# To sell investment property or keep it?



## PaxmanK (3 Dec 2017)

Im a long time lurker and find myself needing some some calm heads for advice.

Age: 43
Spouse’s/Partner's age: 44

Annual gross income from employment or profession: 65k (private sector)
Annual gross income of spouse: 65k (public sector)

Monthly take-home pay : 6k + after AVCs

In general are you:
Saving approx 500 per month

Home:
Rough estimate of value of home: 400K
Amount outstanding on your mortgage: 140K, 13 years remaining
What interest rate are you paying? ECB plus .75 % tracker

Other borrowings – none

Do you pay off your full credit card balance each month? Yes

Savings and investments: around euro 20k cash on deposit in bank, 5k shares

Do you have a pension scheme? Yes, 300K in mine, contribute max every month.  Spouse will have public pension plus 20% AVCs every month (60K in there at the moment).

Do you own any investment or other property? Yes, 1 bed apartment North Dublin. Rent €950PM, worth €1250PM, Mortgage €500PM ECB plus 0.5% (13 years left).  Apartment worth about 170K today.

Ages of children: 1 child, 6 years old (childminding fees 500/month)

Life insurance: yes

Question: 
Im wondering whether to sell the investment property and be done with it.
It makes a profit now but with the rent controls and the even changing landscape and more and more risk of bad tenants overholding, all the extra red tape etc I am seriously thinking of selling it.  Especially as the rules seem to change frequently now, adding more red tape and always to the detriment of the owner.

Should we sell it and pay off as much as possible of the PPR mortgage too.
Or are we, as my other half says, still sitting pretty and just let it roll, rent controls and risk and all.

Any help making this decision much appreciated.


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## Sarenco (3 Dec 2017)

@PaxmanK

I can see why you are struggling with this decision - it looks fairly finely balanced.

A few quick questions:-

1.  What was the acquisition cost of the apartment and was it ever your PPR?
2.  What is the outstanding mortgage balance on the apartment?
3.  Are you currently receiving mortgage interest relief on the PPR mortgage?
4.  Does the apartment OMC have a decent sinking fund?  Is the annual OMC charge reasonable?


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## PaxmanK (3 Dec 2017)

Sarenco said:


> @PaxmanK
> 
> I can see why you are struggling with this decision - it looks fairly finely balanced.
> 
> ...



Thanks for your reply.
1 - The apartment cost €148 in late 1999.  It was my PPR for about 2 years.
2 - There is about €75k left to pay off the mortgage.
3 - No mortgage interest relief on PPR
4 - The sinking fund in in good shape.

I took a fairly big hit on the rent from about 2008 to 2013 and now with rent controls I will never get that back.  You cant average out the bad times with the good times.
My big problem is that before rent controls came in I would have quite happily kept it, but now its like it doesnt belong to me anymore.  It belongs to someone else who calls all the shots and I just have to pay the penalty if anything goes wrong.  I have a part 4 coming to an end in July and im thinking to just get rid and get out of it now, before something goes terribly wrong and what was a nice little investment becomes a liability that I wont be allowed to get out of.

My other half thinks that we should just leave it as we dont need the money and it is increasing in value.

Im really disillusioned with the rental model.

Currently we have an agent looking after it too, so its pretty hands off.  Its the high probability of nasty changes in the law or bad tenants that has me spooked.


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## Brendan Burgess (3 Dec 2017)

You have an apartment worth €170k with a €75k mortgage at  ECB +0.5%

So effectively, your investment is €95k 

You are making a rental profit before tax  of around €9,000  (€950k x 12 - 20% - €75k @.05%)

After tax, that is a net return of around 4.5% to 5%.  

You can sell your investment, but what will you do with the proceeds?  Pay off your mortgage at 0.75%? 

You will pay around €6k CGT to sell it. 

On a purely financial basis, this is a good investment and worth keeping.  There is a risk of property prices falling but this is counterbalanced by the opportunity of a price rise. Sure you can get bad tenants, but if your current good tenants leave, you will be able to refurbish it and get higher rent. 

But I fully understand the disillusionment with the rental model. You are making around €4,500 a year net profit on it. If the disillusionment is more hassle than €400 a month, then sell it. If not, hold onto it.

Brendan


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## PaxmanK (3 Dec 2017)

Brendan Burgess said:


> You have an apartment worth €170k with a €75k mortgage at  ECB +0.5%
> 
> So effectively, your investment is €95k
> 
> ...



