Sell rental apartment? What’s smartest thing to do with money?

S

Setforlife

Registered User
Messages
19
Personal details

Age: 46
Spouse’s/Partner's age:43

Number and age of children: 2 under 6


Income and expenditure
Annual gross income from employment or profession: 110k
Annual gross income of spouse: 55k

Monthly take-home pay

Type of employment: private sector and public sector

In general are you:
(a) spending more than you earn, or
(b) saving?

breaking even.

Summary of Assets and Liabilities
Family home worth €950k with a €360k mortgage
Cash of €0k
Defined Contribution pension fund: €450k plus partner DB scheme
Company shares : €0k
rental Property worth €340k with mortgage of €190k
rental property worth €300k with mortgage of €160k


Family home mortgage information
Lender BOI
Interest rate 2.9 fixed until June 2024

Remaining term: 16
Monthly repayment: 2380€

Other borrowings – car loans/personal loans etc
1 car loan 6% 15k remaining
2nd car loan 0% 17k remaining.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?


Buy to let properties
Value: 340k
Rental income per year: 21k
Rough annual cost : 22k including interest and taxes
Lender aib
Interest rate ecb +1.1
If fixed, what is the term remaining of the fixed rate?

Value: 300k
Rental income per year: 17500
Rough annual cost : 19k including interest and taxes
Lender end
Interest rate ecb +1.0
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:

Do you have a pension scheme? 450k DB scheme, major losses last year.

Do you own any investment or other property? No.

——-

Hope that above is decent information, we are double accidental landlords. We managed to buy an extremely run down largish
house in Dublin 7 years ago, but had to keep two negative equity apartments. In the intervening time, luck and hard work has
us in a reasonable position. Fully refurbished house, both apartments well out of negative equity and just coming out of the expensive early childhood years
. Children both out of large crèche fees just started school. We let agent manage both apartments, repair everything as it breaks
via them etc. We hoped to be in a better place cash flow wise this year but obviously interest rates have killed us on trackers, we
are close to 1k a month worse off. had considered riding this out But it will be difficult come next June when main home fixed rate runs out.
on the other hand, this year was the hardest, paying 2022 tax with 2023 income. And prepaying 2023 tax based on 2022.
We’ve always had a difference of opinion around having the rentals once there was any option to sell.

however tenants in one apartment have given notice to leave in the new year. So there is a good chance to exit one apartment, reduce
exposure to property. Not ideal time to sell, market flat and possibly waiting 6 months/a year would put us in better position. Getting 2x agents
opinion on that in January. We don’t really have the option to not rent it back out to do that though, which is risky enough as we‘ve been lucky to
always have ok tenants.

Leaning to selling, and just taking what we get after a couple of months. should give us 100k worst case, 140k expected, 170k best case after costs and small capital gains.
both apartments approaching 20 years old, so soon will need new kitchens etc.

140k would give us the money to pay off both car loans and put 100k off our mortgage which would knock about 5 years off the term,
speaking to friends with more money than me and no one sees 100k as enough money to do anything else useful with.
so pay off the loans and the mortage, look at increasing AVCs for both pensions and start rainy day savings and be able to afford foreign holidays

are there any other better options, or even 60/40 Ideas?
 
Hi there, could you give the monthly amount you pay on the 6% car loan?

You seem to be forgetting you’ll save 2,500 in subsidising your rental properties as well as saving an annual interest bill on this car loan.

I would sell both, hit your most expensive debt which is 6% after clearing the mortgages on both properties and go from there.

if you’re paying 0% on the other car loan, unless there is a change in that you can service it from cash flow..

Best,
Opus2018
 
Thanks for the input, Not forgetting, the interest rises are the main reason planning to sell. This is a very recent change though, gone from 1% to 5.5/6 in the last 12 months pretty much. offset against mortgage obviously being paid down ~10k each year on each apt. So it’s a still a net increase even with flat property prices. I.e investing 2.5k to get a 20k return. It‘s a cash flow v risk thing really, assuming interest rates come down even 1% next year and we have a better year maint costs wise, we’d break even.

have the 6% loan set to pay off car quickly. Think its 750 a month.
 
Setforlife said:
Value: 300k
Rental income per year: 17500
Rough annual cost : 19k including interest and taxes
Lender end
Interest rate ecb +1.0
If fixed, what is the term remaining of the fixed rate?
Click to expand...

