Prpoerty investment has consistently proved to be wealth enhancing, although entry costs are high (stamp duty, legal and survey costs) and the process can be time consuming.
With €50,000 to invest, your options are limited, unless you are prepared to add to your investment by borrowing, which should enable you to add about €200,000 to your funds.
At this level (€250,000), I favour the residential market, usually best approached through the purchase of a new house or apartment. Retain sufficient funds to cover your entry, furnishing and letting costs (around €10,000 to €15,000 at this level).
Your initial return will be four to six per cent on your total investment, with little or no tax payable, as you can deduct mortgage interest on the borrowings from rental income.
Don't expect a positive cash flow in the initial years - the real value in property is the increase in value which accrues over the years and the prospect of rents rising.
In selecting the property, I watch for the key pointers, accessibility and quality of location, orientation, and pending infrastructural projects (e.g. Luas, road improvements, etc.) which will "enhance" the area.
I also look at proximity to places of employment that have transient employees or residents (hospitals, universities, etc.), any of which are likely to generate extra demand for rented accommodation.
Historic value patterns in Dublin show an unprecedented five-fold increase in the last 10 years, and more than 100-fold increase over 50 years.
Remember, when you sell, you may have to pay Capital Gains Tax on some of the value increase you've enjoyed, but by then you will have benefited by not only the increase in value on your own original equity (€50k) but also on the element which you borrowed, giving an exceptional overall return.
If you don't want to gear up, there are other options open to you. There are a number of single-premium property funds, which allow you invest smaller sums (typically €10,000 to €15,000). This can give a broader spread of locations and types of property.
Of course, you should consider investing the money in your own home - it's the most tax efficient investment and the one which may give you the greatest overall return.
Appropriate conservatories, off-street parking, extensions and fitted kitchens are best to enhance value, but equally important is the need to have the fabric of the house in good repair. At the moment, the market will pay premiums for absolute wrecks or the perfect walk-in home; those which fall in between, where the prospective purchaser feels he may have to undo recent improvements, are less favoured.
Aidan O'Hogan is managing director of CB Hamilton Osborne King
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