Thanks.

Problem is I refurbished it at a cost of €6000 to a high standard about 3 months before the rent controls were brought in.  Total waste of money as now i'll never make that back.  I was hoping that id be able to bring it up to market rent next July, but not possible now.
I feel ive been totally screwed by the government and that there is more to come from them.

Im thinking if I sold it and paid off the mortgage on the PPR then at least id be out of it.  No estate agent fees, no red tape, no registration fees, no property tax, no insurance.  A whole lot of expenses and hassle would be gone.

Hard to know.  I find it very confusing alright.

My sister just had her house wrecked by tenants who are still in it and not paying rent for the last 6 months and she still cant even get them out.  And another friend had a similar story.  It just seems like the risk is through the roof.


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## Sarenco (3 Dec 2017)

Cashing out the equity in the rental and applying it to the PPR mortgage balance (after costs, CGT) would save you around €650pa in interest payments, versus a current after-tax profit on the rental of around €4,000pa.

So, I guess the real question is whether ~€3,350pa is sufficient compensation for bearing the various risks involved with keeping rental (tenant default, further government interference, etc)?  

I think it probably is just about worth keeping the rental in your circumstances but I could fully understand why you might come to the opposite conclusion.


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## PaxmanK (3 Dec 2017)

Thanks for all of your replies.  It really is a conundrum.
I think if we keep it 
We will not be spending a penny on it ever again.
We will be increasing the rent to the max every year.
We will remove the current tenants before we get stuck with them for another 6 years (They are actually good tenants).
We will try to do short term lets only in future.  Certainly not more than a 6 month lease.

My feeling is that this has turned me from someone who actually was happy to help out tenants and was a good landlord and a good person, to a bitter person who is annoyed that he has to now go and protect his investment by doing things he would not have been happy doing before.  To make property investment pay now, you have to turn into a ruthless person.  I really dont like that.


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## PaddyBloggit (3 Dec 2017)

Looking at it from outside the financial box .... the property is driving you crazy with worry.

That being the case I'd sell up and use the proceeds to make your financial position better elsewhere.

What's the point in earning a €4,500 a year if it's hard earned and affecting your mental well being?

(And the bonus is that you wouldn't be selling the apartment at a loss.)


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## llgon (3 Dec 2017)

PaxmanK said:


> We will remove the current tenants before we get stuck with them for another 6 years (They are actually good tenants).



One of your biggest fears seems to be getting bad tenants who will wreck the apartment. Yet you don't want to keep good tenants with a proven track record who are providing a decent return on your investment.

I agree with Paddybloggit that you should sell up, even if this may not be the best move for you financially.


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## robert 200 (3 Dec 2017)

I believe this all boils down to how much you trust your letting agent . An experienced agent will spot a bogey a mile away . References from employers , previous landlords and bank
accounts are a good start .

Conservatively your property could appreciate by 20% in 2-3 years . My glass is always half full , hold onto your investment and dont let a tiny minority of bad tenants decide your future.


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## RedOnion (3 Dec 2017)

PaxmanK said:


> We will remove the current tenants before we get stuck with them for another 6 years (They are actually good tenants).
> We will try to do short term lets only in future.  Certainly not more than a 6 month lease.


If you keep it, this is the bit that doesn't make sense to me. Why get rid of good tenants? If it's already hassle do you really want to get changing tenants every 6 months, and the risks that come with that? Voids, bad tenants, etc. Or can you get a higher rent this way?

It's a decent investment on paper, but I agree with previous posters that the 'size' of the profit might not be worth it. Personally, the appeal of being completely debt free at a young age would swing it for me - sell, pay proceeds off your PPR, and reduce the term to 5 years and you'd be debt free before 50 and your child starts 2nd level.

If you feel bitter about this, just think about how lucky you are to have it on a tracker rate. At least you're not having to plough massive amounts of your own money into it every month.


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## PaxmanK (3 Dec 2017)

Thanks for your advice.  Im still leaning towards selling it.  Im getting the hell out of long term rental anyway.  
We might do short term for a while or even leave it empty and sell in a couple of years.
Problem is not the tenants, its the government and their anti landlord laws that pop out of nowhere.  God knows, next year we wont ever be able to get it back from a tenant to sell it.


