Accidental landlord and now renting abroad - sell or hold?

L

LivingAbroad

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Age: 37
Spouse’s/Partner's age: 37

Annual gross income from employment or profession: 95k
Annual gross income of spouse: 100k

Monthly take-home pay: 10300

Type of employment: Both Civil Servant/Health Service

In general are you:
Saving

Rough estimate of value of home:
No PPR. Renting. See investment property below

Other borrowings – car loans/personal loans etc:
No loans
Expenses:
Childcare (biggest expense) – 1900/month
Rent 1765

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

Savings and investments:
Cash Savings: 81k
Shares: 10k

Do you have a pension scheme?
Occupational Scheme in health service (approx. 20% mixed employee/employer contribution)
PRSA 100k (inactive)
Previous employer occupational scheme 70k (inactive)

Do you own any investment or other property?
House 1:
350k (Mortgage 225k @ Tracker +1.25%; 20 years left. Bought for 520k).
Rental income (after letting agent fees): 10k/annually
House 2:
480k (Mortgage 300k@Tracker + 1.25%; 20 years left. Bought for 590k)
Rental income (no letting agent fees): 26k/annually

Ages of children:
1, 3, 5

Life insurance:
Death in service with occupational pension

What specific question do you have or what issues are of concern to you?
We are renting in the UK and would like to buy a house.

We’ve ended up moving to the UK for careers and became landlords for two properties in Ireland while now paying rent to live in the UK (2.5 bed house). The Irish properties were Celtic tiger overvalued purchases that have not regained their value (so avoiding CGT issues) with only one of them having a good rental yield. If we did end up in Ireland, we wouldn't like to live in either property (location, size amenities).
We have a minimum 5-year timeframe in the UK - perhaps longer. There is uncertainty with Brexit etc. but currently mortgage interest rates are low in the UK.
We would like to buy a house but are constrained by having a limited amount for a deposit, and hit with extra stamp duty (approx. 44k as a non-first time buyer – Irish property is taken into consideration).[House prices (4 bed) locally approx. 690k]
Does it make sense to sell one of the Irish properties (diversify and free up deposit money) or continue to save for a deposit and keep the Irish properties (e.g. tracker, future capital gain etc.)?
Note - I’ve converted all figures to euro.
 
Last edited:
Very salient point!

No. We would not like to live in either for lots of reasons location, size, amenities etc.
 


House price in the UK €700k

Stamp duty €44k

Total –Say €750k

Equity in house 1: €125k

Equity in house 2 €180k

Savings €90k

Total available: €400k

Option 1 – sell both houses

Amount required to borrow : €300k

Option 2 – Sell House 1 , but keep House 2

Amount required to borrow €480k

This seems very clear to me. €480k on a joint income of €195k is very comfortable at aged 37



House 2 is very profitable

Rental income: €26k

Interest actually paid : €4,000 ( €300k @1.25% )

Notional interest : €6,000 (€180k @3%)

Profit: €16,000

By keeping House 2, you will have an extra €180k mortgage at UK interest rates of around 3%. You need to factor this in to the decision.

In any event, it’s absolutely clear that you should keep this.

If you do the same calculation on House 1, you will see that it’s much less profitable.

Another reason for keeping House 2 is the tax free capital gain

As you bought it for €590k, it can increase to this value before you end up with any taxable capital gains.

Yet another reason for keeping House 2 is the hedging

Although you don’t want to move back to this house, at least you will have this stake in the Irish property market. So if you do move back, and property prices have gone up much higher relative to UK prices, then you will have some protection.



This decision is reviewable and should be reviewed regularly

You are not keeping House 2 forever. If interest rates rise and rents fall, it could become right to sell it and pay the proceeds off your UK mortgage

 
A few things to consider:

  1. A hedge against Irish house prices is useful. Irish house prices track British house prices, but only roughly, and with a big lag.
  2. I would tend to follow Brendan's advice of holding on to one house. It might be worth hanging on to the house with the letting agent though. Property management from a foreign country is a major hassle.
  3. Bear in mind the notice periods for tenants which have gone up recently. For a termination to be valid you need to make a statutory declaration that you intend to sell and then follow through by putting the house on the market.
  4. Your UK mortgage provider may lend less to you because of your mortgage(s) in Ireland, even if they are fully profitable. I guess a lot depends on how much you tell them.
  5. Take professional advice on your tax situation which is tricky because of income in two jurisdictions.
 
Thank you both for replying.
Very clear-eyed analysis. Needed some objectivity in weighing things up.
Re: Selling House 1 - Notice period for tenants and fees/costs associated with selling house (EA, solicitor, maintenance) - I will have to add into calculations.
I've also read the Key post that covers some of the issues here: https://www.askaboutmoney.com/threads/should-i-keep-my-old-home-as-an-investment.134222/
Love the forum and will keep reading/learning.
 
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