Is having a 2nd home worth the stress

M

milly123

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We bought a second home and have been renting our old house to family for the past few months - nightmare, late paying rent, not paying bills etc.... anyhow, they have given their notice and I'm trying to persuade hubby to sell rather than hold onto to it and rent it out.

It is now worth double than what we paid for it, so selling it now (after clearing mortgage, top up loans, legal fees etc.) would net us about 40K cash. Hubby thinks we would be mad to sell with the SSIAs coming out shortly.

I'm worried about getting new tennants, security etc. We also have to put about €250 to the rent each month to make the mortgage. To add to it, we could do with spending about €1000 to get it painted . To top things off, we have our first baby on the way and I can't help worrying about interest rates rising etc. etc.

Sorry if this is all over the place but just want to hear your opinion... is it better to hold onto the house or get out now and keep my sanity.

Cheers

Milly
 
I had to move this from Mortgages and Home Buying to Property Investment where it more correctly belongs.

Why/how did you decide that property investment was the most appropriate investment option for your specific needs/circumstances in the first place?
 
Well this one at least seems pretty clear cut. Sell, sell, sell.

The financial merits/demerits of this scenario have been debated in numerous other threads but from a purely personal point of view it sounds like YOU want to sell.
 
Hi Clubman,

We only paid 125K for the house 4 years ago and they are now selling for €250 Plus and they are in big demandso i would imagine we would have it sold in a few weeks.

We decided to hold onto it because we had a net income of approx 4K per month with outgoings of only 1K (inc mortgage & bills), so we were effectively blowing 3K a month on rubbish and thought it would be a good savings plan or a pension. Now between the two mortgages, bills etc. we have about 400 spare cash per month plus any rent received.

But with a baby on the way and the interest rates rising i'm having second thoughts
 
We also have to put about €250 to the rent each month to make the mortgage.
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You say the house is worth double what you oringinally paid? So if you were to buy a similar house in today's market, you'd be covering even more of a shortfall, as your mortgage payments would be even greater. Doesn't sound like a good investment to hold on to, to be honest. You could always put it on the market anyway, and if you get an offer in excess of what you think it's worth, might that also please the hubby?
 
Hi Howitzer,

Thanks for your reply. Yeah I would like rid of it to be honest, i'm not a risk taker - too much of a worrier. Hubby was told by some estate agent to hold off cos property prices will rise a lot next year with the SSIAs.

Milly
 
milly123 said:
We only paid 125K for the house 4 years ago and they are now selling for €250 Plus and they are in big demandso i would imagine we would have it sold in a few weeks.
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Did you pay the stamp duty clawback liability on it when you rented it out within five years of purchase as an owner occupier? Have you factored taxes (SD clawback, income tax on rental income, CGT on some portion of the eventual resale gain of a property that was both a PPR and a rental property etc.) into your calculations/analysis?
Hubby was told by some estate agent to hold off cos property prices will rise a lot next year with the SSIAs.
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An estate agent is not qualified/authorised to give investment advice and may have a vested interest in telling porkies.
 
ClubMan said:
CGT on some portion of the eventual resale gain of a property that was both a PPR and a rental property etc.
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CGT won't be liable if she sells within 1 year of it becoming an investment property (1 year - "a few months" from now).

I don't think this is a financial decision however. Quality of life anyone?
 
Hi Clubman,

We didn't pay any stamp duty, we actually got the FTB grant, just before it was abolished. I figure we will owe about 2,000 - 3,000 tax on rental income each year.
 
As i've stated here before on another thread, forget the opinions, emotions, what people think etc, look at the numbers.

Clearly, you're "investment" is a loss maker. Its costing you money to keep a hold of it. Currently, you justify losing over 200 a month on the premise that prices will keep rising.

Maybe they will, maybe they won't, but you as an investor are exposed to the risk of these prices not going up. And that is not what real investors do.

If the house doesn't pay for itself, get rid of it yesterday.

