Selling 1 of 2 properties – evaluation criteria to determine which to sell?

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sport

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The situation: I have 2 properties – details are as follows:



Property 1 - Bought 1998, Purchase Price 127k, Present Value 310k, Annual rental income (gross) 10800euro (an accurate projection)
Property2, Bought 2002, Price 186k, Present Value 310k, Annual rental income (gross) 9600euro



Property 1 is a PPR at present but I will shortly be moving to a new PPR. Property 2 is an investment property. I have decided to sell either property 1 or property 2 to reduce my exposure to the property market. At face value selling property 1 would seem the obvious choice as I would not incur any CGT on its disposal. I have however, had second thoughts on this for the following reasons:

Property 1 will produce a higher rental yield in the future.
Property 1 is in a better location and so, will probably do better than property 2 on capital appreciation in the long term.
Property 1 is located within 6 miles of my new PPR and so will be easy to manage. (Property 2 is another part of the country 150miles away).

In reality, if the difference between what the properties are worth (assuming property 1 appreciates quicker) is more than what I will eventually pay in stamp duty if I sell property 1, then it will be the correct one to hold onto.

Is my logic correct? Should I consider any other evaluation criteria?


Many thanks in advance for any advice given………
 
sport said:
Property 1 is in a better location and so, will probably do better than property 2 on capital appreciation in the long term.
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Location location location. Without knowing any other facts i would think holding onto property1 to be a good choice.
 
sport said:
..I will eventually pay in stamp duty if I sell property 1..
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Do you mean CGT? Anyway if you sell Prop. 2 your CGT liability will be approx. 20k (don't have detailed figures to work with). Even after tax etc. you'll have a nice profit to put against new PPR/invest.

If I were in your position I would hold on to Prop. 1 as when you rent it, the yield will be higher, also if you eventually sell it, capital gains will only be charged for the years you had it rented. You are allowed one year's grace after you vacate the property i.e. it is still considered your PPR for a twelve month period.

I'm sure you could carry out an analysis to the nnth degree, i.e. what overheads does 1 have over 2 etc. Really though, if you get a good return, 1 is expected to appreciate more than 2 AND it's closer to home, then I'd sell 2 and keep 1.
 
Thanks for the posts guys. liteweight, I did of course mean CGT and not stamp duty.
Let me see if I understand you correctly. If I do not sell property 1 now, I have 12 months to sell it without having to pay CGT, even if I rent it out during this 12 month period. Is this correct? (Even if I have changed my PPR to another house)
 
As far as I know, this is correct. There are lots of posts about this so maybe if you do a search you'll find all the details. Good luck
 
I think the rest of the advice is correct, without further details I have to say that from experience a property thats closer to home is a huge benefit, you dont want to have to cross the country to address a problem with tenants etc unless you`re intending on using an agent to deal with all of it.

Although you may realise more equity from the sale of P1 you also will have much less exposure to debt by selling the second (assuming you have a mortgage on it?? I assume you do).

Best of luck with your move
 
I am also trying to decide which which property I should sell.
I want to sell one of my rental properties. They are all 3 bed semi houses, near dart/ arrow.
They are as follows:
house in carpenterstown: monthly rental income= 1100, worth approx. 500,000 euro, profit after tax =174,000
house in Raheny, monthly rental income= 1300, worth approx. 580,000 euro, profit after tax = 75,000
house in baldoyle, monthly rental income=1200 (worth approx. 420,000 euro). profit after tax = 90,000

Based on location, which house would you sell?
 
"Based on location, which house would you sell?"

Why do you ask based on location? I wouldn't base my decision on one consideration, i.e. location only. I assume because you wrote other details in your post (rent, profit etc) that you may be considering these criteria also. I dont know dublin well enough to comment on these locations but based on yield the property in Carpenterstown is producing the smallest yield and will yield you the most profit if sold.
Maybe you should consider selling this.............
 
I don't know much about Carpenterstown.
I'd certainly hold onto the Raheny one.
I'd worry about the Baldoyle one with the huge amounts of new apartments/duplexes/semi-d's being built over there. There also building a new dart station between portmarnock and howth junc., so if people in the future were to rent there I'd imagine they'll head towards these new homes. Also with the high percentages of new homes that are being bought by the BTL brigade I could see quite a bit of competition in the Balydoyle rental market.
 
northdub said:
house in Raheny, monthly rental income= 1300, worth approx. 580,000 euro, profit after tax = 75,000
house in baldoyle, monthly rental income=1200 (worth approx. 420,000 euro). profit after tax = 90,000
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If that's all you stand to make on 2 properties worth 1 million,then you are massively exposed to a property downturn.
You must have some massive mortgage repayments,and the banks say they are not overlending !.
 
That's a good point about Baldolye. Thanks.

The main reason I want to sell one of these properties, is so not to be overloaded. I used equity from them to purchase other properties (some of which don't have a mortgage).
Overall, my total rental income covers the total mortgages but I don't feel comfortable having high borrowings against these 3 properties. I'm looking to sell one property and then hold on to the remainder for the long term.

I sold a different property last year and was able to reduce my PPR mortgage considerable with the profits. I have no immediate need for the profit from the sale of one of these 3 properties. Because of this, I thought location should be a big factor in which one to sell.
 
I would sell Carpenterstown as the yield is not as good as the other two, but the profit on sale is better. Also the location is not as good as the others with regard to transport links etc. If I were asked to hold on to only one property...Raheny.
 
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