does in the midst of the uncertainty being caused by the Covid-19 pandemic, a source familiar with the matter cautioned that should it proceed, any expansion by TikTok of its operations here would likely take place over several years. Global tech Such a growth pattern would however be in keeping with the pace set by the mainly US-headquartered global tech companies that dominate Dublin’s so-called Silicon Docks currently.   In the case of Google for example, its arrival here in 2003 involved just five employees and the use of serviced offices on Harcourt Street.   While the search engine giant made the headlines last week when it abandoned plans to rent a further 202,000sq ft of space at the Sorting Office, its footprint in the capital extends today to a massive 1.1 million sq ft. Total area When taken together, the collective presence which is in the process of being established by Google, Amazon, LinkedIn, Facebook and Salesforce at their respective campuses across the city will cover a total area of 3.4 million sq ft (31.6 hectares) – or enough space for 34,000 workers.   Although it would take some time for TikTok to grow its operations in the capital to a scale equivalent to its American competitors, the Chinese-owned social media app gave a clear indication of the importance it attaches to Dublin last January when it announced the establishment of its EMEA trust and safety hub here, creating 100 jobs.   More recently, the company, which is owned by Chinese group, Bytedance, signalled its intention to add a data privacy division to its Dublin team, and to locate a $500 million (¤420 million) data centre in Ireland.TikTok’s search in Dublin for what could become its European headquarters comes just two months after it pulled back from talks with the UK government on a new London headquarters. If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Source: The Irish Times  – Ronald Quinlan.  
    Author: Conor Fitzpatrick
    Read Time: 4 mins
  • Market News

    Tech sector drives Dublin office deals in third quarter

    Tech sector drives Dublin office deals in third quarter As much as 230,000 sq ft of office space was transacted in Dublin in the three months to the end of September bringing take-up for the first nine months of the year to 1.1m sq ft according to figures compiled by Knight Frank.   "While this is down 46pc on last year, it still represents a relatively strong level of take-up given that most companies are still functioning on a working from home basis," said Declan O'Reilly, the firm's director of offices.   He has not seen "any movement in quoting rents across any of the major schemes across Dublin as of yet".   A number of high profile tech and pharmaceutical companies expanded their Dublin operations in Q3.   The largest transaction saw Microsoft take 44,000 sq ft at 3, Dublin Landings to complement its South County Business Park space. In South Docklands, cloud communications platform Twilio sub-let 20,493 sq ft from State Street at 78 Sir John Rogerson's Quay. In total, the tech industry was the main driver of activity accounting for 34pc of take-up and reflecting how companies in these sectors have seen their value increase during the pandemic and will need increased office space to house their growing workforces following the pandemic.   Pharma had the second highest market share comprising 24pc of take-up with Gilead letting 31,301 sq ft at North Dock where it is planning to hire 140 employees by 2022.   Meanwhile, Regeneron is expanding its Dublin operations by sub-letting 13,637 sq ft from Bord Gáis at One Warrington Place which will see them move from Europa House on Harcourt Street.   The State accounted for 19pc of take-up which was driven by the OPW's taking of 42,060 sq ft at 1GQ. Construction activity was strong in Q3 with 727,000 sq ft of office space delivered. This included Mapletree's The Sorting Office (203,000 sq ft), TIO's North Dock (201,000 sq ft) and Ryanair's Airside Green (120,000 sq ft).   Mr O'Reilly says that as productivity starts to dip and as workers display working from home fatigue, along with a discussion as to the longer term impacts on people's physical and mental health, he expects many companies will move back towards 'work from office' strategies, albeit perhaps with more flexibility than heretofore. If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Source: Independent  – Donal Buckley.  
    Author: Colin O`Regan
    Read Time: 3 mins
  • Covid-19

