Rent Vs Buy if we are planning to move out in 5 years

hello all,

We are a working couple who wants to move back to another country in a few years, say 5 years. Could you please let us know if the below calculations are correct based on a few assumptions? Breakeven seems to be around 4 years, after which it seems more sense to buy the house. Also, another question is should I invest more money in the deposit or the minimum amount in this scenario?

Joint Salary: 150K Euro, Mortgage Approved is 500K, Savings 120K,

Case 1: Rent - 2000 Euro with an increase of 4% every year ( Vantage, Sandyford)

Total Rent Paid for 5 years: 130000 Rent
Deposit Saved: 85000 Euro


We booked a 3 bedroom newbuild house in Adamstown, Dublin which is available to move in July

Case 2: Home price 450000,

Deposit 45000
Buying Cost: 40000 ( stamp duty, furniture etc)
HTB: - 30000

Effective Cost 45000

Mortgage 405,000, Interest rate 2.0% for 5 years

Scenario 1: Sell the house for 500K

This calculation is based on if we can sell the house at 500000 Euro after 5 years, The buying price is already inflated for this area and it might reduce once the market stabilizes in a few years.
if we assume the selling price to be <450000, then renting makes sense.

Scenario 2: Put the house on rental after moving to a different country -

and if you sell for 450K, dont forget selling costs

I don't really follow your calculations. For example, the deposit is not a "cost".

You need to look at the costs of buying and selling and interest on the one hand
vs. renting on the other.

Assume the price you sell at will be the same as the price you pay for it in the first case.

Forget about renting it out after you leave. You must assume you won't rent it out and that you will sell it. (When you leave, you might review that decision but it makes very little sense to own a rental property in Ireland while living abroad. )

Cost of buying and selling again in 5 years
Buying cost (furniture, stamp duty, solicitors) : 40,000
Help to Buy : (30,000)
Net cost: 10,000
Interest 405K @10% 40k
Selling costs: 10k
Total cost: €70k

Rent: €130k

So the price would have to fall by more than €60k or 12% for renting to be better than buying.

Cost of buying and selling again in 4 years
Buying cost (furniture, stamp duty, solicitors) : 40,000
Help to Buy : (30,000)
Net cost: 10,000
Interest 405K @8% 32k
Selling costs: 10k
Total cost: €62k

Rent: €100k

So, it still seems to make sense to buy and sell if you are going to stay for only 4 years.

So you have to stay in it for 5 years, or else Revenue will claw back the Help to Buy. I assume they claw it all back, but I don't know.

Can Revenue claw back a refund?​

Revenue can claw back refunds if you:

• do not live in the property for a minimum of five years

So make sure that the property is ready for you to occupy in July and that you won't leave within 5 years.

If the property is delayed, and they often are or if you need to move home early, your calculations are tighter.

Brendan

Another consideration.

If someone in the UK asked me the same question about moving back to Ireland, I would advise them to consider buying in Ireland now as that gives them a stake in the Irish property market which is very important for them.

For you, if Irish prices fall but the prices in the country to which you are moving rise, you could get squeezed.

So, if you know where you are going to be living, then consider buying in that location and just live with the high rents in Ireland.

Brendan

HTB Clawback, see the table on page 26 of the Revenue guide.

Leo said:

HTB Clawback, see the table on page 26 of the Revenue guide.

Click to expand...

Thanks !

Brendan Burgess said:

I don't really follow your calculations. For example, the deposit is not a "cost".

You need to look at the costs of buying and selling and interest on the one hand
vs. renting on the other.

Assume the price you sell at will be the same as the price you pay for it in the first case.

Forget about renting it out after you leave. You must assume you won't rent it out and that you will sell it. (When you leave, you might review that decision but it makes very little sense to own a rental property in Ireland while living abroad. )

Cost of buying and selling again in 5 years
Buying cost (furniture, stamp duty, solicitors) : 40,000
Help to Buy : (30,000)
Net cost: 10,000
Interest 405K @10% 40k
Selling costs: 10k
Total cost: €70k

Rent: €130k

So the price would have to fall by more than €60k or 12% for renting to be better than buying.

Click to expand...

Thanks Brendon ! I was also looking at it from the net profit/loss point of view.

That deposit amount will be included in the calculation once we evaluate the profit/loss from the sale of the home.?

Found one good calculator

Buying is better by:​

€36,322​

over the same period.​

Buying after 5 years
Renting after 5 years