Interview: Aidan – A data analysts’ approach to property investment.

It’s time for another interview post and you know I’m a big fan of investing via property in Ireland, so I literally could not turn down the chance of interviewing Aidan who lives in Dublin, Ireland.  Aidan is a smart, focussed and curious investor who has decided to utilise his data analysts’ approach and blend it with the property investment market to gain a competitive edge. Let’s get straight into it, I really enjoyed this one..

I asked the same 3 key interview questions as I do with everyone on FIREDAVE – Here are the Q & A, enjoy..

Who are you and how did you discover fire?

I’m 28 and my name is Aidan. By day I work to help wind farm developers and investors gain certainty in a wind farm’s revenue generation by estimating the long-term energy yield so that they can be confident in investing in a wind farm project. By night I turn my attention to property investing, where I apply my data analytics’ background to sourcing high yield property deals with the goal of building a property portfolio and achieving financial freedom.

I first discovered FIRE through the blog Mr Money Moustache. Mr Moustache is a Canadian-born engineer who retired at the age of 30 by frugality and stock investing. I was particularly inspired by his blog post “The Shockingly Simple Math Behind Early Retirement”. Which explained that the most important factor determining your distance from financial freedom is not landing a super high paying job that will take up 80 hours of your week. But maintaining a high savings rate, and intelligently investing those savings in high yield investments.

What is the backbone of your fire strategy?

Inspired by Mr Moustache I had a simple plan. Secure a decently paid job that I enjoyed and left me enough time to actually live life. Aggressively reduce my expenses to maximise my savings rate and put all my savings into some sort of broad market index fund that would secure returns in line with the growth of the market (historically about 10%).

However, there was a problem. Unlike the US where low regulation, low taxes, and high market returns are the norm. Ireland is not as friendly to the average stock market investor. The European market hasn’t grown quite as rapidly as the US market historically, many stocks can only be purchased through a broker that will charge you high fees, and a 41% exit tax that you have to pay every 8 years so you can’t even take advantage of compound interest.

Dismayed at discovering the downsides of stock investing for Irish investors, I started to look for alternatives and found property. Unlike stocks there are actually significant tax breaks for the Irish property investor, such as no capital gains tax (CGT) on your Principal Private Residence (PPR) and no income tax on rental income up to €14k/year with the rent-a-room scheme. Ireland also has one of the strongest rental markets in the world with gross annual yields of up to 10%, plus strong capital appreciation (historically about 3%) on top.

The final and possibly most attractive benefit of investing in property is the ability to leverage your money with mortgage financing. A buy-to-let investment property can be bought with just a 30% down payment, while a first-time buyer can get away with as little as 10%. If we assume a solid investment property with 10% gross yield + 3% capital appreciation, after expenses maybe that results in a net return on investment (ROI) of 10% a fantastic investment on its own. Now let’s say you only actually had to put down 30% of the purchase price, securing a mortgage at 4% interest. Your net ROI can be worked out by taking your gross income (13%), minus your expenses (5.8%)1, divided by your down payment (30%),

An absolutely unbelievable investment!

1 Expenses calculated as management + maintenance of 3%, plus mortgage interest at 4% (4%·70% = 2.8%)

 

How do you plan to implement your investment strategy?

Now while a 24% ROI sounds amazing, every investment vehicle will come with its own downsides. With property the biggest downside is that it is not a passive investment. You cannot simply call up a broker and ask them to buy you an investment property, and after you have put in all the work to find one you will then be responsible for managing and maintaining it. Fortunately, there are property management companies that can take care of the property once you have it. But there is no way to outsource finding the properties in the first place.

To solve this problem, I have turned to my data analytics background. I have written a web-scraper that pulls all the listings for Ireland off daft.ie and compiles them in a database for reference. The database can then be queried and key indicators analysed to identify opportunities for investment.

There are many benefits of this method over manually searching for properties online:

It allows you to analyse many more properties than you could realistically do manually.

It allows you to extract meta-data that is not easily found in a manual search such as the mean rental price of a room in any particular area over the last 12 months, or a heat map of the highest yield areas in the country.

It allows you to seamlessly integrate other sources of data such as the Central Statistics Office (CSO) recorded crime statistics which can be used to assess the relative safety of an area and allow for appropriate risk. Or the residential property price register to assess if the asking price is above or below market value for the area.

While there are endless possibilities, the core functionality is quite simple, find the highest ROI investment opportunities on the market!

I bought my first investment property in October of last year which increased my take home income by 40% all of which is completely tax free. I am now saving 84% of my take home income and plan to close on property number two in the next six months. Maybe Ireland isn’t such a bad place to pursue FIRE after all!

 

Thank you Aidan, I hope you all enjoyed this one as much as I did!

When it is put on the table like that you can really see how advantageous property can be in Ireland, when so many other investment vehicles and taxes are working against us. Indeed, Ireland currently has a high rental yield for Europe and I agree with so many of points made by Aidan in this interview.  Aidan has already demonstrated a beta version of his Web Scrapper and I was blown away.  So, perhaps this will ease the decision making process and help Aidan see opportunities even the more seasoned investors amongst us may miss manually flicking through Daft.

 

If you express an interest in seeing or using the Web Scrapper: please email me so I can put you on the waiting list dave@firedave.com

If you have any questions please comment below or contact me directly.. Stay safe

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