Money Makeover - Should we sell our rental property?

D

deanne

Registered User
Messages
29
My husband and I aged 63years and 60 years have a mortgage on our home of approx. 144,000 euro and own an apartment in Dublin, valued approx. 250,000 euro. No mortgage on this property.
My husband's salary 80,000 euro p.a., my salary 40,000 euro p.a.
No outstanding loans
We have two boys, 21 and 25 years old, one working and one has dropped out of college and is working part time.
Should we sell our rental property? We live in a rural part of Ireland.
My husband has a small pension pot and I receive 400 euro monthly from my pension which matured when I was 60 years old.
Any suggestions welcome.
 
presidenttttt said:
How much rent are you getting for the apartment?

What % interest is your mortgage?
Click to expand...
We are getting 1,200 euro monthly for the apartment and mortgage interest rate is 4.85% on home loan. This home loan expires in 7 years time, when I will be 70 years old.
 
Gordon Gekko said:
What’s the plan to clear the mortgage absent selling the rental property?
Click to expand...
Would it be a good idea to sell the apartment now and clear the mortgage ? Or sell our home as it is a house with a large garden which is difficult to maintain?
 
If your home is in rural area its value is perhaps not going to be sufficient to enable you to comfortably buy a second smaller home? It can be hard to trade down in Ireland, as demand is up for efficient homes in urban areas and down for larger less efficent older homes, with many people stuck including my own parents.

Given the rent is 1,200 now it's probably difficult to increase that much given controls. The return is relatively low too, while the mortgage interest rate is high, so big incentives here to "invest" in the mortgage not the property. With the info provided I would sell the apartment and pay off your mortgage immediately.

It will probably be a great emotional/pressure release to not have a mortgage at your time in life.

I would suggest with the circa 100k that remains post sale you are protective and diligent with what you do with this.

If you think trading down can be done in a cost effective manner in your area at this time it might also be something to look at. However sell the apartment first.
 
deanne said:
Would it be a good idea to sell the apartment now and clear the mortgage ? Or sell our home as it is a house with a large garden which is difficult to maintain?
Click to expand...
It depends really on other circumstances. Perhaps complete a ‘Money Makeover’? The key questions for me are whether there’s an ability to clear the €144k without selling the rental, when you both plan/need to reture, and whether your projected pension income (presumably State Pensions plus the two small pension pots) is sufficient.
 
As part of the moneymaker perhaps you can outline what it is that you want to achieve. Are you happy being a landlord? You mention downsizing because of the garden. Is this something you want to do? Do you want to live in the apartment or would a property with a smaller garden suit you better? Do you want to live in Dublin or remain in the area you're currently living? Are you both enjoying working? Etc.

In terms of reviewing your rental property you say it's currently being rented for €1200 per month. When was the last time you increased the rent? What is the comparable market rent for a similar property?
 
Gordon Gekko said:
It depends really on other circumstances. Perhaps complete a ‘Money Makeover’? The key questions for me are whether there’s an ability to clear the €144k without selling the rental, when you both plan/need to reture, and whether your projected pension income (presumably State Pensions plus the two small pension pots) is sufficient.
Click to expand...
It would be fantastic if we could keep the rental but I am conscious of our ages and perhaps impending illness on the horizon. The tenants in the rental are moving out at the end of next month and because of the Rent Pressure Zone etc, we can increase the rent by 2%, I think. That's why I am contemplating selling the rental, paying off the mortgage on our home and maybe then downsizing in our locality.
 
skrooge said:
As part of the moneymaker perhaps you can outline what it is that you want to achieve. Are you happy being a landlord? You mention downsizing because of the garden. Is this something you want to do? Do you want to live in the apartment or would a property with a smaller garden suit you better? Do you want to live in Dublin or remain in the area you're currently living? Are you both enjoying working? Etc.

In terms of reviewing your rental property you say it's currently being rented for €1200 per month. When was the last time you increased the rent? What is the comparable market rent for a similar property?
Click to expand...
The rent has not been increased for at least 5 years as we had good tenants, currently properties in the area are about 1800 euro which seems excessive for a one bedroom apartment. My husband does all the work around maintenance etc but he is losing enthusiam for it ,we live 2 hours drive away from Dublin. We would not move back to Dublin as we enjoy country living.
 
presidenttttt said:
If your home is in rural area its value is perhaps not going to be sufficient to enable you to comfortably buy a second smaller home? It can be hard to trade down in Ireland, as demand is up for efficient homes in urban areas and down for larger less efficent older homes, with many people stuck including my own parents.

Given the rent is 1,200 now it's probably difficult to increase that much given controls. The return is relatively low too, while the mortgage interest rate is high, so big incentives here to "invest" in the mortgage not the property. With the info provided I would sell the apartment and pay off your mortgage immediately.

It will probably be a great emotional/pressure release to not have a mortgage at your time in life.

I would suggest with the circa 100k that remains post sale you are protective and diligent with what you do with this.

If you think trading down can be done in a cost effective manner in your area at this time it might also be something to look at. However sell the apartment first.
Click to expand...
 
On a back of an envelope basis, you are making around €6,000 per annum, after tax, on the rental (I’ve assumed deductible costs of €2k per annum).

That’s less than the annual interest bill on your PPR mortgage.

So, I think you should definitely sell the rental and pay off the PPR mortgage.

The remaining balance will come in handy as a deposit for a new home if you do decide to downsize. So, keep it on deposit until you decide what you want to do.

And you should be absolutely shovelling money into pensions!

At your ages you could be getting tax-relief at your marginal rate on contributions of up to 40% of your income and you will pay a much lower effective rate of tax on drawdowns given your circumstances.

Even if it’s just for a few more years, it’s well worth maximising this valuable tax break while you can.
 
Sarenco said:
On a back of an envelope basis, you are making around €6,000 per annum, after tax, on the rental (I’ve assumed deductible costs of €2k per annum).

That’s less than the annual interest bill on your PPR mortgage.

So, I think you should definitely sell the rental and pay off the PPR mortgage.

The remaining balance will come in handy as a deposit for a new home if you do decide to downsize. So, keep it on deposit until you decide what you want to do.

And you should be absolutely shovelling money into pensions!

At your ages you could be getting tax-relief at your marginal rate on contributions of up to 40% of your income and you will pay a much lower effective rate of tax on drawdowns given your circumstances.

Even if it’s just for a few more years, it’s well worth maximising this valuable tax break while you can.
Click to expand...
Brilliant, may thanks for your advice....greatly appreciated.
 
While not increasing rent on good tenants is understandable it is somewhat towards the "soft management" to not do so for 5 years in the current market.

A good property investment doesn't require landlords to ruthlessly squeeze every last dime out of tenants, but not lifting rent in so many years might be a sign that other investments would be better for your hands off preference.

Everything so far suggest selling the apartment is the way to go, and it will take a lot of uncertainty out of your lives.
 
You must log in or register to reply here.
Back
Top