You need to look at the profitability of the property you wish to sell on its own merits.
Then look at it in the context of your overall finances.

How much are you borrowing to own a property worth €300k? It's not just that mortgage, but it's also the costs of the other loans you could pay off.

Rental income €17,500
€190k @5.5% = €11,000
car loan €15k @6% : €1,000
Home loan €100k @3% €3,000
Expenses: c. €4,000
Loss before tax: €2,000
Tax : €1,000

So it seems fairly clear that you should sell this while you can.

Pay off your car loan and pay down your mortgage.
 
Setforlife said:
Not ideal time to sell, market flat and possibly waiting 6 months/a year would put us in better position
Click to expand...

We don't allow speculation about house prices on Askaboutmoney.

But this might well be a great time to sell in that the policy of all political parties is anti-landlord. Many are getting out while they can.

Price-wise, it might be worth more next year, but you might not be allowed to sell it or might only be allowed to sell it with the tenant in situ. Or you might have to give the tenant the right to buy it.

Brendan
 
Last edited:
Thanks. Yes, the tenants giving short notice to leave and nothing of the promised efforts to keep smaller landlords in the market with worse conditions to come make it seem all risk. I presume we could offer some kind of short lease of 6 months, but if you got the wrong tenant basically nothing you can do.
 
Sell apartment. I disagree on market flat/better times to sell, but don't want to enter speculation debate!

Pay off car loan ( A pet hate of mine when it comes to financial decisions people make in this country, usually to keep up with the Jones while having no actual wealth or retirement fund).

Looks like you are in a great position, enjoy some new found cashflow while managing outgoings sensibly
 
small update, not fun seeing the state ‘good tenants’ leave things. if there was any doubt that clinched it for us, fair bit of
hard work across the holidays to get it back in reasonable shape and putting it up for sale asap. Agents reckon shouldn't be too fair
off our estimates, although not the perfect time to put it on the market.

current plan is to clear loans, whatever is left up to hopefully 100k off mortgage. Anything extra that comes out of it into rainy day fund or a number of small finishing touches to current house.

We have got cash flow challenges now for the next few months while we wait for it to sell though and prefer not to put any payments on hold, will have to look for a payment break in one of the mortgages at some stage after a month or two though.
 
Small update as I’m sure people who give advice like to see who it turns out. We are closing out the apartment sale in 10 days and will be able to clear loans and costs and have ~ 130k left. We’ve had a potential childcare issue arise which could mean we need to lose a salary for 9 months. So the 30k is basically emergency fund/next year fund depending on the outcome there.

Apart from that we have a decision to make on the 100k, mainly around how much to pay off the mortgage v how much to invest in AVC. We have a fair amount we could put in tax free to main DC AVCs. I’m putting in 5% avc currently for last number of years on top of 7% contribution and 11% employer. So I could increase this a lot. Spouse doesn’t make avcs to DB scheme so could start putting in a great deal also just for the tax effienency.

Once we have no loans we’ll have increased cash flow, so I’m considering holding back 30k of the 100k as a margin to allow full avcs for both of us, while we see can we cope cash flow wise.

Have done a fair bit of work on DC pension in January also , plan to use it for an ARF eventually and have moved it into 60% riskiiest, 20% next riskiiest and 20% average risk funds. Some ups and downs since but fund now sits at 540k, I’ve also managed to track down a personal retirement bond from first job post college. 10k then is at 44k now, which is great although it was a battle finding it.

I’m moving it into by main fund which will then be at 584k. It seems like getting the max avcs in there now will compound well for us and open up some options later for us, possibly around early retirement. However 100k off the mortage would line us up with 40kish interest savings and put us into paying mostly capital off and for us to be paid off in under 10 years which could also line up well for early retirement and no lump sum needed to pay off mortage.

We took a payment break for 3 months of main mortgage for cash flow and also because it stopped us rolling off the 2.9% rate, which will now fall in September. It looks to me like we should be able to pay off the chunk and get a similar rate by then also.

These are good options to have and neither one seems like any really bad move, it’s more a retirement planning thing I guess. Certainly I appreciate the advice here re selling, it’s been a massive relief to us and I actually feel now we are properly financially secure. Before selling we felt any of a few things could put us at risk and it’s been a stressful few years being double accidental landlords and putting two small kids through the expensive childcare years.
 
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