Selling investment property???

T

Tweety

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Hi,
We have an Investment Property which we bought in 2004 for €180k, with an extra €10k borrowed for stamp duty & solicitors fees (Total €190k). We are currently 1 year into a 2 year fixed rate. However with interest rates rising, we are wondering if we should sell now while the market is still at a high. We would probably owe in the region of €180,000 but we are on Capital Mortgage (i think approx.3.74%) and currently topping up the rent by approx. €300 per month. We are not sure what we would get for the house if we sold it but presumably it would have increased some bit in the last 2 years (Cork City).

Basically we are wondering if we would be better off to sell now and pay any profit we get off our own mortgage. Then we could still put the €300 per month into a pension policy of some sort. We are concerned that with the rise in interest rates, it could cost us up to €400 per month instead of €300 to keep it, plus our own mortgage repayments will have increased also.
Also what kind of penalties do the bank impose for coming out of a mortgage during a fixed rate?
Thanks.
 
no one can advise whether to sell or not based on what property prices may do as interest rates rise.

given the high transaction costs involved in buying a property; selling within in a relatively short period of time is quite a dramatic move. can you increase your rent? at what level of interest rates would you begin to feel financial pain?

your tennant(s) have certain rights so be sure to communicate to them what your plans are.

check your mortgage documentation to see what your bank will charge you for ending early (you did sign it after all).

get the place valued by a couple of agents and then decide what to do.
 
JohnBoy said:
your tennant(s) have certain rights so be sure to communicate to them what your plans are.
Click to expand...

I have a couple of tenants that could murder a couple of tennants today
 
Tweety said:
Hi,
We have an Investment Property which we bought in 2004 for €180k, with an extra €10k borrowed for stamp duty & solicitors fees (Total €190k). We are currently 1 year into a 2 year fixed rate. However with interest rates rising, we are wondering if we should sell now while the market is still at a high. We would probably owe in the region of €180,000 but we are on Capital Mortgage (i think approx.3.74%) and currently topping up the rent by approx. €300 per month. We are not sure what we would get for the house if we sold it but presumably it would have increased some bit in the last 2 years (Cork City).

Basically we are wondering if we would be better off to sell now and pay any profit we get off our own mortgage. Then we could still put the €300 per month into a pension policy of some sort. We are concerned that with the rise in interest rates, it could cost us up to €400 per month instead of €300 to keep it, plus our own mortgage repayments will have increased also.
Also what kind of penalties do the bank impose for coming out of a mortgage during a fixed rate?
Thanks.
Click to expand...

Why are you considering selling your investment after only two years? It seems a bit premature IMO. I'm assuming that you have done your research and have taken a long term view with regards to property investment. Did you not factor that rates were at historic lows and were bound to increase?
 
Hi,
We did factor in increases when we were doing our figures, but I suppose with all the posts about a slump in the market, I am panicking a little and wondering whether now is the time to sell. I am also a little concerned about how high the interest rates might go, as we did factor in some increases but they seem to be rising more than we expected. Maybe this was naivety on our part but it was our first investment property.

Also with the rise in oil, which will have a knock on effect on everything else, I am a bit concerned now whether we made the right move!!
 
what is the place worth now? what is your net financial position on this property (not forgetting the €300 per month you have to pay to cover the mortgage).

do you have any other investments?
 
I have not had a valuation done but its a 2 bed terraced house in Cork City. Another house (3 bedroom) sold in the same estate for approx. €300k so I would put a conservative value of €240-€250k on it at the moment. My fear is that the value will drop & repayments will increase & we may not be able to afford to keep it..... particulary if our situation changed in any way.

At the moment, net rent per month is €700 and the mortgage (including house insurance & life cover) is €985 per month. We do not have any other investments.
 
Tweety said:
My fear is that the value will drop & repayments will increase & we may not be able to afford to keep it..... particulary if our situation changed in any way.
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Your repayments will not increase for another year. When your fixed rate contract expires next year, the ECB rate could be as high as 3.5%. Assuming that the bank is charing you a margin of 1.74% (plus ECB rate last year of 2% = 3.74%) this could push your rates at least 5.24%.

If property investment frightens you, you should sell up. Profits can be large as can losses. If you can't afford to realise a loss, then you have entered the market blinded by profits. Sorry if my post is a bit blunt. :eek:
 
gotta agree. this is supposed to be a medium/long term investment. if you are getting the jitters so early into this then perhaps this is not the best place for you to put your money. you are fortunate in that your property appears to have appreciated in value. your investment portfolio is not supposed to give you sleepless nights unless it is high risk. ignore all the media guff about a house price correction - look at the numbers. this investment is costing you cash every month and will not produce any income until the mortgage has been paid off (25/30 years time?).
 
JohnBoy said:
gotta agree. this is supposed to be a medium/long term investment. if you are getting the jitters so early into this then perhaps this is not the best place for you to put your money. you are fortunate in that your property appears to have appreciated in value. your investment portfolio is not supposed to give you sleepless nights unless it is high risk. ignore all the media guff about a house price correction - look at the numbers. this investment is costing you cash every month and will not produce any income until the mortgage has been paid off (25/30 years time?).
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ignore all the media guff about foreign properties in middle of nowhere and the prices never go down attitudes in media too.
 
what i was trying get Tweety to do was to separate the media noise from the financial decision. Tweety seems to be bothered by the scare stories in the media. what is of greater concern is that this 'investment' is cashflow negative (and increasingly so thanks to the ECB) and thus entirely dependent upon further capital gains.
 
My tuppence worth would be to change the investment mortgage into an interest only mortage. This would give you a return from your investment which you should put tax free into a pension OR pay off your home mortgage as an overpayment. Paying back the amount owed in investment decreases the interest which is tax deductable for investments. Rough figures should mean I/O payment of about 500 a month. Rent 700 so profit over a year say 1.5k. If you take the money and run on this you're liable for tax at 42% + PRSI which fizzles it down to say 750. Placing it into a pension would give the lot into the pension.
Hope you get my gist
 
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