Rent or sell?

G

g_mc_21

New Member
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2
Hi,

This is my first post here, and would greatly appreciate any feedback from people with a lot more experience than me in this area.

We (Wife and 3 young kids) have just moved into our new home and we're wondering if we should rent out or sell our apartment?

Apt:
Cost: €265k
Current valuation: €275k
Mortgage: €202k remaining (180k & top-up loan 22k) @ 2.9%, €1.25k p.m. (19.5 / 17.5yrs remaining on the loans)
Rental valuation: €1600-€1700 p.m.
(Management fee - €1700 p.a.)

New home:
Cost: €527k
Mortgage: €407k remaining @2.1%, €1.9k p.m. (24yrs remaining)

We haven't rented before, and would almost be accidental landlords. Tax on any profits would be at 40%.

In a few discussions with people, it has been said to us that the apartment could be an ideal additional pension income. But we're unsure if selling now - given the buoyancy of the market - would be a prudent move, and put any profits from the sales into our existing pensions.

Considering the above, is it worth it or should we sell? Any advice is greatly appreciated
 
A lot more information would be required to answer and the best advice u could.get is to talk to a financial planner (I am not one). But to answer your question you need to think about
How close you are to pensionable age? And are you in a DC or DB pension? If DC how much is in the pot already? What salary are you on ? If the apartment was vacant 3 months how would that impact you? Any other loans, CC or car? Kids education fund etc As a single property landlord I can tell u it's not easy money. U can be lucky but assume you will.l not be. Finally if you rent it out u will most likely go on higher mortgage rate as u are no longer an owner occupier. Good Luck whatever you decide
 
I would say sell - if you have a full time job and three young children you don’t want the hassle of being a landlord. You say tax will be 40% but you will also be liable for USC.
 
Based on information given, i would sell and pay against existing mortgage (unless pension underfunded). I prefer an easy life.
 
Id say sell now as its on your mind, as its probably going to wreck your head should you run into any Landlord issues down the road.

Id also say, in 15 years time, kids grown up, most of the monkey off your back, you were mad to have sold 15 years ago if you could have afforded to keep the property.

Hope that helps..
 
I would sell based on the following rough numbers. Monthly Rent 1,600 - 1400 (Mortgage + Management Fees) = 200. At best on a monthly basis you will have 200 euro positive cashflow, but this does not factor in any upfront letting fees and ongoing management fees, additional expenses. Then at the end of the year, you will have to pay the lump sum tax and provisional for the following year. You will definitely end up spending out of your own pocket to meet all the obligations whilst roughly building 6k of equity per year.

If you sold and cleared 55k and used that towards the new mortgage you would get your repayments down to 1,550 a month. An additional 350 a month in your pocket (4,200) a year. Over 20 years that could grow to 100k assuming a modest 2% growth. Or if used to fund your pension there will be greater tax benefits.

No hassle, no annual lump sum benefits. I've just gone through the exact same process and ended up deciding to sell.
 
The framework set out in this post might help with your decision -

Key Post - Keep property as Rental or Sell?

Updated May 2020 The question regularly comes up on AAM whether somebody should keep an apartment that their family has outgrown as a rental or whether they should just sell up. Borrowers often run projections on the anticipated rental income from an apartment with a cheap tracker and conclude...
www.askaboutmoney.com
 
Very few circumstances where holding on to the property makes sense.

You'll lose half of the rental profits on tax so you are cash-flow negative from the start. You are somewhat vulnerable to negative equity if house prices fall. A rogue tenant could leave you with no rent for six months. You'll probably build up a CGT liability even if house prices stand still.

You have a high income if the bank allowed you to hold on to the old mortgage so just sell the house and maximise tax-relieved pension contributions.
 
g_mc_21 said:
New home:
Cost: €527k
Mortgage: €407k remaining @2.1%, €1.9k p.m. (24yrs remaining)
Click to expand...

Judging by you new home cost, and the fact you already had a 2 bed property, it doesn't sound like your short of funds, necessitating in the need to sell up.

Rental is a long haul business if you want to succeed in it, whether that be 1,2 or 3 units . Of course there will up-front fees, management fees etc, that goes for every property for let, there may even well be void periods, nothing is guaranteed, pensions included.

"what if it falls in price", well what if it doesn't. If you have to pay CG, that's great, the market held and you pay tax on the profits.

If you can afford it, Id hold on to it and pass it over to an agent.. and not look at it again for 10 years.
 
LS400 said:
Id also say, in 15 years time, kids grown up, most of the monkey off your back, you were mad to have sold 15 years ago if you could have afforded to keep
Click to expand...
Dublin apartment prices are still 29.5% lower than at the last peak, almost 15 years ago (per the CSO).

I would suggest that a lot of folks that bought investment properties 15 years ago look back at that decision with some regret.
 
Sarenco said:
Dublin apartment prices are still 29.5% lower than at the last peak, almost 15 years ago (per the CSO).
Click to expand...

Very true, I was one who bought a property 9 years ago though, I thought at the time it was still over priced, 9 years later, its more than doubled. I wasn't trying to time the market, I just happen to be ready to buy.
It could have dropped further, I had no way of knowing if the market was going to improve.
 
LS400 said:
15 years later, its more than doubled
Click to expand...
Are you saying that the property is now worth more than double what you paid for it in 2006?

That property must have some very particular characteristics - average property prices certainly haven't doubled over the last 15 years. In fact, they have fallen over that period.
 
There are three questions

1 Is it profitable
2 Is the cash flow acceptable The Most Important Question
3 Is it worth the trouble (only you can decide)

1 Is it profitable ?

Income 18,000
Costs
Interest 5,858
Mgt 1,700
Letting 1,800 Will you use an agent ?
Other 1,000
Profit 10,358

Profit % circa 15% (10,358/70,000)

Yes it is very profitable

2. Is the cashflow acceptable ?

Income 18,000
Outgoings
Mortgage 15,000
Tax 5,200
Other 4,500

Negative Cashflow 6,700. I would find this unacceptable, but if you have this to spare easily and securely you might think about it. The excellent return is tempting, but cashflow is all.
 
Curious why is your first analysis before tax and second after tax?
 
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