Buying My Apartment in Ireland

Having been working for a few years in Dublin, I realized that I wanted to get away from living from month to month and wanted to start to work towards financial freedom. When I looked at my spending I realized that I was spending a lot of money on things I didn't really need. Sure people will say that money doesn't buy happiness and that I should spend it and enjoy myself. But for me, I actually enjoy making money. It gives me a thrill to see my investments slowly increase, it's the equivalent feeling for me. So I chose to cut this spending and start saving. If you want my tips on how to save click here. At the time I didn't really know what I was saving for but I knew I would want the money and most likely it would be for a house.

The more I saved the more I wanted to use this money to buy a house or apartment. The main reason behind this was that I saw the money I was spending on rent as a waste. I saw that rent and said: "well if I could just be spending that money to pay a mortgage then at least I would be paying myself and not somebody else". I was in a solid job that I enjoyed and I expected to stay there for at least 10 years. This meant that I didn't expect to have to move area anytime soon, so buying a property wasn't going to limit me. I also felt that even if I did have to move then I could rent the room I was staying in in my property to cover some or all of the rental costs in another property. Without realizing it, the decision I was making was that I wanted to increase my net worth.

I spent the next few years saving and was getting close to the amount I felt I needed to start looking a properties when I got a bit lucky. The landlord in the apartment I had been living in rang me to tell me that he was getting the apartment valued with a view to selling. I told him that I had been saving and asked him to let me know what he was looking for once he had gotten it valued. After a few weeks he rang to let me know. The price was a bit higher than I had hoped but I asked him to give me a week to look at finances and see what I could do.

I spent the next week looking around at mortgage providers. I spent hours calculating the mortgage amount I could get, the repayments, the fees involved for solicitors, my ability to repay and my ability to get that dreaded deposit together. After all my calculations I decided I was in a position where I could make an offer at least if I was approved for the mortgage. I made the application and was approved in principle. 

I knew that the landlord was very unlikely to accept my first offer so I made an offer below what I was capable of affording. As expected, the landlord rejected this and I asked for a bit more time to redo my calculations and see what I could do. I didn't need this but it was a negotiating tactic to make the landlord feel like I was being stretched. I knew that he wanted to sell and that he would prefer to sell to me as it would mean he wouldn't have to pay auctioneers fees and it would be a far quicker sale. After a few days I called again to increase my offer, though not all the way to my maximum, and the landlord asked for a bit more time to consider it. When they called the next day they told me that we were close and that if I could increase my offer a slight bit more then we could make a deal. I made an increased offer there and then and said that was my absolute maximum and that if that wasn't acceptable then I would have to stop there. Luckily they accepted!

At that point I had a mortgage in principle and an offer accepted. The first main task was to complete the mortgage process. This included submitting bank statements, completing application forms, choosing a mortgage option and getting an independent evaluation on the property. It took about a week after submitting all the paperwork but I was granted the formal approval. During this week I had contacted a number of solicitors to get quotes. In the end I chose a solicitor who wasn't the cheapest, but was also close to where I worked and easy for me to get to during my lunch breaks. This made things easy for completing and submitting paperwork as I could actually pop in to the office. The process of drawing up contracts and completing registration took about 3 months. During this time I had to pay the deposit which was 10% of the property value. I paid this to my solicitor and they looked after it from there. My solicitor was probably overly picky but I was happier with this than if they weren't careful enough. This was too important to rush and get wrong. Too be honest it also gave me a few extra months to save because I was really pushing myself to the limit to complete the deal. As this was an apartment in an apartment complex, I also had to review the management company finances and make sure I was happy that the apartment complex was being run well. Eventually I signed the contracts, the solicitor took care of all mortgage draw down and transfer and after all of this was completed and I was given the keys to my new apartment.

One of the best things about the deal for me was that I had lived in the apartment for 3 years before this. I was familiar with it and happy that I knew how things ran and that nothing was being covered up. It made me much more comfortable with the investment. The other great thing was that the apartment had rooms I could rent out! After getting the keys I was able to rent 2 rooms. Because I am a live in landlord I can make up to €14,000 per year tax free from rental income. In my case this means that the income I get from rent covers my mortgage payments.

I created a separate current account for the apartment income and expenses. This allows me to keep track of the costs and income much better. I also still pay "rent" myself each month. I deposit the same rent I used to pay from my personal current account to the apartment current account because even though the rental income covers the mortgage, I need to pay for management fees and maintenance costs. I also want to build up a safety fund for the apartment, just like I have for my personal account, so that I can deal with any emergency expenses. Once I have this safety fund in place I will be able to use this extra money to invest in other areas.

That is how I have put my foot on the property ladder. I was lucky that the apartment I was living in was being put up for sale but even if it hadn't, within 6 months I would have purchased another similar property anyway. I am now 6 months into being a property owner and landlord and so far its going great! I have rental income covering my mortgage, my own rent covering expenses and building up a safety fund and I am also able to keep saving at the same rate that I was before I purchased the apartment. Admittedly I have used a small amount of these savings to redecorate the apartment and I will continue to do this for a few more months.

Thanks for reading and keep an eye out for more updates!

The 8 mindsets you need to make money

1. You control your life, your life does not control you

This is the most important mindset anybody who wishes to make money needs to have. If you believe that you control your life you will take action to achieve the outcome that you want. If you believe that there is nothing you can do and you must rely on others, then you will do nothing to take action and probably nothing will happen. The signs of this attitude are that you blame others for your situation, you justify it by saying that don't want to be successful anyway and you criticize those who have achieved success.