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## Bronte (4 Dec 2017)

I think your thinking is crazy.  You have good tenant's for 4 years and you would be mad to let them leave.  There is no reason for you to pay an estate agent when you have stable tenants.  The apartment is being paid off nicely there by the rent.  The 6K you spent on refurbisment is not wasted.  You are giving a quality product.  You can write off the cost against tax. 

The idea of you thinking short term rentals of six months is a good idea sounds like hell to me. 

Your real main issue seems to be two things.  A nightmare tenant.  Yet you clearly have an excellent stable tenants.  Second issue seems to be the paperwork.  Do you have an accountant?


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## Brendan Burgess (4 Dec 2017)

Bronte said:


> The 6K you spent on refurbisment is not wasted. You are giving a quality product.



It's not wasted on the tenants. It's wated by Paxman because he can't increase the rent to reflect the better quality product.

Brendan


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## PaxmanK (4 Dec 2017)

Brendan Burgess said:


> It's not wasted on the tenants. It's wated by Paxman because he can't increase the rent to reflect the better quality product.
> 
> Brendan



Exactly.  It is the best apartment for rent in the block by a mile, yet the cheapest.
So far the changes brought by government have been all anti landlord.  There is absolutely no reason that I can see to think that they wont just keep going and making things worse for the landlord.  To the point even when you cannot ever ask tenants to leave.
This is the appalling vista for landlords that I am fully expecting.  Things definitely arent going to change on the side of the landlord anyway.


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## Sarenco (4 Dec 2017)

PaxmanK said:


> To the point even when you cannot ever ask tenants to leave


Well, they couldn't go that far - that would very clearly be unconstitutional.

I strongly agree with you that the RPZ regime is both grossly unfair and counterproductive.  However, I think you just need to accept that we are where we are. 

Make your decision to retain or sell your rental on the basis of the hard numbers and your own personal risk assessment - don't let your emotions or sense of injustice get in the way.


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## PaxmanK (4 Dec 2017)

Sarenco said:


> Well, they couldn't go that far - that would very clearly be unconstitutional.
> 
> I strongly agree with you that the RPZ regime is both grossly unfair and counterproductive.  However, I think you just need to accept that we are where we are.
> 
> Make your decision to retain or sell your rental on the basis of the hard numbers and your own personal risk assessment - don't let your emotions or sense of injustice get in the way.



Didnt such a proposal coming into effect lost by just one vote in the Dail this year?


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## Sarenco (4 Dec 2017)

Are you thinking of the Anti-Eviction Bill proposed by Ruth Coppinger earlier this year?

To be fair, that Bill (which wasn't passed) didn't propose that tenancies could never be terminated by a landlord.


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## PaxmanK (4 Dec 2017)

Sarenco said:


> Are you thinking of the Anti-Eviction Bill proposed by Ruth Coppinger earlier this year?
> 
> To be fair, that Bill (which wasn't passed) didn't propose that tenancies could never be terminated by a landlord.



No, but it was nearly there.  Another step along the road to effectively taking control of property.
The wife was back last night and I showed her this thread.
We are in negotiations 
Most likely scenario is that we do short term for some of the year and leave empty when not let short term.
Possibly airbnb or something similar rather than 6 month lets.
Still have to work it out.


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## Sarenco (4 Dec 2017)

PaxmanK said:


> Most likely scenario is that we do short term for some of the year and leave empty when not let short term.
> Possibly airbnb or something similar rather than 6 month lets.


In that case, you might find this thread of interest:-
https://www.askaboutmoney.com/threads/airbnb-pros-and-cons.203303/


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## Fella (4 Dec 2017)

Looked at been a landlord myself , have very similar views to yourself now you'd be mad to get into it and mad not to get out of it. That's just my view I see issues that you see also. I've invested some of my cash in IRES property REIT so I get some of the benefits of increased rent and house prices but none of the hassle. It's another consideration , people have said IRES share price doesn't track house prices I dunno about that but its done very well for me since investing , I can put in small amounts every so often which appeals and it pays a part of an overall portfolio of shares. Might be of interest , I'd see while you can , imagine you don't sell and get a nightmare tenant now you can't evict after been on the fence about selling it would tip you over the edge , go with your gut, this government are going to bring more rules in imo they can't help themselves.


