Should we sell house or rent it out?

D

DBehan

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Long time lurker, first time poster here.

Our house has been up for sale for the last 4 months (3 bed semi), asking price started at 315k and is now 305k but we're prepared to come down more. In that time we've only had 4 viewings and 1 offer of 275k. On the days when we're feeling really desperate I'm tempted to accept the 275k offer, which is what we paid for it 2 years ago.

We're selling because we've got planning permission to build (site for free), but cannot get stuck into it as we've a mortgage on our current property of 270k approx. We've started the build a small bit - site clearance / poured foundations / blocks done to floor level, as we took out a small loan from the CU. However, now we can't go any further until we get rid of our own house & can get a new mortgage.

My question is should we seriously think about accepting the offer of 275k or should we consider taking it off the market and renting it out instead? (a thought which has only popped into my head recently). Even if we did rent it out we wouldn't get enough rent to cover the mortgage so would have to make up the shortfall of approx. 400 euro per month (which would be doable)
While we'd be getting on with the building then we could live with my parents.
On a general note, we're on a seriously tight budget as things stand at the mo, there is little or nothing left over every month (but thats probably a post for the Money Makeover thread later on)

Advice appreciated, if I've left out any info please just ask. Apologies if my post is a bit all over the place, my head is just wrecked today!!
Thanks.
 
If you are being offered what you paid in 2006 you should hog tie that buyer ASAP. I would be more likely to be offering you 200-220k

But that is just my opinion.
 
if you where to rent would you be making a profit compared to the repayment ??

if so consider keeping the property as a long term investment - the property market has ups and downs so you could be sitting pretty in a few years.

but on a different note alot of the mortgage lenders are declining clients who have a rip and are looking to buy so you would need to clear this obstacle first, find out of your mortgage provider who you are going through for the self build loan and ask the question - no harm trying !
 
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I think it is quite easy - the credit crunch will probably dictate what you can do. Even if you rent out the property, where are you going to get the funds to build from? Chances are, as you infer, the bank are not going to advance you any money if you already have a mortgage in place so you HAVE to sell, clear that mortgage and then get another to build. So the question is not 'hold on to rent or sell' - it is really 'sell at what price'

Also consider the cost of borrowing, even if you could get the additional funds from the bank on top of the 270k mortgage - borrowing say 300k for the build will cost you another 1600-1800 approx a month ON TOP of your rent top-up. So after a year of your self-build, you'll have paid about 20k on additional interest on top of 5k in rent top-ups - so unless they are offering more than 25k less than asking it makes FINANCIAL sense to sell at that price. Also as you are going to live with parents the savings you are making on rent/mortgage payments also add up on the positive column

So to sum up - sell at the 275k - clear your mortgage and thus have a clean credit slate to facilitate your credit for your build. And when you take the opportunity cost of borrowing funds for the year - your 'rent and sell later' model only works where you could expect to get 300/305k and more in a year - which is doubtful.

I am in the same boat, and have done the sums and while the house is really worth more, I will take less than the real market value (as opposed to the pretend EA value) based on the 'cost of funding' arguement for the build (but lets not tell the buyers that!)
 
Try this.

Forget about everything that has occurred in the past. It's relvance to an investment decision is pretty close to irellevant - i.e. all the arguments you get about riding out the cycle etc. is in fact just people articulating thier own personal beliefs.

Look at the pertinant information to hand:

Cost of capital: presently 6% say. Without speculating short rates are defininately going up over the next 6 months, starting this week.

Yield on you property: At the price you were offered, it is probably something around 3% gross I am guessing.

Current rental market status: quite large over supply - i.e. no indicatoin that real rents will be rising much.

A dispassionate investor without any strong personal beiliefs about Irish residential property would cut this out ASAP. It is destroying capital.
 
Thanks for all the advice.

By Tuesday evening we'd pretty much decided to take the 275k and were happy and more than a little relieved with our decision. We'd checked with the EA on Monday that the offer was still on the table. Unfortunately by Wednesday lunchtime when we rang to accept for definite they had changed their minds, deciding to set their sights on the next nearest (bigger) town instead!!

Back to the drawing board so....may sit tight and hopefully someone else will make us an offer!

Thanks again for the advice though.
 
DBehan said:
Even if we did rent it out we wouldn't get enough rent to cover the mortgage so would have to make up the shortfall of approx. 400 euro per month (which would be doable)
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Hi DBehan
Have you had a look at this thread?
It appears that you would not be able to offset the mortgage interest against the rental income if you did decide to rent.(I discovered this to my horror yesterday)
(not sure if that is in the link that ClubMan gave. )
Nicola
 
NicolaM said:
Hi DBehan
Have you had a look at this thread?
It appears that you would not be able to offset the mortgage interest against the rental income if you did decide to rent.(I discovered this to my horror yesterday)
Click to expand...
Unless there has been some recent change in the tax rules here I don't believe that this is correct.
 
Sorry, it is not (you have just answered another post re this ClubMan)
The correct answer is in the above link in my post
Nicola
 
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