# Should we sell investment properties or hold onto them?



## BobbyMc (2 Oct 2009)

Age: *49*
Spouse’s/Partner's age: *49*
Annual gross income from employment or profession: *0 per week*
Annual gross income of spouse: *204 per week in benefits*
Type of employment:* Self employed in construction*
In general are you: 
Rough estimate of value of home: *250,000*
Amount outstanding on your mortgage: *0*
What interest rate are you paying? *N/A*
Other borrowings – *$400,000 for business property loan*
Do you pay off your full credit card balance each month? *Yes*
If not, what is the balance on your credit card? *N/A*
Savings and investments: *10,000*
Do you have a pension scheme? *Yes*
Do you own any investment or other property? *Yes - 4 houses valued at roughly €700,000 in total if am being realistic*
Ages of children: *25 year old daughter*
Life insurance: *Yes*

What specific question do you have or what issues are of concern to you? *I am self employed in construction and out of work apart from the odd job here and there. I built 4 houses in a rural area with a view to sell in 2006. We had savings of almost 400,000 back then from a previous property sale which we put straight into this project. We got blinded by the celtic tiger and the houses are not moving even after dropping almost 50% off the original asking price. They are currently advertised at $200,000 each ($375,000 each in 2006) but not moving so I'd say the combined value is probably 700,000 at the moment but who knows. The rental demand is quite low in the area so our rental income just about covers our interest only repayments (bank extended us to interest only for another year recently). This may not be the case if the bank look for repayments on the capital next year.*

*We are lucky in that we have no mortgage on our home or personal debt and can survive on my wife's benefits plus our savings. We don't spend a lot of money in general (no holidays abroad and only a 9 year old car for both of us). My wife's brother has already offered us $40,000 should we have a cash flow problem. We refused it but it is there as a last resort if things get really bad.*

*My question is should we drop the price of the 4 houses even further taking a bigger hit or should we see it out in the hope that we can regain some of our losses? We are not under pressure as things stand but that could change depending on our unreliable rental income and if the banks refuse to give us interest only repayments next year.*


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## jhegarty (2 Oct 2009)

It all depends on when you think houses prices will start to recover.


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## z107 (2 Oct 2009)

It's hard to answer this without speculating on the future od house prices, which I think is still banned on AAM.

If it were me, I'd sell. Keep reducing the price until they sell. Maybe keep one of them.


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## spursman (2 Oct 2009)

if rental potential is low then these houses must be in the middle of no where. you prob wont be able to sell them for any amount of money


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## BobbyMc (2 Oct 2009)

Fair points about property speculation. It's probably a big risk at this stage of our lives to try to ride out the recession in the hope of some sort of bounceback. To be honest, we have no idea which way it will go and I guess a lot depends on the success of NAMA. Then there is the extra stress this generates with troublesome tenants, property speculation, property maintenance etc. that is hard to put a price on. We are just trying to get another perspective on what people would do if in our situation.

I thought about posting something similar on the property pin too but reading a few threads there, it seems that many posters there are bearish on property prices and would just laugh at hearing about our situation without offering any constructive advice. AAM seems to provide a more balanced discussion.


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## BobbyMc (2 Oct 2009)

spursman said:


> if rental potential is low then these houses must be in the middle of no where. you prob wont be able to sell them for any amount of money


 
I disagree with this. I feel that if you drop the prices low enough, they will sell. The question is just how low do we need to go.

Edited to say that they are on the outskirts of a town albeit in an area that is not exactly thriving.


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## Bronte (5 Oct 2009)

Can you do a rough income and expenditure for each of the houses?  As you've pointed out renting property has many hidden costs but you need to put figures to this.  If you are not going to be able to pay capital in a year's time and you are close to borrowing 40K to live than you have to sell.  You may though be able to hold onto one or two of the properties depending on the figures.  As you know we are not allowed discuss house prices but based on your own experience so far do you yourself think that property is going to come back anytime soon.  If you sell now you pay back the mortgage with some left over.  Forget about the profit you made in 2006 and what you invested and also what property was priced at then.  Look at where you are at now and only that.  Also don't forget that the dole office will reduce the amount it pays depending on what assets/capital/money you have which could be relevant if you are going to be long term unemployed.

Some other things to think about are moving somewhere you will get steady work, also you could put up your home for sale if this will sell easier than the others.


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## BobbyMc (8 Oct 2009)

Sorry for the late reply. Had no internet access. Selling our home is not an option. We both grew up in this area and all our family live close by. We don't want to live in any other location other than the home we have been in for almost 30 years.

At the minute, we are making a profit of about $300 per month after all other expenses (tax, maintenance, etc). However 6 months ago, we were just about breaking even each month. The rental demand is unstable.

We are not close to borrowing the €40,000 but it's just if things get really bad. The 2006 prices are out of our heads now. We realised that a long time ago. The benefit point is a good one as who knows what will happen with that in future.

It really does come down to whether we think house prices will rebound soon and it's probably a very large risk to take at our age. It becomes clear once you put everything down on paper. Thanks for the replies.


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## Arch2 (9 Oct 2009)

What is the VAT situation?

If you build these house have you reclaimed the VAT on building.  Is a significant portion of any sale receipt going to go to the tax man?

If VAT was correctly accounted for and no outstanding liabilities then you have property worth €700K with €400k of loans (excluding your own home).  The situation is not that bad. 

It is the bank interest to work with you on this and continue the interest only.  

I think you hold on my view, offcourse I could be wrong.  If no sings of pick up then reduce one and sell in to reduce borrowings.

I dont think anyone can say they know what the right thing to do is, just what they might do (as we really don't know even what we would do until we are in the same situation)

Best of luck.


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