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## PaxmanK (4 Dec 2017)

Sarenco said:


> In that case, you might find this thread of interest:-
> https://www.askaboutmoney.com/threads/airbnb-pros-and-cons.203303/




Thanks for that.
My brother has two apartments in Dublin he has been doing airbnb on for the last three years so i'll hit him up for his expertise too.
Hes been telling me for years we should move to it.


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## Gordon Gekko (4 Dec 2017)

The merits of entering the investment property market now and the merits of remaining in it are two very different things.

You already have a cheap tracker and good tenants in a property where the sinking fund is in decent shape.

The biggest issues for many potential landlords are lack of access to cheap finance, the potential for problematic tenants, and sinking fund-related concerns.

I would argue that you’re in okay shape and that, on balance, you should hang tough.

I would also contend that investments should generally be avoided when euphoria prevails and the shoe shine boy is recommending a particular asset class. Interestingly, we’re at a point in time when investment property is an unloved asset class; “too much hassle”, “regulation”, “potential for bad tenants”. Yet yields are attractive, demand is sky-high, and supply is constrained. Personally, I remain happy to be a landlord; if investors were falling over themselves to enter the rental market and yields were falling, I’d be concerned.


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## Sarenco (4 Dec 2017)

PaxmanK said:


> My brother has two apartments in Dublin he has been doing airbnb on for the last three years so i'll hit him up for his expertise too.
> Hes been telling me for years we should move to it.


You might also be interested in this new Bill, which proposes to limit short term lettings to 90 days per year without planning permission. 
https://beta.oireachtas.ie/en/bills/bill/2017/145/

Airbnb already imposes a 90-day limit on hosts in London without planning - I think it would be reasonable to assume that we see a similar restriction being applied in Dublin before too long.


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## PaxmanK (5 Dec 2017)

Thanks Sarenco.

I have to laugh or I would cry.
Every piece of news or legislation proposals seems to be an effort to just prevent landlords from running their properties in a way that they choose.

I think 90 days would be plenty and then just leave it empty for the rest of the year though.if it came to that.


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## cremeegg (5 Dec 2017)

Gordon Gekko said:


> we’re at a point in time when investment property is an unloved asset class; “too much hassle”, “regulation”, “potential for bad tenants”. Yet yields are attractive, demand is sky-high, and supply is constrained. Personally, I remain happy to be a landlord; if investors were falling over themselves to enter the rental market and yields were falling, I’d be concerned.



Exactly !


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## Sarenco (5 Dec 2017)

PaxmanK said:


> I think 90 days would be plenty and then just leave it empty for the rest of the year though.if it came to that.


According to evidence presented by Airbnb itself to the Oirechtas Housing Committee, a typical unit of housing in Dublin would need to be rented for well over 120 nights a year to beat the revenue of a long-term rental.
http://www.irishtimes.com/business/...from-long-term-letting-company-says-1.3136665


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## PaxmanK (5 Dec 2017)

Sarenco said:


> According to evidence presented by Airbnb itself to the Oirechtas Housing Committee, a typical unit of housing in Dublin would need to be rented for well over 120 nights a year to beat the revenue of a long-term rental.




I dont need it to beat it.  I just need it to remain in my control.


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## Sarenco (5 Dec 2017)

Understood @PaxmanK but I guess my point is that in the relatively short term you might well find that you have just moved from one set of regulations to another.

There's not much point earning less revenue for more effort/risk.

Here's the full Airbnb submission to the Housing Committee - they are practically begging for the short-term letting sector to be regulated:-

http://data.oireachtas.ie/ie/oireac...7/2017-06-28_opening-statement-air-bnb_en.pdf


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## Black Sheep (5 Dec 2017)

Having got rid of the NPPR, the mortgage, the tenants, the Accountant, taxes, repairs, maintenance, rules and regulations, it's a new life. OK there's a drop in income but I can live with that.

Sounds to me you have already made up your mind so if you like me are not a risk taker, get rid. Set yourself free.  You can't buy peace of mind!


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## Brendan Burgess (6 Dec 2017)

Black Sheep said:


> Having got rid of the NPPR, the mortgage, the tenants, the Accountant, taxes, repairs, maintenance, rules and regulations, it's a new life. OK there's a drop in income but I can live with that.



Hi Black Sheep 

That really captures it much better than the cold financial analysis done by Sarenco or me. 

Brendan


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