To sell or not to sell

Hi all.
Looking for some advice, financially whether to sell an apartment or not.
I bought an apartment (my first property) at the height of the Celtic tiger in a regional city for 190k. I started renting it out about ten years ago, when I bought a house, got married and started a family. I have 107k left on the mortgage, which is a tracker. I charge a rent of 700 pm to an excellent tenant, who has been living in the apartment for 5 years. I intend to increase this rent to 758 pm but still way below market value. Prior to the mortgage rate increases I was making about 1k a year loss on the apartment but was happy enough as about 5k a year was coming off the capital with the bank. Now with the interest rate increased, it looks like I will be making a 3.5k loss (paying out of my pocket to pay increased mortgage, mgt fees and tax bill), but the capital will be decreasing by 4.5k per year. I am really unsure whether to sell or keep. Obviously those figures are based on present interest rate increases and predicting another .75 increase in December. An apartment went up for sale in the block this week for 125k, which I feel is really below what the asking price should be. The area the apt is in is due some changes over the coming years, with lots of infrastructural changes and will make the area more desirable to live in. Should I hold onto the apt or would it make sense to sell now.
Would appreciate your advice.
Thanks in advance.

hambla said:

An apartment went up for sale in the block this week for 125k, which I feel is really below what the asking price should be.

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You paid €190k and value may be €125k.

That would be 1/3 below peak levels which seems a lot even by the standards of properties where people had the worst luck in timing their purchases.

I would get a valuation or two. It could be worth more.

The sellig price is whatever someone you wants to buy will pay - you can think it is worth a lot more but that is irrelevant to the buyer

It is possible that the low sticker price on the property may be an auction opening ask price. Suggest you first examine if the sticker price is an auction guideline e.g. bidx, or private treaty sale. Probably best if you call the sales agent and enquire, rather than worrying perhaps needlessly. I think NoRegretsCoyot makes a good observation concerning the varianace between the 2007 peak price period and now, 14/15 years later. If there were serious issues with the apartment management company, or zero provision in the sinking fund with extensive retrofit work or roof maintenance works for the block to be undertaken in the near future then that would impact the current asking price.... but as an owner, in receipt of management company correspondence or annual reports, you would most likey be aware of such issues if they exist.


Unfortunately, you are prevented from charging market rent for your asset, due to the rent cap restrictions and are effectively subsiding your tenant to a significant degree No one knows for sure what the future will bring, but its is possilbe that further restrictions will be introduced that will prevent landlords from selling their properties with vacant possession in future. You have a difficult decision to make, however, unless you have a significant appetitie for risk going foward, then it may make sense to plan to sell up after the temporary eviction ban expires next year. It may make sense to establish your relationship with the auctioneer now.

Good luck with your decision.

I looked at the CSO numbers. Apartments outside Dublin are down 13% from the 2007 peak and Apartments in Dublin are down 18% from 2007 peak. These are average statistics for the market of course but apartments are more of a commodity than houses are.

So, ruling out factors specific to development or property, a reasonable lower bound for what you'll get on the open market would be 75% of what you paid.

hambla said:

Should I hold onto the apt or would it make sense to sell now.

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Even allowing for the fact that speculation about future property prices is not allowed here, it's impossible to answer or give a useful opinion on this question without a more detailed overview of your overall financial/personal circumstances such as is dealt with in the Money Makeover forum.

As above that depends on your financial/personal circumstances.

It would depend if you can afford (and are willing) to pay the increased costs going forward. Make a worst case scenario forecast of increased costs in the future, see what you're breaking point is. But aware that others will be in the same boat and likely in that scenario you'd be competing with others to sell up. Perhaps you'll realise a breaking point is unlikely and just keep it.

hambla said:

Hi all.
Looking for some advice, financially whether to sell an apartment or not.

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hambla said:

it looks like I will be making a 3.5k loss (paying out of my pocket to pay increased mortgage, mgt fees and tax bill), but the capital will be decreasing by 4.5k per year.

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So negative cashflow of €3.5k a year

With a profit of €1,000 after tax.

On an investment of say €43k (€150 value less €107 mortgage). That is a return of 2.3%

1. Can you afford the negative cashflow, with a high degree of certainty. If not sell.

2. The return both as a % and in absolute terms is poor.

3. If after 1 and 2 you are happy to hold then you have a potential upside on the price. (And no there is not a corresponding downside potential on the price, if you can handle the cash flow and consider the return acceptable then a fall in the price is irrelevant)

As others have said you are subsidising someone else's living costs with that below market rent. Depending on when your most recent tenants moved in you could also give them notice to leave at the end of a 6 year part 4 cycle and consider short term rentals like air B&B. In an RPZ you'd need change of use permission from the local authority but corporate lettings might be an option as they are exempt. With such a low rent you wouldn't want to get caught by a change in regulations banning no fault evictions because the value of the apartment with that low rent locked in would be much lower than market value.

Something I've wondered is will Revenue come after those tenants who are paying below market rents? If you sell a house to someone below market value, the buyer gets hit with a tax bill for the difference so how is this any different?

ryaner said:

Something I've wondered is will Revenue come after those tenants who are paying below market rents? If you sell a house to someone below market value, the buyer gets hit with a tax bill for the difference so how is this any different?

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They should certainly consider a tax credit for landlords on the shortfall to market rent if they want them to stay invested, but they won't. They have no problem valuing property for the property tax so a database of market rents would be easily implemented.