Sell investment and buy another cheaper investment

Hi. I have an investment ( was my PPR ) until I married and moved to a larger house. The mortgatge on it is €225k, it is rented but I am putting 70 per week into mortgage as well as the rental inc. The same houses are selling now at around €205k.
I would love to sell the house and go for another house I have seen closer to where I live but for €150k.... it is already reduced to sell from 210,000 and Id say it could go down less. This would be a joint investment between my husband and I. I have 2 sites on my deceased fathers land which I will always have for myself in the future.

If I sell the house there may be a good chance that the selling price willnot cover the mortgage redemption - although I know I could get my hands on the money for this.

Am I mad in thinking this could be a good idea ??

I am currently with KBC on the investment property - if the mortgage is redeemed would they be more likely to turn around and give us a buy to let mortgage...as I have a history them ?

Would like to hear what anyone thinks !

Thanks.

Ps our mortgage on our PPR is €200 each per week on top of the €70 I [ay into the investment property - I just want some breathing space.

What would be the benefit of selling 1 property, incurring transaction costs, and then buying another similar property, incurring yet more transaction costs?

Thanks for the reply!

The second property is significantly lower in price, the rent on this property would cover the mortgage payment, and there is scope for the property to increase in value..it is next to a popular beachfront, will always have either rental from holiday makers or locals.

Right now I am kind of resenting the investment property I have...I am finding the extra money I pay into the mortgage each week hard to do.

Obviously if I owned an investment property with my husband it would all be split down the middle...

unstacked said:

I am currently with KBC on the investment property - if the mortgage is redeemed would they be more likely to turn around and give us a buy to let mortgage...as I have a history them ?

.

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I wouldn't make any assumptions about getting another mortgage from KBC, times have changed.

If you are struggling with the current investment property why don't you ask your partner to contribute as he is after all your husband or am I missing something.

It's very difficult to give advice on this without knowing your long term financial goals.

The investment property is my own and was my residence up to the time we both bought our own home.. therefore I contribute to the extra needed in the mortgage on it... that is why my husband does not pay anything into that house.
We contribute equally to our own mortgage..and have our own debts individually.( I actually prefer it this way - responsibility lies with each other then )

unstacked said:

The investment property is my own and was my residence up to the time we both bought our own home.. therefore I contribute to the extra needed in the mortgage on it... that is why my husband does not pay anything into that house.
We contribute equally to our own mortgage..and have our own debts individually.( I actually prefer it this way - responsibility lies with each other then )

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The thing is if anything happened to you, then your husband would automatically get your investment property anyway. Realistically you own an investment property with your husband as it stands. I'm getting married in Sept - we are moving into my fiancee's house (our PPR). My house we will rent out. That will be 'our' investment property. That is our take on it anyway.

Yes, you are right in saying if anything happened, my husband would automatically inherit the investment.
But his name is not on the title of the investment property, therefore it is in my name, so for the time being it is my investment.

I think you need to think carefully about this and do the maths in detail.

You want to sell an investment property at a loss and buy another one. As has
been pointed out, there will be a big cost of doing this, which means that your new property will have to increase in value to cover the transaction costs and the 20K loss on your present property, before making you a penny in profit.

Actually, the loss is more than 20K as you dont say what the purchase price was.
If we assume a 90% mortgage, then your loss is currently 45K.

This will not happen unless the new property increases in value by about 36% I am guessing. How many years do you predict that it will take property prices to increase that much before you stop making a loss.

It sounds from your posts that your reasons for doing this are not financial, but more
emotional, which is never a good reason to make big financial decisions which could
loss you lots of money.

You are resentful about having to top up the mortgage and you want the financial burden of an investment property to be shared with your husband.

What if rent fall again, and you still have to top up the new mortgage

You need to make 2 decisions -

Do you cut your losses and sell the house at a loss ?
Do you and your husband invest in a property now.

I suggest that you make a decision of both of these in cold financial terms,
before you throw good money after bad,

unstacked said:

But his name is not on the title of the investment property, therefore it is in my name, so for the time being it is my investment.

