What to do - Anyone?

[JohnnieKippe]

It would make 1000 - 1200 monthly.

If i keep onto it, i would have to remortgage another 20K to fit out new house i'd imagine.

I checked online rates and an interest only mortgage for 228K would be about 970 per month.

Would i break even after paying taxes then perhaps if i rented it out. I'd love to keep onto it and if i could break even, i probably would

Its touch and go - could go slightly either way. Firstly, depends on if you would get 1000 or 1200 per month. If that could be narrowed down a bit, the sums can be done. Maybe check another few estate agents.

It also depends if you would be able to afford to subsidise it a little. If you can not afford to subsidide it at all, maybe not worth the risk. Whereabouts is the property ?

You can PM me any futher details you like and I can run them through the spreadsheet I set up when trying to make the decision myself.

 

[Newby]

... i would be liable for 20% on any gain from 180,000 euro up.

Am i right?

No. If the property ceases to be your PPR and you hold it for a number of years as an investment property you will be liable to CGT on the gain "from 180,000 up" to the extent that the property was not your PPR.

(Length of time it wasn't your PPR - 12 months) / (Total time of ownership)

There are about a million threads on AAM that deal with this situation. Run a search for CGT and PPR here or check out Revenue's website

 

[beattie]

.

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After a few years, rents will have gone up so you can then switch back.



Johnnie

What is this based on?

 

[ClubMan]

but then if i hang onto it as a landlord, i would be liable for 20% on any gain from 180,000 euro up.

This is not correct. Where the property is retained for more than 12 months (rented or otherwise) after vacating it as your PPR then some portion of the overall capital gain is assessable for CGT. Not the whole lot and not just the gain between when you vacated it plus one year to the disposal.

Sorry - just saw Newby's post on the same issue above.

Before you make any decision you really should get the facts straight about tax etc.

 

[JohnnieKippe]

What is this based on?

It's based on the fact that rents go up. Ask anyone who's every rented property (me included) how often the landlord comes and says "Good News. I've just dropped your rent". In all my years as both a tennant and landlord - rents don't go down.

 

[beattie]

It's based on the fact that rents go up. Ask anyone who's every rented property (me included) how often the landlord comes and says "Good News. I've just dropped your rent". In all my years as both a tennant and landlord - rents don't go down.

Well my landlord got a rude awakening from me four years ago when I knocked €150 off a €1750 monthly bill and the following year I knocked off another €50. I haven't bothered to go for more in the last two years and he hasn't raised the prospect of jacking up the rent either.

 

[ClubMan]

The exception that disproved JK's rule?

 

[Satanta]

JK, rent is based on supply and demand. With the level of property investors over the last few years supply has grown rapidly. With the booming economy of the past decade or so we had a very large level of growth (foreign workers, Irish workers returning etc) in demand, so rents increased.

Over the past couple of years however rent increases have slowed dramatically and in some cases fallen (I had my rent decrease from 2005 to 2006, only a small amount, but given inflation etc. still worth noting).

There is no magical formula that means rent will always increase. It always comes back to supply and demand. If the economy slows the number of people looking to rent may fall (more people leaving the country again, less coming in from other countries) and rents may/would slide accordingly.

None of us can predict this, no more than we can a property crash/correction. I'm not saying rents will fall (over a medium to long term), but you certainly can't say with certainty that they will rise!

So, as for coments like "rents don't go down", I'd like to be the second of many to disagree, with a personal example to back it up.

To the OP, you will find people who fall strongly on either side of the fence (bullish like JK, bearish like.... well, half the posters on AAM). Neither side is correct (until we can look back) so you need to form your own opinion on what to do. Becoming a landlord comes with a lot of risks attached to the potentially (very) large returns. Other forms of investments can also provide large (though seldom in the league of property in the last decade) returns for high risks or smaller returns for less risk. If you have one property you increase the risk of holding onto a second by having all your eggs (investments) in one basket (non diversified portfolio). Once you can understand the potential risks/returns, you can make an informed decision, but do be sure not to get swayed by the strong beliefs of another, whether that be on the bullish or bearish side.

 

[ClubMan]

To the OP, you will find people who fall strongly on either side of the fence (bullish like JK, bearish like.... well, half the posters on AAM).

Ahem! And then there are those of us who try to maintaing a dispassionate objectivity. For example, some people may assume that I am bearish on property from my posts but any circumspection about property investment is usually less related to market conditions than to the specifics of the case in hand which often seems to involve people with little or no knowledge of the issues involved considering lumping most or all of their wealth into a single asset class, geographic region and risk/reward profile instead of diversifying more to mitigate risk and maximise returns.

 

[Satanta]

Ahem! And then there are those of us who try to maintaing a dispassionate objectivity.

Yes, of course .

How could I possibly have left you.... sorry them, out. I'd suggest this is exactly where the OP finds themselves, sitting somewhere between the two, hence the confusion of the best way to proceed.

 

[Newby]

I dropped my rent on tenants by €50 per month becuase I wanted to keep them there. I don't think this is uncommon where landlords are more concerned about the long term view rather than squeezing every last penny out of the property each month. Cheaper to reduce rent and keep a good tenant than have it vacant and then let it out to people who wreck it.

 

[Purple]

This is not just a financial decision. The OP has to weigh up how selling or not selling will affect their quality of life in the medium term. They will still have a significant property asset (their PPR) and as long as they are living within their means and have some pension investment they should think long and hard about how much financial stress and worry being a landlord will entail. They should also think about how much of their time it will take up as for many people free time is a scarcer commodity than money. Property investment is not the sure thing that it was 5 years ago. It may or may not continue to appreciate but returns will not be lower, that can be said with (almost) certainty. In this context is it worth the worry/ risk/ hassle?

Think of 20 years time - the mortgage will be paid off (by someone else) and you will have an income generating asset probably worth a million. Whereas the 150K you would get by selling, is probably gone. It's a no-brainer.

If they put €150k into a pension how much would it be worth in 20 years?

 

[whathome]

It's based on the fact that rents go up.

That's not always correct. I've had to drop rent between tenants to attract interest in a property.

According to the DAFT rental index, rents had a steady decline of between 6% and 8% every year between 2001 and 2005.

 

[ClubMan]

Also - presumably if rent doesn't at least increase by the rate of inflation then it is going down in real terms?

 

[cjh]

It's based on the fact that rents go up. Ask anyone who's every rented property (me included) how often the landlord comes and says "Good News. I've just dropped your rent". In all my years as both a tennant and landlord - rents don't go down.

Mine has - twice.

 

[thebop]

Clubman,

What do you mean i won't be charged 20% on any profit from 180,000 to whatever the property would fetch if i sold same.

I rang revenue and they stated that it was 20%?

 

[Satanta]

I rang revenue and they stated that it was 20%?

The rate is 20% but certain exemptions exist.

If you sell a property which is a PPR (and always has been) you are exempt from CGT so you don't pay the 20% on profits*.

*It isn't quite that simple.. check all the other posts in this thread for the full details. You have 12 months to sell as a PPR after you vacate the premises as a PPR in which it's still considered (as a PPR and) exempt.