At first glance, property investment appears a nobrainer and despite expectation of an increase in interest rates, house-price growth at 8%-10% a year is still higher than the best savings rates.

Unlike other investment vehicles, you can borrow to invest in property and competition among mortgage lenders is strong. There are currently 275 different packages available to help make buying a home, either for your primary residence or for investment, easier.

According to independent broker, Irish Mortgage Corporation, 22% of new homes are sold to investors. Many are first-time or small investors with just one or two properties. Typically, they will have released equity in their existing homes to buy second homes in Ireland or abroad, either for their pension provision or children's nest egg.

With SSIAs coming onstream and continued good news on the property front, many more will be considering property investment. A recent SSIA survey found that almost 20% of savers are considering investing in property. However, for the novice investor, to ensure property investment is profitable you need to approach it with the precision of a business. So before you decide to leap, here are 10 key steps to making a successful first investment.

1 Sort out your finances You need to assess how much you have to invest, how much you can borrow and how much rental income you can expect. As interest rates rise, so do mortgage repayments . . .

you need to structure your mortgage to cover all eventualities. The simplest way to do this is to get independent mortgage advice.

In theory, the rental should cover the mortgage and profit is made on capital appreciation. Experts advise taking a long-term view (up to 10 years) when property investing.

You should also allow for periods when the property might not be let, as well as paying tax on rental income and other costs associated with renting property.

When calculating how much you have to spend, you need to factor in expenses related to the purchase and ongoing expenses such as stamp duty, fit-out/refurbishment, legal fees and miscellaneous costs.

For example, on a new property worth 300,000 you can add at least another 26,000 for additional costs. (Additional costs for a second-hand property would be even higher because of stamp duty, see below).

While many of these expenses are tax deductible, they will need to be paid up-front and so will affect your cash flow. To get the maximum out of your investment and to minimise up-front expenses, you should consult a professional tax adviser/accountant.

2 Second-hand or new property?

Stamp duty differs for new and secondhand investment property and you can't borrow for this. For new properties, stamp duty is chargeable on the net of Vat purchase price (13.5%). On second-hand property, stamp duty is payable on the total purchase price. As a result, stamp duty will be considerably higher on second-hand property. New property also has the advantage of being in pristine condition and therefore can often be more attractive to the rental market. For example: stamp duty on a property worth 400,000.

New property: purchase price less VAT (13.5%) = 352,423, stamp duty at 6% = 21,145.

second-hand property: stamp duty at 7.5% = 30,000 Difference: 8,855.

3 What type of mortgage?

The type of mortgage you choose will have a large impact on how profitable your investment is. Traditional annuity mortgages are not the most efficient route unless you have a sizeable deposit (thereby reducing the mortgage). You can borrow between 90-92% for property investment. Many lenders now have tailored buy-to-let or investor mortgages.

Interest-only mortgages lasting up to about five years are increasingly popular with investors as they don't need a deposit. Many investors combine this with some equity release. With this type of mortgage, you simply pay back the interest on the mortgage and therefore have significantly reduced monthly repayments.

The capital sum is paid back on the sale of the house. The risk with this is of negative equity.

4 Location The big decision here is whether to buy at home or abroad. Familiarity with the Irish market makes it an easy option . . . experts consider this a low/medium risk investment.

Buying abroad requires a lot more research into the market and is considered a medium-risk investment. Cheap entry level prices in emerging locations are no guarantee of success. Many of the newer overseas developments, particularly in France and Spain are now offering guaranteed rental income, reducing the risks slightly.

Well-located property always rents and sells well.

The rental market has improved recently and yields in Dublin are around 3-5%, depending on location. Citycentre locations have traditionally outperformed suburban areas, but locations close to transport hubs such as the Dart, Luas and QBCs are now highly sought after. Rents along the Luas line have increased by 10% and house price growth is above the average at 15-20%.

Always buy in a location with good commercial and leisure facilities. Other factors such as parking and employment are important. As a general rule, you should visit the area to get a feel for the location and to determine if you would rent there yourself.

Buying in growth areas has the advantage of higher capital appreciation over the long run. Talk to estate agents and look out for locations around proposed transport hubs such as Swords, City West, Carrickmines, Ballybrack/Shankill and Bray.

5 Tax Planning Careful tax planning is essential in business.

As well as paying tax on rental income (payable at the rate you pay income tax) you will have to pay capital gains tax (20%) when you sell the property.

While consultancy fees are in the region of 500 upwards, they are tax deductible, as are many of the costs and fees involved with letting your property. A good financial adviser is essential because he or she can help maximise your finances so that you can buy the best investment property.

6 Register for Vat By registering for Vat, investors can construct the purchase of a new home so that they reclaim the VAT (13.5%), which is equivalent to an interestfree loan.

This cash injection at the outset will allow you to either reduce your mortgage or to invest in a better location/more upmarket development. The downside is that you will have to repay the Vat. If this is not achieved through Vat payments on rental income (21%) then the remainder must be paid when you resell. A good tax adviser will assess if this is your best option.

