Planning for slowing down and BTL decision

N

Narek14

Registered User
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Private sector €150k pa with no dependents, age 47
PPR Mortgage 92k UB tracker on 500k house
BTL 300k mortgage free
No other debt

Through a combination of 100k savings 4 yrs ago and Covid savings/ pay increases I’ve made serious headway into the mortgage - and planning to payoff over the next 3 yrs. I’m on UB tracker but have taken the view that the costs and hassle of moving outweigh the interest gains given I’ll be mortgage free by 50 and am overpaying 1500 a month.

Still maxing pension contributions and pot in equity strategy worth €730k and rainy day fund of 6 mths pay.

BTL still throwing off €10k net, I would prefer to hold onto it as a down size option for my parents who live in the area in the next 5 yrs but eviction ban/SF mood music means unfortunately I think I need to sell once my current tenants leave. I was also hoping to take a career break in a few yrs and use rental income for prsi contributions but without security on ability to control occupancy I think I need to forego this.

My thinking at present is to keep going for 5 yrs, estimate pension to be €1-1.2m at that stage, accumulate €150k to fund a sabattical once mortgage done and then a part-time job/ less pressure through my 50s.

I know I am in a fortunate position but any thoughts on above and if I do sell BTL, is prsa of 300k outside company pension the best option at 52?
 
Narek14 said:
I know I am in a fortunate position but any thoughts on above and if I do sell BTL, is prsa of 300k outside company pension the best option at you
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you cannot i don't think get full tax relief on the 300k (from the BTL?) by investing it in a prsa. is that what you mean or maybe i misunderstood ?
 
To clarify, maxing contributions to occupational scheme so I’m aware I’ve no ability to get further tax relief. Looking for views on whether selling apartment given thoughts above is the best option and if so is putting proceeds into a prsa is the best way to go to maximise flexibility of some drawdown in late 50s?
Can use savings to cover a sabbatical and then take a less stressful job that covers day to day expenses and leave dc pension which I hope will be worth c€1m in an equity portfolio at 52. My understanding is I could access the prsa as needed in my late 50s to top up living expenses/ bucket list experiences and this would leave dc main scheme to continue to hopefully grow through market gains. Other option is 5 and 10 yr state savings certs but given inflation, I don’t think this is the way to go.
 
Narek14 said:
if so is putting proceeds into a prsa is the best way to go to maximise flexibility of some drawdown in late 50s?
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I'm missing something. Why use a PRSA?
You won't get tax relief, but you'll pay tax taking it out, possibly at higher rate if you already hope your DC will be worth 1m at retirement.
Also as you already have a pension, I think it can only be an AVC PRSA, so might not provide the flexibility you are looking for?
 
Thanks Red Onion, this is why I’m looking for guidance, given my position any thoughts on what to do with 300k? as mentioned, my preference up til recently was to retain the BTL but the politics and reg changes of being a landlord are making me a reluctant seller of the property.
 
Would you consider a long term rental to the council? They would act as management. You would have the benefit of a long term rental income without the day to day stresses...
 
Seaniemed said:
Would you consider a long term rental to the council? They would act as management. You would have the benefit of a long term rental income without the day to day stresses...
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I would caution against this approach of going with the council. As the property owner, you lose control over what tenant is housed by the council, but you still have to deal with all the anti-social issues with neighbours and neighbourhood organisations should they arise. I speak from experience.
This puts you in the insidious position where you are held to account for something which you have no control. Very stressful. Having a property returned in its near-original condition by the council when tenant damage has occured is also an extremely onerous exercise, again, only if damage to the property has been done. The calibre of some of the tenants is of concern. In my case, the single mother council placed tenant moved in a partner who it transpired was a prisioner on early release. He began actively dealing drugs from the "middle class" housing development. Immediate neighbours had young kids and were threatened by said individual. I brought this to the attention of the council, but they did not want to know as he was not their tenant, despite him living in the property. After 12 months of these activities, he eventually was arrested and sentenced on a far more serious crime. Garda seraches of the property for drugs are very detailed including forced entry, accessing plumbing pipework behind plastered walls and stipping out pretty much everything. The Gardai are not responsible for making good on the repairs and the council will not step up as the damage was caused by the Gardai. Again, in my case there was 14,000 Euro of damage including 3 months down time.... and a cash payoff to the original tenant.

I cannot fathom why anyone would hand over a €200K-€300K-plus asset to a public organisation who have zero individual responsiblity or culapbility to protecting your asset. Bonkers.
 
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I’m not thinking of selling the BTL because of stress of day to day management, I pay a prop management company and have had a good experience with them over a 10 yr period so it’s not a hardship having a BTL. My likely decision to sell is driven by the fact it looks like in 3-5 yrs when my circumstances change and I will either want to get a parent into it to downsize or sell it, I won’t be able to control the use of the property in the future, ie give tenant notice and get vacant possession. My question for here, is as part of that decision making process, I don’t have a clear idea of what the best options are for the sales proceeds?
 
Fair points. I thought the council took more responsibility as outlined on their website:
 Guaranteed Rental Income
 No management of tenants where a Direct Lease Arrangement has been chosen
 No rent or arrears collections
 No maintenance of the residential property after the first six months of the lease if a Direct Lease Arrangement has been chosen
 
Guaranteed Rental Income is not guaranteed unfortunately. If the tenant stops making their contribution, the council stop the HAP payment to the landlord. Rent arrears can mount up but the landlord still may have their own financial obligations to fulfill.

While the landlord does not source or select the tenants, the landlord has no say or input into who the council places in the landlord's property. Unfortunately, in such a scenario where there are incidents of anti social behaviour, the neighbourhood watch schemes and residents association report the issues to the landlord, not the council. The landlord is completely powerless to address tenancy issues and the council is "faceless". So the landlord is left in a position which can last a significant length of time, where they are on the receiving end of legimate concerns and complaints from neighbours but yet cannot rectify or intervene to resolve the issue directly. 95% of the time, the gardai will (correctly) state that unless a crime has been comitted, its a civil matter. With this type of tenant (and I know its not politically correct to state this, but I am speaking from direct experience, there are a lot of them out there), the property is not going to be maintained in any shape or form. This further exacerbates the issues with neighbours. The council are not going to take care of your asset as you would yourself. It would be niaive to think otherwise.
 
Thread has gone a little off track. I’d appreciate any thoughts on best options to deploy 300k given my circumstances set out at the start or if others believe I should retain BTL as cash generating asset instead of selling and having 300k net proceeds to manage
 
My two cents, sell... I had previously outlined that we had 5 x BTLs in Ireland held long term. 2 x sold in the past 12 months, 1 x sale agreed, and 2 others with tenancy termination notices issued. Due to the reasons outlined in this and other threads, it is a no-brainer. The risks governing your ability to normally dispose of your asset in an open martet is being steadily eroded and may eventually be removed. Invest the proceeds elsewhere. (We are purchasing abroad.)
 
When you say the rental is “throwing off €10k net” do you mean the annual profit net of costs (that’s what the phrase normally means) or net of costs and taxes?
 
Thanks, I suspected that was probably the case.

So a net profit of around €20kpa, before taxes, on a property worth around €330k. Roughly a 6% net yield. That’s not too bad at all.

I think, on balance, I’d hang on to the rental in your circumstances. Yes, there are risks with that approach but your reasoning for hanging on to the property look sound to me.

I would take a different view if you weren’t in a position to maximise your tax-relieved pension contributions and aggressively pay down your PRR mortgage ahead of schedule.
 
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