Trading up and keeping PPR as Rental for Future

[DublinHead54]

Hi All,

So after much back and forth we decided to initially rent. We priced it towards the higher end of the market in the area given the fact the apartment was refurbished and better situated compared to the others in the development and area. However, the market is very opportunistic and people are looking for deals and interest was at much lower prices than made financial sense. So we have now made the decision to sell.

It is likely to prove a somewhat costly mistake as we could have put it for sale earlier and before fixing the mortgage rate. But on the whole, when considering the rent we would have been paying and equity built up it could have been a lot worse.

On the flip side we are enjoying suburban life and the never-ending DIY list which comes with an old house!

 

[Sarenco]

Thanks for the follow up.

According to Daft, average asking rents have fallen by 6.5% in Dublin city centre over the year to 31 March 2021 and I can certainly see how that would impact your decision.

 

[DublinHead54]

Thanks for the follow up.

According to Daft, average asking rents have fallen by 6.5% in Dublin city centre over the year to 31 March 2021 and I can certainly see how that would impact your decision.

I can confirm that Daft is not wrong

 

[NoRegretsCoyote]

I can confirm that Daft is not wrong

I watch inner suburbs closely enough and I would have thought asking rents are back to February 2020 levels..........a noticeable increase in even the last six weeks.

 

[DublinHead54]

I watch inner suburbs closely enough and I would have thought asking rents are back to February 2020 levels..........a noticeable increase in even the last six weeks.

The asking rents are perhaps but the demand to pay the asking hasn't returned at least in my example. There is still a lot of variation in pricing around the Docklands, and what I found interesting was the feedback from the agent was people were interested but straight away wanted a reduction in rent. Anecdotally I have heard of some companies offering a free month so that the rent is reduced without impacting the advertised rent and their ability to charge market rate when demand returns and not be bound by the RPZ.

The variation in rent might be driven in part by long term renters leaving and landlords who hadn't raised rent and are now stuck by the amount they can increase due to RPZ.

I think the rents will return to pre covid levels but the demand in the area I was trying to rent out just wasn't quite there yet.

 

[LS400]

I think the rental environment for the apartment is better than the current selling environment.

I think that situation has probably done a 180` degree turn in the last 6 months.

 

[DublinHead54]

I think that situation has probably done a 180` degree turn in the last 6 months.

You were right, the apartment went sale agreed quickly. Fingers crossed it goes smoothly, already felt a huge weight of my shoulders.

 

[DublinHead54]

As a quick update, the apartment sold and we now have a lump sum that we need to decide what to do with. Since the first post we now have short term debt of ~15k for a car loan, which I plan to clear first. I'm discovering the joys of homeownership so the part will go towards immediate renovation costs.

The question is what to do with the remaining lump? I see two options and I am not sure what is the best long term option or if a mixture or both should be followed. Please let me know your thoughts.

Mortgage outstanding: 660k @2.9%...this was my only option and is with BOI fixed for 1 year, I will move after this.

1. Option 1: Use lump sum to pay down mortgage (LTV will be 80%). Lower monthly payments going forward and use the additional free capacity to make AVCs to pension.
2. Option 2: Use lump sum as AVC into our pensions today, getting the tax relief and allow it to grow from now.

I am leaning towards paying down the mortgage to have lower monthly payments but have not done the maths.

 

[Brendan Burgess]

It's probably worth taking the initial post and copying it into a new thread and updating it.

Brendan

 

[NoRegretsCoyote]

1. Option 1: Use lump sum to pay down mortgage (LTV will be 80%). Lower monthly payments going forward and use the additional free capacity to make AVCs to pension.
2. Option 2: Use lump sum as AVC into our pensions today, getting the tax relief and allow it to grow from now.

I am leaning towards paying down the mortgage to have lower monthly payments but have not done the maths.

There is merit to both. Normally I would say you won't beat the return on tax-relieved equities over the next half century, so put it into the pension.

OTOH you have monthly mortgage costs of nearly €3k. This is feasible on your income, but leaves you vulnerable if your income changes.

I am a few years ahead of you on the family path, and we eventually found that two demanding, full-time jobs and two (also demanding) kids didn't work. If you make that choice in a few years you'll appreciate having lower mortgage costs.