Trade Up: Let Out House First

J

JoJoBranches

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My wife and I live in Dublin and have two young kids. Needing more space as the kids get older, we are looking to trade up. We are still paying our mortgage on our current house. We can afford our current mortgage fairly comfortably and have savings.

A usual move here is to try and sell our current home and use this to buy our next at the same time.

Demand for rental properties in the area that we want to move to is very, very high.

We are thinking of purchasing the next house, 40/60 cash/mortgage and renting it out immediately. While staying in our current home for the next few years, eventually moving.

Given the issues with renting and onerous taxes on private landlords in Ireland, have we lost our minds?
 
OK, so the choice you have is

1) Sell your current home first and then buy another home.
2) Buy your new home first, and then sell your current home
3) Buy your new home as an investment property and let it out and then trade up at some future stage.

You have the money, so rule out Option 1.

Now it's a choice between 2) and 3)

Frankly, I don't see the advantage of option 3)
  • You will have all the hassle of dealing with tenants
  • You might not be able to get them out when you want to move in yourself
  • You might buy a house in good condition and they wreck it.
 
In practice, what you do is get mortgage approval to buy a new home.
As soon as you are near to putting in an offer, then put your own house on the market.
Don't accept any offers on your own house, until you have exchanged contracts on the new house.

If the new house requires work before you move in, then you have the comfort of your existing home.

Brendan
 
Brendan Burgess said:
OK, so the choice you have is

1) Sell your current home first and then buy another home.
2) Buy your new home first, and then sell your current home
3) Buy your new home as an investment property and let it out and then trade up at some future stage.

You have the money, so rule out Option 1.

Now it's a choice between 2) and 3)

Frankly, I don't see the advantage of option 3)
  • You will have all the hassle of dealing with tenants
  • You might not be able to get them out when you want to move in yourself
  • You might buy a house in good condition and they wreck it.
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Another to add on to that;
You will certainly get tenants straight away, you'll vet them yourself, or an agent will. They'll pay you whatever deposit you want within reason and you just might never get another penny. On top of that, try getting them out?
 
JoJoBranches said:
My wife and I live in Dublin and have two young kids. Needing more space as the kids get older, we are looking to trade up. We are still paying our mortgage on our current house. We can afford our current mortgage fairly comfortably and have savings.

A usual move here is to try and sell our current home and use this to buy our next at the same time.

Demand for rental properties in the area that we want to move to is very, very high.

We are thinking of purchasing the next house, 40/60 cash/mortgage and renting it out immediately. While staying in our current home for the next few years, eventually moving.

Given the issues with renting and onerous taxes on private landlords in Ireland, have we lost our minds?
Click to expand...
We did something similar in 2005 and I still regret it .It truly was a stupid mistake.

My advice is keep it simple do not over complicate life, as it has the ability to hurt you and change your dreams.

Best of luck
 
noproblem said:
Another to add on to that;
You will certainly get tenants straight away, you'll vet them yourself, or an agent will. They'll pay you whatever deposit you want within reason and you just might never get another penny. On top of that, try getting them out?
Click to expand...
Yes it's a minefield. And the landlord has very little rights on anything.
 
It's not the worst idea if you feel it gives you an advantage in having time to pick the property you want without being in a rush to sell.

Tenants' rights here are not huge. If you want to move in yourself you can terminate the tenancy with enough notice.

Downside is of course a BTL mortgage of 4-ish % and tax on rental income.

You should talk to a broker to see if this is feasible of course before making more plans.
 
Thanks for the informative posts above. Really appreciate it.

With the crazy rental demand I got drawn in to the idea of renting a place out, vetting the tenants and it all being ok. But as mentioned above the risks don't seem worth it.
 
NoRegretsCoyote said:
It's not the worst idea if you feel it gives you an advantage in having time to pick the property you want without being in a rush to sell.

Tenants' rights here are not huge. If you want to move in yourself you can terminate the tenancy with enough notice.

Downside is of course a BTL mortgage of 4-ish % and tax on rental income.

You should talk to a broker to see if this is feasible of course before making more plans.
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You must be thinking of the UK because the reality of the rental situation in Ireland is very different.
 
JoJoBranches said:
Thanks for the informative posts above. Really appreciate it.

With the crazy rental demand I got drawn in to the idea of renting a place out, vetting the tenants and it all being ok. But as mentioned above the risks don't seem worth it.
Click to expand...
Landlords are exiting the market by the thousand. Why do you think this is? It's because of the government meddling a tenant knows that they can stop paying rent and stay rent free for years without consequences.
 
losingsleep said:
the reality of the rental situation in Ireland is very different.
Click to expand...
A landlord retains the absolute legal right to end a tenancy with the intention of occupying the house him/herself.

This right can be hard to exercise if a tenant refuses to move. But it does exist.
 
NoRegretsCoyote said:
A landlord retains the absolute legal right to end a tenancy with the intention of occupying the house him/herself.

This right can be hard to exercise if a tenant refuses to move. But it does exist.
Click to expand...
I agree with you. The statement is true however the reality is very different.
 
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