Forget all the emotional nonsense, the numbers tell the story.
 
milly123 said:
We only paid 125K for the house 4 years ago and they are now selling for €250 Plus
......
(after clearing mortgage, top up loans, legal fees etc.) would net us about 40K cash
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How can you only make €40k net ?
 
milly123 said:
Hi Clubman,

We didn't pay any stamp duty, we actually got the FTB grant, just before it was abolished. I figure we will owe about 2,000 - 3,000 tax on rental income each year.
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If you buy as an owner occupier and then rent the property out within 5 years of purchase then you are liable for a clawback of stamp duty. This means that you pay the difference between what you originally paid (0% in this case) and what an investor would have paid on the same property. Seems to me that this liability is still outstanding and you need to discharge it as a matter of urgency. Also seems to me that you need independent, professional advice on the tax and possibly other aspects of this situation.
Howitzer said:
CGT won't be liable if she sells within 1 year of it becoming an investment property (1 year - "a few months" from now).
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I stand corrected assuming that the property has been rented for less than a year.
 
Thanks everyone for your replies. I am going to print all of this out and show it to hubby, hopefully i can get him round to my way of thinking

Cheers !!
 
milly123 said:
GVA, i wasn't aware that I could be liable for stamp duty - its just another reason to sell as far as i can see.
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Selling does not obviate the need to discharge the SD clawback liability. GVA's post encouraging tax evasion has been deleted by the way.
 
hi Clubman,

I just checked the revenue website and it seems that because the property was bought for less that 127K, there is no liability for stamp duty for investor or owner occupier or FTB. - I could be wrong.
 
OK - I missed the earlier point about it being under the SD threshold even for investors in which case you are indeed in the clear as regards an SD clawback liability. Apologies for any confusion caused.
 
Thanks to everyone who replied yesterday. Spk to my sister last night and she has offered to buy the house including contents for €250K, it just so happened she is a FTB and looking for a house in the area. I spk to an estate agent friend of mine who said it is a good price, but prices in that area are still increasing rapidly and she recommended that I try out the leasing for maybe six months.

If we accepted the offer from my sister, after clearing outstanding loans, and legal fees (€198K approx) we would have 52K profit to take off our PPR.

As I don't think i am cut out to be a landlady - i think perhaps this is the way to go. Have also spoken to hubby about it and he agrees that the money we save each month, could go towards a pension plan for him - i have one with work already.

what do you guys think ?

Milly
 
hi milly,

Someone said the numbers speak for themselves...

The way I see it you spend 250 per month for an annual return of 25k+ (the capital appreciation in your property thus far), that sounds like a great savings scheme to me.
Remember, the SSIA's have people saving 254 per month for a 25k return after 5 YEARS !!. you get the same return every year ?.

Your mortgage repayments can't be much on the 125k (€750ish C&I @4% over 20 years). where is the house ? and what rent do you get ?.

You need to look at it as a saving plan, if you can afford the shortfall then hang onto to it, wait 20 years and give your kids a helping hand onto the property ladder or keep the cash yourselves and enjoy.

Lastly think about using a professional to Let & Manage, it's where the real work is in investment property.
 
milly123 said:
I spk to an estate agent friend of mine who said it is a good price, but prices in that area are still increasing rapidly and
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Don't expect independent, professional investment advice from an estate agent - friend or not. They are not authorised to give such advice and, in most cases, are not qualified to do so either.
she recommended that I try out the leasing for maybe six months.
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I thought that the property was already rented out?
 
hi there,

Alalalal, we did originally buy for 125K but remortgaged and the loan now stands at 195K, good point about the savings scheme though !!. The mortgage repayments are 950 per month (fixed for 1 year), rental income 750 per month at the moment -

Clubman, it is rented at the mo to family who are moving out in a few weeks, so its really only now that we have to advertise it for rental tennants that we won't know. So up until now it wasn't really like I was a landlord.
 
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