Want a bigger home, closer in. I suggest sell existing house to rent. Thoughts?

A

amgd28

Registered User
Messages
643
Hi there,
Situation is this:

Living in D16, have a toddler in a creche in Terenure, and both my wife and I work in town. We are due to have a second child in January (touch wood), and we are considering our options...
We live in a standard 3 bed semi in a decent location in Knocklyon, but is is a small bit tight with one kid, so it's going to get worse soon. We had considered converting the attic to add some space, but we are not sure whether its the right call.
It looks like I'll be moving my work to Sandyford, so as I drop the child to the creche, my commute would be very annoying....So ideally we want to either move creche or move home. We don't want to move creche.......so

My wife would like to move in to Terenure, but for two reasons this is not a runner:

(1) At current income, I'm not sure a mortgage, even if approved, would be feasible for us to meet, particularly with extra childcare costs
(2) Also, as I only set up my business less than a year ago, it is unlikely my income would even be considered by the banks

Given the current market, I was considering that we sell our current house, and ringfence the equity/profit, and rent for a couple of years, at around the cost as our mortgage, or maybe a bit more, for a bigger house in a more convenient location.

This way in a couple of years my income would qualify for a mortgage and also my business should (hopefully) have taken off significantly, and so would be a better time for us to buy

So.......in the words of my wife "Are we mad?"
 
In the current market I think it's a very good plan.

As long as you invest the difference between the rent and the mortgage then in a years time you would probably be in a very strong position to buy in your desired area.
 
seeing as you do not nee to access that extra money for anything just now could you rent in terenure and rent out your current property

even if this was expensive ie extra monthly outgoings would it not be cheaper than the stamp duty on that new property a year down the road, plus you have another year paid off on your mortgage?
 

What would the advantages of keeping the old property to rent it out be
 
well not paying stamp duty on a new property to start

then picking a dream property to rent in Terenure to see what the area is like?

still keeping a foot in the mortgage market.....
 
I think renting out your house and renting another place would be a good idea but you will have to shell out for stamp duty at some stage unless you want to rent forever so might be best plan overall to sell up, ringfence the equity and rent for a few years.

If you could put the equity sum on a 21 day notice deposit account at 5% (assuming it's a few hundred grand) or so that might even pay a portion of your rent in the new place?

I've been thinking of the same thing as yourself and might go with this plan of action when I get around to doing the homework on it properly!
 
gar123 said:
still keeping a foot in the mortgage market.....
Click to expand...
To be honest, I had thought about that, but I already have another property with a good yield and good tenants, so I don't want to go through the hassle of renting out my ppr and making a loss, when I think there are better uses of my time and money.
The houses we are looking at to rent in Terenure seem to have a gross yield of about 2.5%, which to be honest looks like a better use of cash than paying down a mortgage/loan at 4-5%, with a much better quality of life thrown in to boot

The other benefit to this plan that I see is that if/when we do see our 'dream house' in that area, we will be in a strong negotiating position as we will be able to move quickly, not being in a chain etc, so I think that could lead to future savings of certainly tens of thousands when we do decide to purchase
 

I could be wrong but I think you only keep your PPR status on your current home for a max. of 12 months after you vacate it - if you were to rent it out for say 2 years it would be deemed an investment property and you'd be liable for CGT when the time came to sell it.

Also, by keeping your current house while renting, you're taking a risk - better IMHO to bank the takings now if you've decided to rent for a while and see what happens. At least that way you'll have a presumably decent fund to pay stamp duty, perhaps sizeable deposit etc. when you do decide to buy again.
 

My thoughts exactly.


Actually on the CGT issue, the CGT would only be payable on the difference between the value of the house 12 months after moving out, and the final sale price, so while there could be implications they are likely to be minor in nature. For example if the house was rented from Jnauary 2008 and finally sold in janury 2010, then the CGT payable would be on the difference of the value at Jan 2009 and Jan 2010, rather than the difference in value from when I bought the house (2002) and the time sold.

So to be honest, the CGT is not a big issue, and did not influence my thinking.
 
I think that your current needs would definately be served better if you were to take the sell to rent route. One thing that you might need to be careful of is ensuring that you have adequate security of tenure while renting. The only way to do this in Ireland is to make sure you have a fixed term lease. You may be able to do a deal with the landlord to get a 2-3 year fixed term lease, and would give you security even if the landlord wanted to sell up or take up one of the clauses that allow a typical Part IV tenancy to be broken. As a tenant you would still be able to break out of the fixed term lease by asking the landlord to assign the lease to someone else or by subletting it.
 
Hi AMGD28

Are you certain about the CGT liability? I'm sure that you have investigated this, but I was led to believe that e.g. if you own a house for 12 years and rent it out for 2 years, then you will be liable for 1/12 of the CGT on the full gain on the house for the past 12 years, less allowances and indexing.

Also there is the issue of having to pay tax and PRSI on the rent from the property.

SM
 
New_Buyer said:
Is that directed at me or gar123
Click to expand...
gar123. I just don't see how keeping the existing PPR and renting it means that there will be no SD on another PPR purchase (unless the replacement PPR is a new build or under the relevant exemption threshold).
 
hi clubman, I meant if they were to keep the ppr and rent it out and then rent in Terenure they would have no stamp duty to pay

ie they are not buying another place in Terenure
 

I'm fairly certain on the CGT - I did a tax module as part on an MBA last year and that was one of the things that was covered.

The tax on the rent is obviously another issue thrown in wit the whole hassle of trying to rent the house out. Not worth the bother methinks.


Actually that is an important point - the ones we have been looking at in Daft do have minimum 2 year leases, which I think is essential for us. Good point, Thanks
 
Just speaking from experience, bear in mind it could take a up to a year to sell your house and have the sale go through. So you either have to sell our house (that is have viewings) while you are still in it (not fun with a new baby and toddler having to tidy frantically all day and then leave the house at 6pm for an hour), or vacate the house and pay rent and mortgage at the same time. I guess you could restrict viewings to Saturdays only or something.
 

Have to agree with Square mile on this. Covered many times on AAM See here for one example
 
The landlord can also take posession back if he decides he wants to sell the property or wants to let a family member live in the property. Hardly what you'd call adequate security of tenure. A fixed term lease is the only way you can guarantee that you won't be thrown out on your ear with minimal notice in Ireland.
 
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