    Invest in more social housing to avoid Covid-related supply shock, says ESRI

    Invest in more social housing to avoid Covid-related supply shock, says ESRI The State should increase its investment in social and affordable housing now to offset a future supply crunch caused by Covid-19, according to the Economic and Social Research Institute (ESRI).   A new paper from ESRI researchers has concluded that the long-term effect of Covid-19 on the housing market is likely to be a reduction in supply of homes in coming years caused by a dip in investment now, as builders find it harder to secure development finance from banks whose profits are down.   In the short term, the ESRI predicts, as State pandemic income supports are unwound, demand will decrease in the housing market. But in the long term, a supply crunch could exacerbate the “imbalance” between supply and demand that already existed in the housing market, once the economic uncertainty of the pandemic ends and housebuyers come back on the market.   The researchers, Kieran McQuinn and Conor O’Toole, highlight that the savings rate – the proportion of income put away by the public – is likely to rise to close to 20 per cent this year from 10.5 per cent last year, as the public remains cautious in the midst of the economic uncertainty.   They suggest in their paper, Assessing the Impacts of Covid-19 on the Irish Property Market, that, once the pandemic ends, these elevated savings “could be directed towards the housing market” and potentially cause “a surge in demand”. Undersupply “As demand picks up, the level of supply will not be there to meet it, amplifying the existing undersupply,” the ESRI researchers conclude. They suggest the full effects of Covid-19 may not be become apparent in the housing market for another year or more.   Latest estimates from the lobby group for banks, the Banking and Payments Federation of Ireland, suggest that housing completions in 2020 will fall by 3,000 from last year’s total to 18,000. Previous ESRI estimates have suggested completions could fall as low as 15,000 or 16,000 this year.   The number of new houses needed to meet demand in the long term in the Irish market is believed to be up to 35,000.   The ESRI researchers say the imbalances in the housing market, both for purchases and in the rental sector, may also be exacerbated because of affordability problems among the cohort of workers currently employed in the sectors most affected by anti virus restrictions. Hospitality, tourism and retail, which have a higher proportion of lower-paid workers, are the segments of the economy that have been hit hardest by Government curbs to stop the spread of coronavirus. Imbalance “One of the most appropriate policy responses is for an increase in State provision of social and affordable housing. An increase in the supply of such housing at this point would help to reduce the extent to which the imbalance would be exacerbated by the present crisis,” the report concludes.   “At a more speculative level, the potential increase in the number of people who can and will work from home in the future may have significant implications for the housing market and the general economy over the longer term,” they say.   The researchers suggest this means that most of the existing pre-pandemic long-term predictions of future housing requirements may have to be recalculated. If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Source: The Irish Times  – Mark Paul  
    Author: Conor Fitzpatrick
    Read Time: 5 mins
  • Property Market

    Almost 50,000 new homes needed each year, report says…

    Almost 50,000 new homes needed each year, report says... As many as 47,000 houses will have to be built each year for the next five years just to meet demand, according to a new report.   This is almost twice the 25,000 target set out in the Government’s Project Ireland 2040 plan and more than twice the current level of supply, which was 21,000 last year.That figure is expected to fall to between 14,000 and 16,500 this year amid Covid-19 disruption.   The analysis by property economist Ronan Lyons and industry body Irish Institutional Property (IIP) suggests the main drivers of housing demand in the coming years will be the natural increase in population, net migration and changes in household size.   It estimated that 30,000 homes a year are needed to meet the likely population changes alone.The bulk of new homes are needed for smaller households and in locations that are in and near the main cities. The overwhelming evidence from both sale and rental markets in Dublin is that availability is “the key determinant of price”, the report says.   Since the 2008 financial crash, supply of all forms has been inadequate and recent improvements still fall short of underlying demand, it finds.   The report also claims that the supply of new homes is determined by viability – effectively the cost of construction   – and not affordability for buyers and that viability is “extremely challenging”, particularly for apartments.   It says two-bedroom apartments in Dublin now cost up to ¤460,000 to build when land, VAT and levies are added to the traditional bricks and mortar construction costs.   The report says the Government should take steps to tackle affordability gap for prospective buyers. Cost-rental schemes It says Government housing policy should provide for cost-rental schemes, where costs are shared with the taxpayer for households with low incomes.   The authors also call for the introduction of new shared-equity and share-ownership schemes which they say would enable thousands of aspiring homeowners, currently shut out of the housing market, to bridge the affordability gap.   “The mix of new housing supply in recent years in this country has been inadequate. New homes are increasingly out of sync with Ireland’s household structure,” said Mr Lyons of Identify Consulting and Trinity College.   “Ireland’s housing is out of line not only with its own demographics, but also compared to all other European countries, where typically 50 per cent of dwellings are apartments,” he said. If you are thinking of investing in property as a source of alternative income, ​ why not contact us today to discuss your requirements in more detail?​ ​ Phone: +353 86 325 0048 I Email:info@spirecapital.ie Source: The Irish Times  – Eoin Burke-Kennedy
    Author: Colin O`Regan
    Read Time: 5 mins