7 Tax-incentive scheme property Although there are conditions and they have a premium price, these offer many benefits. The full price of the property does not qualify for relief, but the qualifying amount can be offset against all Irish- sourced rental income and unused portions can be sold on.

While investors tend to build up a property portfolio first and then look for a tax-incentive scheme, as they won't go on forever, buying now may make more sense. In any event, as they are a limited commodity and will continue to be for the next 10 years, even if you don't make use of the entire tax advantage, other investors will be on the lookout for them.

Location and price are key factors with tax-incentive property; those who bought in Smithfield, for example, have bought extremely attractive properties both to rent and to sell.

8 Buying off plan As well as buying at the best price, buying offplan gives you time to build up the initial finances.

9 Apartment or house?

Whatever type of property you choose, well-maintained units with all the mod-cons in good locations are the easiest to rent. Traditionally, the apartment market has been the best for investment purposes with one- or two-bed units being the most popular with young professionals.

Apartments require less upkeep than houses and generally have a management company to share the maintenance costs, although this is also an additional cost.

The newest apartments are the most sought-after and there is a growing trend for people to move regularly to the newer apartment schemes.

Flats/bedsits are unable to compete against new apartments. However, the increase in immigration has led to a greater demand for three- or four- bed homes in areas close to good schools, employment or transport (see location).

When buying either an apartment or house, remember to choose the best unit.

Additional features that will help to rent the property now will also help sell the property down the line. Two-bed houses bought for rental are in greater demand if they have two bathrooms . . . one can be as an en-suite in the main bedroom. You should budget 10,000 to fit out a two-bed apartment. The higher the standard of furnishing, the better the tenant and rental you can hope to achieve. Rental units must comply with 1993 Housing Regulations.

10 DIY or property management?

Managing your property can be time-consuming and unpredictable. A good property management company will take care of every aspect of renting, from letting the property to paying insurance, issuing rent receipts, vetting tenants, general up-keep and maintenance, filing tax returns, providing tenancy agreements/contracts, paying service charges, etc. A property management company charges in the region of 10% of rental income. As a landlord, you must register with the Private Rented Tenancies Board ( 70) additional costs include letting agent 6. . .7% annual rent, legal costs, accountant's fee as well as charges mentioned above.

LOCATION VITAL TO ATTRACTION OF INCHICORE

APARTMENT WITH continuing demand for rental accommodation, modern apartments in good city locations continue to attract investors.

One property in Kilmainham Orchard on Turvey Avenue, Inchicore, Dublin 8 presents itself as the perfect investment property.

Located in an attractive contemporary development, just off Emmet Road, No 11 Kilmainham Orchard is a spacious three-bed, two-bath apartment with a decentsized balcony overlooking the Camac River. Less than two miles from the city centre, Inchicore is a popular rental location, particularly with young people looking for accommodation close to all the amenities in town.

The area is also a short walk from Kilmainham Gaol and from the Irish Museum of Modern Art at the Royal Hospital.

According to selling agents at Sherry FitzGerald, a threebed apartment in this development would achieve a rent of between 1,300 and 1,400 per month.

Built just one year ago, this apartment is in walk-in condition, and has been decorated in neutral shades, always best for the rental market, where bold interiors may not be everyone's cup of tea.

A spacious apartment with a floor area of 98sq m (1,050sq ft), accommodation comprises a long entrance hall, good-sized living cum diningroom which opens out to a balcony, a separate kitchen, two double bedrooms, one single room, and a main bathroom. One of the double bedrooms has a lovely corner window and ensuite bathroom.

Ready to walk into, the apartment includes a modern fitted kitchen with integrated appliances, fully tiled bathrooms, fitted wardrobes and carpeting.

Price: Advised Minimum Value (AMV) 420,000.
Agent: Sherry FitzGerald 01-4969909

IVY LEAGUE TOWNHOUSE COULD FETCH 1,200 A MONTH IN RENT

NEW to the market is No 7 Ivy Court, a modern twobed mid-terrace townhouse in Beaumont, Dublin 9. Less than four miles from the city centre and just a few minutes' walk from Beaumont hospital, this is an ideal investment property, which would achieve a rent of between 1,100 and 1,200 a month.

In pristine condition, this townhouse is ready to walk into. The house is 66sq m (700sq ft) and accommodation comprises a hall with understairs storage, large sittingroom, separate kitchen, two bedrooms, one en-suite, and a main bathroom.

Tastefully decorated in neutral shades, this is a bright and airy home. The sittingroom is over 20ft x 9ft and has maple flooring, fireplace with gas fire, and recessed lighting. The separate, stylish kitchen is about 12ft x 9ft, giving enough space for a small table and chairs. Double doors open out from the sittingroom to a well-kept south-facing paved patio and garden with timber shed.

Upstairs, both bedrooms have timber flooring and built-in wardrobes. The landing has access to the attic, where there is potential for an extra storage area.

The property has a fitted alarm system and gas central heating, and there is communal parking to the front of the terrace.

Price (AP): 381,000 Agent: HOK Residential, 01-8830630