# My 2nd property - currently rented out - would you sell?



## *Donegal* (22 Jun 2012)

Sorry if this is the wrong forum, but 1st post and not sure what would be best section for it.

Looking for a bit of advice. Been a reader of this site for a while and seems to be full of knowledgeable people, so interested to hear what some of you think.

I own a 2nd property, a 3 bed semi (in Donegal as you can probably guess) that I currently rent out for €400 per month. 

It is now up for sale and I have an offer of €80,000 for it, and myself and OH are split on whether to sell or not. I would like to get it sold, OH thinks for the money it might be better to hold on to it to have some investment for the future (ours and the childrens).

Only thing that worries me is increasing taxes and charges on properties in Ireland, and whether it might be tough being a landlord in the future, with reducing rent supplements etc. I have good tenants at present who don't really want to leave, so that's one less worry.

I'll give some of the details which might help.

*Offer*: €80,000
*Mortgage remaining*: €63,000
*Term remaining*: 11yrs
*Mortgage Rate*: Tracker ECB + 0.95%
*Monthly Mortgage*: €550 approx
*Rental Income*: €400 per month

My logic?
- In these times, might not get another chance to sell the house (assuming offer went through and house sold ok). 
- The profit of €15,000 approx after solicitor/agent fees could be taken off our main mortgage (approx €80,000 / 13yrs).
- Owning a house is going to get expensive in Ireland, and NPPR and Property taxes could end up at any figure in the near future, and having to pay 2 of these instead of 1 would not be advisable.
- Prices may fall even lower if I don't accept this offer.
- We are adding €150 per month to the rental income to pay the mortgage. Its fine for now as both working, but with rent supplements under attack, this additional figure may increase year on year.
- I am about to start to make a tax return, so not sure how much this is going to cost annually.

The OH logic is more like:-
- We haven't got big mortgages and any profit from this will not make a big enough dent in our debt to be worthwhile
- Our 2nd house is a nice property in a desirable location, so should always be able to be rented out.
- Our 2nd property mortgage will soon be in single figures in terms of years left, and it won't be far away to being cleared (I Say a lot can happen in 11yrs!).
- In 4 or 5 yrs time, we'll never be able to buy a house like ours for €80k.
- It will be an investment for the future, be it ours or the kids. Should it be needed to pay for university fees, or whatever.


So that's about it. Sorry for being so long winded, but we have had about 10 viewings since it was listed about 3 months ago, and this is the 1st offer. Part of me doesn't want to turn it down, but I can see the other angle too.

Now the $64,000 question, *what would you do*?


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## Slim (22 Jun 2012)

Hi Donegal

You don't say what the house cost you and if you are making a loss on the sale price. A significant loss would be a sickener for me. Also, if your mortgage is interest only and you are paying €150 pm top up, then you may have little tax liability. There are several threadson here about taxation of rental income. If you are about to make a tax return for the first time, I wonder if you have a back tax issue? Your business anyway.

Overall, in your position, I might keep the property as it is rented, not to expensive to top up and you may soon own it.

In my own situation, larger mortgage, currently vacant, I would hate to sell at a big loss but sometmes you have to cut your losses. Hoping for a return to normality for the housing market!!


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## Brendan Burgess (22 Jun 2012)

Hi Donegal

Check out this key post which sets out a framework for evaluating such decisions

http://www.askaboutmoney.com/showthread.php?t=154137

In summary,

You are getting rent of €4,800
The cost of the mortgage is €1,600 ( 80.000 @ 2%)
Gross Profit: €3,200 per year  

Most people incorrectly look just at the cash flow - but your repayment of €6,600 a year includes around €5,000 of a capital repayment.  

But read the full post above and come back if you have any remaining questions.


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## *Donegal* (22 Jun 2012)

@ Slim

I would not make a loss on the property, as I bought it 10 yrs ago for  roughly the same price. I really should have more of the mortgage paid  off, but that's a different argument!

My mortgage is *NOT *interest only. 

I only started renting the house over a year ago, so I have no back tax  liability. Not sure what its going to cost me to pay tax every year,  that also is a concern but at present it will be affordable.



@ Brendan, thanks for the link. 
A question, if I keep the house for the remainder of the 11yr mortgage and it is cleared, do you then have to pay the CGT on the 13or so yrs that it wasn't your primary residence, or does CGT only kick in if you ever sell it? What about if I gift it to my children, is that subject to certain Tax?


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## *Donegal* (23 Jun 2012)

Thats the sort of logic I have had in my head too Cashier. I don't want a noose around my neck.

Discussed it a bit with the OH today who thinks it isn't a noose at all. 

Even if house prices continue falling, we are still a bit away from going into negative equity, so thats a bonus. And as time passes, even if the prices locally fall from the €80k now, to maybe €70k, we are receiving income and the mortgage is being lowered anyway.

I just worry that some of the horror stories you hear about in the media re: the Eurozone, the world economy, impending chaos etc may come to pass. If rent supplement, dole etc were slashed dramatically, and things like household charges, property tax, rent relief etc rose sharply, who knows how difficult it could be being a landlord? I was a reluctant one at the off, as we tried to sell this house before first renting it, and found it was impossible. 

I also can see the other side that selling the house now would not realise any great amount of profit, and with the house gone, would our savings build up quicker over the 11yrs to outgrow the worth the house might have when it was mortgage free in 2023?

Who knows?


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## *Donegal* (29 Jun 2012)

Brendan Burgess said:


> Hi Donegal
> 
> Check out this key post which sets out a framework for evaluating such decisions
> 
> ...



Brendan

You say I have gross profit of €3200 per year.

But from what I see, my annual expenses are going to be:
Estimated tax return: €1500
2nd home charge: €200
Property tax: €100
Supplement to bring rent to mortgage: €1800

So am I not looking at paying €3600 annually?


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## elcato (29 Jun 2012)

At current rates it costs you roughly 3.5k per annum. Over 11 years that is roughly 40k. Will the house be worth more than that in 11 years si the question you need to ask yourself. 

Disclaimer : Of course, costs mey go up but so may rent. Your home is at risk if you light a fire under the stairs. Don't try this in a bungalow.


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## *Donegal* (29 Jun 2012)

elcato said:


> At current rates it costs you roughly 3.5k per annum. Over 11 years that is roughly 40k. *Will the house be worth more than that in 11 years* si the question you need to ask yourself.
> 
> Disclaimer : Of course, costs mey go up but so may rent. Your home is at risk if you light a fire under the stairs. Don't try this in a bungalow.



I'd hope so!


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