Another should I rent or sell query

S

staunton

Registered User
Messages
61
Hi I was looking for a bit of advice.
Myself and my wife are looking to trade up.
Current status:
Both relatively secure permanent private sector jobs three kids between 4 and 9. We are both 44 so pension is starting to become more a part of our thinking.
No childcare
No loans
I work shiftwork, my wife works one day a week, hence no childcare costs.
Current mortgage;
ECB +.51 with Pepper
Balance 101k
House value 180k (maybe less now?)
Bought for 215k
Repayments 500 pm for 17 years
Strong rental potential cork city area typical rent~1400pm Potential to rent under HAP as a family member has been given notice from landlord.
Cash savings of ~200k
Also shares ~20k
Proposed mortgage of 190 from KBC 2.25% repayments ~1000pm over 20yrs
To purchase property of ~330k we may take a smaller mortgage and use more cash to buy. Wife wants to push the boat out to 360k but I’m not so sure.
Pension ~100k to cover both of us as my wife has no pension
Earnings:
Main income in pharma sector 77k p.a. including 33%shift
Annual bonus 5-10% typically 7%
Wifes income 7k p.a.
Outgoings:
House insurance 400 p.a
Life assurance 240 p.a
Internet 800 p.a
Life and illness cover: 650 p.a


Thoughts that if we keep as rental, the future income can be used to top up our pension which is not great and with no potential future windfall we are where we are from here on.
I am currently working shift which in the medium term I would like to get out of but at some cost to my salary. On the flip side my wife may get another few days work. We are both in private sector but relatively secure industries.
We could try to sell before buying but this may be difficult in this market.
I have read some other scenarios on this site but everyone’s situation is slightly different.
Any advice is much appreciated as it seems a no brainer to rent but nothing is cut and dried when you dig into it as I have seen when reading other peoples stories.
Thanks
Staunton
 
staunton said:
Current mortgage;
ECB +.51 with Pepper
Balance 101k
House value 180k (maybe less now?)
Bought for 215k
Repayments 500 pm for 17 years
Strong rental potential cork city area typical rent~1400pm Potential to rent under HAP as a family member has been given notice from landlord.
Click to expand...

First of all, let's look at the investment proposal

4647

This is a very profitable investment.

House value 180k (maybe less now?)
Bought for 215k

It is also a tax-efficient investment.

As you paid €215k for the property, you will not face any CGT until it increases in value to €215k, so the first €35k of a gain is tax-free.
 
Would you be better off selling and paying down your mortgage?

If you sell your property, you will get €80k equity.

If you pay this off your mortgage at 2.25% , you will save about €2,000.

So you are far better off holding onto the property based on these figures.
 
staunton said:
Cash savings of ~200k
Also shares ~20k
Proposed mortgage of 190 from KBC 2.25% repayments ~1000pm over 20yrs
To purchase property of ~330k we may take a smaller mortgage and use more cash to buy. Wife wants to push the boat out to 360k but I’m not so sure.
Click to expand...

4648


I'm with your wife.

You can comfortably afford a mortgage of €140k

Not sure why you want a mortgage of €190k when you are spending €330k.

With two secure jobs and good rental income, you don't need a big cash reserve.

However, maybe you should hold on the equivalent of 6 months' rent in case of a bad tenant or a problem in renting the property.

staunton said:
Main income in pharma sector 77k p.a. including 33%shift
Annual bonus 5-10% typically 7%
Wifes income 7k p.a.
Click to expand...

A mortgage of €140k on a salary of €84k is very comfortable.
 
Last edited:
Don't forget that you are not making a commitment for life here.

You should review your decision every couple of years.

If circumstances change, then you can sell the property and use the proceeds to fund your pension, pay for your reduced working hours or fund your kids' education.

Under the circumstances, it might be better to avoid HAP. Doesn't that tie you in for a long time? Which reduces your flexibility.
 
Is this risky?

You can handle the risk easily.

You will have two properties worth about €540k between them

And mortgages of € €240k

So your equity is €300k

You can handle most risks.

Brendan
 
I wouldn't personally choose to be a landlord, but this looks attractive. It's even better than Brendan's summary, as half the rental income will be at lower tax rate while your wife is on s low income. You also have the capacity for a 35k increase in value without any CGT liability.
 
Brendan Burgess said:
First of all, let's look at the investment proposal

View attachment 4647
This is a very profitable investment.

House value 180k (maybe less now?)
Bought for 215k

It is also a tax-efficient investment.

As you paid €215k for the property, you will not face any CGT until it increases in value to €215k, so the first €35k of a gain is tax-free.
Click to expand...
What is a HAP discount?

There is no commitment to the HAP contract as regards anything, it’s the same as a normal tenancy except the government pays the landlord directly and the tenant pays his part to the council.
 
OP

I’m with your wife. But given the market I’d imagine your 360k has reduced.
I also think it’s a bad time to sell, so you’re in a perfect situation as a buyer and a holder.
I would keep a cash reserve of 100k. This covers you for a good long period if you hit a rocky road. I’d then use the rental profit to over pay your variable KBC.
Do not sign your contract to buy without a legal clause ‘subject to mortgage drawdown’ (not just mortgage approval)

As a landlord in HAP I can tell you given where I see rents going I’m delighted to have most of my tenants in HAP.
 
Really really appreciate everyone's advice and time. It's good to get a neutral perspective. Feel a bit more confident now.
 
Just to note if you are considering renting to a family member on HAP:

As I understand it a person cannot rent using HAP from a family member unless the property was already a rental property but this would depend on the degree of relationship between you and also may be a Rent Allowance condition which may or may not have carried over to HAP.
 
Thanks for the advice I will look into that and post back. My sis has been asked to move out by her landlord and herself and her son have to move back in with my dad. I'd rather not mix family and money but how could I not rent to my sis. If the rules forbid then decision is out of my hands though. Thanks again
 
You must log in or register to reply here.
Back
Top