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It's not much of an investment is it, I'm not saying this to be unkind. Look at it this way if your husband were to acquire co-ownership of it today he would be in negative equity ie more debt.

What's really odd about your post is that you insist on keeping the 'investments' and money separate but at the same time you want to purchase a new property with your husband?

There are many people who wish to keep their finances separate but I disagree with this in relation to married couples (personal opinion)

The reasons are absolutely financial. I suppose I am finding the pressure of having the investment a lot to handle at the moment on top of everything else...and I feel I am just looking for options to take the pressure off so to speak.

unstacked said:

The reasons are absolutely financial. I suppose I am finding the pressure of having the investment a lot to handle at the moment on top of everything else...and I feel I am just looking for options to take the pressure off so to speak.

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Then why not sell one or both of the sites you own and use that to help with reducing your debt?

Hi Bronte,

There is no planning on these sites yet - planning has really tightened up around the area. I have approached a neighbour and asked him if he would be interested in renting the land - no reply yet - I figured that at least if it was rented it would be fertilized, taken care of so to speak.
I could always sell a site without planning but that would be a last resort.


If I had a magic wand I would sell the investment prop, build on the site and have a house with a small mortgage on it, which then could be rented out - that would be the ideal situation...

Your ideal scenario still leaves you with all your eggs in the one basket, the exact same scenario that you are currently in. Your property investment hasn't preformed but you're still focused entirely on this asset class.

Take a step back and leave the property obsession to one side.

Why is your investment losing value? Why can't you achieve enough rent to meet the mortgage repayments?

Your existing property, you're paying 70 euro a month on top of the rental payments to meet the mortgage. Are you on an Interest Only mortgage? If not, change. An Interest Only at, say, 5% would work out at 11K per annum (4% = 9K). How does that compare to your existing payments?

From a taxation point of view there's little value in anything other interest only on investment properties. Are you tax compliant on your existing investment property? Sort out your existing situation rather than incurring more costs to get to exactly the same end point. It seems to me that you want to be busy doing something, that that constitutes hard work and as such is the right thing to be at, rather than sorting out your existing situation and learning from the process.

Hi Howitzer,

It is interest only and the payment is €962 per month, but the tenants have asked for a reduction in rent, which I have done, the property management company take x amount towards their fee, and the rent coming is is only 730 pm...normal rate for the area. The property is registered with PRTB and I am not making profit on the rental therefore... I think I do not have any tax payments to make ( hope I am right here ).

huskerdu said:

You need to make 2 decisions -

Do you cut your losses and sell the house at a loss ?
Do you and your husband invest in a property now.

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This is really the best advice. Forget completely about buying another property. That is a separate decision and irrelvant. And it is distracting you from thinking clearly about whether you should hold your existing property or not.

You have a property worth €205k with a mortgage of €225k.

Your PPR is also irrelevant.

You are finding the going tough forking out €70 a week.

Then it seems to me that you should try to sell your investment property. It is too risky for you. If rents fall or interest rates rise or both, then you will find it even more difficult.

You will have to find €20k to pay off the mortgage. That is tough, but there is no getting away from it.

When this loan is paid off, and you are more comfortable financially, then you can look at other investments.

I haven't much to add to the other posters - you got some good advice there and I certainly wouldn't be adding another property to your portfolio in the current climate, regardless of what you do with the first one, particularly if you are finding E70 a week a struggle.
Two brief points though... be careful that by 'seperating' your debts from those of your husband's that you aren't cutting off your nose to spite your face, ie paying extra interest or getting into day to day debt that he could help you with (or vice versa) because of a desire to keep things seperate. At the end of the day, legally you are a married unit and it's usually better to pool all ingoings and outgoings (unless one of you is really bad with money).
2nd point - I wouldn't at all bank on KBC taking your previous record into account. We're getting a top up from them at the moment and they don't care about our (very good) repayment history, job security or anything else - they are strictly working on a loan to value basis and I'd say they'd be even tighter on investment properties. The old days are well gone... I doubt if any bank would be significantly different.