Worth the investment?

Eoin Deering Auctioneers have a three-bed townhouse on their books with a guide price of €900,000.

Address: 122 Upper Leeson Street, Dublin 2.

Agent: Eoin Deering Auctioneers.

House type: Three-bed Regency townhouse being auctioned on September 22nd with a guide price of €900,000.

What do you get? Around 186 sq m (2,000 sq ft) of refurbished and modernised space in a house built in 1838. It has a livingroom with a period mantelpiece, diningroom, a kitchen and breakfastroom with modern fully fitted wall and floor units, polished granite worktops, a large exposed brick chimney, and double patio doors to a walled patio garden.

There are three bedrooms, two of which have mantelpieces. The bathroom has a Victorian bath tub and shower unit and tiled shower cubicle. There are also double-glazed Georgian windows and replicated period radiators.

Where? Close to all the hot spots of Dublin 2 and Dublin 4.

How much for an investor to buy? Stamp duty at 9 per cent and legal fees of 5 per cent will bring acquisition costs up to €986,445. An investor requiring a maximum mortgage of 90 per cent at a tracker rate of 3.1 per cent over 20 years will have payments of €54,395 per annum. If rental income is around €30,000 per annum (allowing for one month's void period and one month's costs) this will leave an annual shortfall of €24,395.

Payments on an interest-only mortgage would be €25,110 per annum giving a surplus of €4,890 per annum, and a yield of 3.3 per cent.

If an investor required that mortgage payments are equal to rental income, a 50 per cent mortgage at a tracker rate of 3.1 per cent over 20 years would involve an annual repayment of around €30,000, so the investor would break even. On an interest-only mortgage the repayment would be €13,849, giving an annual surplus of €16.151 and a yield of 3.3 per cent.

How much cost to buy? A residential buyer on a 60 per cent mortgage at a tracker rate of 2.95 per cent would pay €35,776 per annum on an annuity mortgage and €15,390 on an interest-only mortgage.

A residential buyer on an 80 per cent mortgage on a tracker of 3.1 per cent will pay €52,995 per annum, and €24,464 on an interest-only mortgage.

Stamp Duty: €81,000

Legal fees (at 5 per cent plus VAT): €5,445.

Potential: According to auctioneer Eoin Deering, the house commanded a rent of around €3,000 per month up until recently. In 1980 it was sold as two apartments for £68,000. Two years ago it was restored and modernised. It could continue to fetch a rent of €3,000 but, with the corporate rental market less than buoyant, it is questionable whether it would be easy on a continuous basis with only on-street car-parking.

Verdict: For an investor the property represents high entry costs and high cash outlays.The property appears fully valued at its guide price of €900,000, so mid-term capital appreciation may not be strong. It is a very desirable house but probably more suited to an owner occupier.

• Calculations by Simply Mortgages