2. Admire other successful people don't resent them

You have probably heard that successful people are greedy. This creates a negative view of success and is called the "scarcity mindset". In this mindset you think there is a limited amount of wealth in the world and the wealthy have taken more than they should have. Viewing these people as inherently bad you will never truly want to be successful. Whenever you find yourself resenting successful people you are showing the scarcity mindset. The opposite is the "abundance mindset": In this view you think that value can be created and situations can be win-win. In this scenario you look at successful people and think that they have delivered a great value to the world and so have been rewarded for their contribution. With this view you admire successful people and you want to achieve their success.

3. Be committed to being successful

Everybody wants to be successful: ask anybody and they will say yes. But the people who become successful are the ones who remain committed to their views and goals for the long term. People who fail generally give up after a short period where they don't see instant return for their efforts. Those who succeed understand that they are investing for a longer period and are willing to continue and adjust their efforts as required until they realize their goals.

4. Value and monitor net worth

To be a successful investor you must appreciate the idea of net worth. This will help shape your decisions to help you make successful choices. Take for example two people who each win €10,000. One takes his money and buys a brand new car to replace his old one, the other invests his in a 5 year guaranteed 10% return investment. After 5 years the person who bought the car sells his car for €2,000. The person who made the investment has €11,000. Though they both started off with €10,000 but now one has €2,000 while the other has €11,000. This €11,000 can be reinvested and the cycle repeats itself. Here is the idea that the rich get richer and the poor get poorer, but the rich make smart investment decisions that increase their net worth, the poor make poor investment decisions that decrease their net worth. Consider net worth before spending your money.

5. See the opportunities not the obstacles

Successful people see opportunities and obstacles but ask: "How can I overcome them?". Unsuccessful people see the obstacles and give up. Many people see the same opportunities but have the courage to chase them. This is not to say that you make reckless decisions. You have to assess the risks and rewards, and if that makes a good investment to you, have the courage to follow the opportunity.

6. Be comfortable with managing money

Have you ever seen somebody who is uncomfortable with having money? It's common for somebody who wins a large amount of money to simply spend it all straight away and return immediately to their old way of life. This is because people are uncomfortable with making decisions about their money. The easiest way to change this is to start managing your finances when they are small. Make small calculated saving and investment decisions. Some will be successful and some will fail, but you will become more comfortable with making investment decisions

7. Make your money work for you

One of the greatest ways to lose money is to allow your money to sit. For example, assume you have €10,000 cash in your hand. You have enough money to buy a car for €10,000. Every year inflation causes everything to increase in value, assuming the economy increased at a rate of 2% inflation. Now you still have €10,000 cash, but the car is now selling for €10,200 and you can no longer afford it. The lesson here is that you must invest your money in some form just to prevent it from losing value.

8. Constantly learn and grow

Unsuccessful people claim to know all the answers. This is an attempt to not seem stupid. Successful people accept that they don't know everything. They view each thing they do not know as an opportunity to learn and increase the value that they can provide. As in point 2, they view this as a way to provide value to more people and so a way to increase their capacity to be successful.

This post is my interpretation of a book I read called Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth. I have modified it to be based on my views and highlighted the items that I felt were the most applicable and agreed with my views of life and investing.

7 steps to start saving successfully

The first task for anybody looking to invest in anything is to start saving! Here is a 7 step guide to start saving successfully.

1. Write down you savings goal

What is it you are saving for? A deposit on a house? A holiday? A new car? Whatever it is, write down the amount you need to save. I will make it more real and make you think about what you really want.

2. Write down your existing spending

Its very simple, log in to your online banking and one by one categorize your spending for the last full month, or even better over a 6 month period so that you get a better average. Categorize your spending into rent, bills, food, clothing, entertainment and whatever other categories suit your current expenses.

3. Filter out the non essentials

Take this categorized spending and start asking yourself what could I remove from this and still be OK? What do I need and what do I want? In this step be ruthless. Cut it back to only the bare essentials, rent, food (if you cook at home), travel for work, essential clothing (you don't need to have the best designer clothes!), health and anything else you personally need. Things that aren't needed are eating out, social nights, cinema tickets or new gadgets. These lists are not exhaustive but you can get the idea. Don't worry I'm not suggesting you get rid of everything just yet, but you need to see whats technically possible.

4. Decide how much money want to set aside each month

Look at the difference between what is technically possible for you to live on and what your income is. In theory its possible for you to save this! In practicality its a bit different. Saving should not completely remove your life, after all your health (mental as well as physical) could be your most important investment. Find a balance. You might decide you can do without all of the nice things depending on your desire to save and invest. If you can great for you, but you might decide you need €500 per month for yourself. That decision is up to you, but be honest with yourself here. Its nobody else's responsibility to let you save that deposit, or get that first €1,000. If you can't give up things or find a way to set something aside, don't expect to be reaching your goals any time soon and don't try to blame anyone else for it.

A good number here is 10-30% of your income, but anything is better than nothing! If you can start only with €20 then do. It will get you into the habit of saving and can give you a sense of achievement when you start to see it grow. You might even decide that you can cut back on your spending and add a bit more.

5. Set up a savings account

Set up a separate savings account. This will allow you to set aside the money you plan to save each month and keep it safe from those moments of weakness! Keep this money separate and only touch it in emergency situations! It will also give you a way to clearly show your savings increasing. Its amazing how rewarding it is to see that balance growing!

6. Set up a direct debit

Set up a direct debit from your current account to your savings account and schedule it for right after you get paid. This will make sure the money gets transferred automatically to your savings account and you never get that urge to splash out. If you wait until the end of the month its more than likely the money won't be there to transfer.

7. Watch your savings grow

You've done all the hard work, now sit back and watch your savings grow!

This post is based on my idea of the concept of paying yourself first. It is how I started saving but you can do it in different ways. It is not just applicable to somebody who is starting saving in Ireland. If you want to read more there are lots of articles and literature based on this principle.