Young Family with Investment Property , unsure.

[SidTheDweeb]

we owe 360k (400k was the entire price -40k deposit = 360k i forgot ) on the house in dublin we live in , this is our house and we have no problems making this mortgage .

We are only short 200 euro PM on rent in the house in Navan , and there is a prosperous rental market there . Also keep in mind the opening of major roads , businesses i alluded to earlier ( did you read that ? ) ...

so the mortgage for navan is covered with the exception of 200 euro , we easily make the mortgage for our dublin house , how are we in DEEP TROUBLE ?

We have 3 viewings set up for this weekend for the last room , which only became vacant last weekend ...

The reason for the post was to see if it was a wise investment considering our circumstances , we are far from being in Deep Trouble ( yet ) , and of course if we lost tenants , our jobs etc.. that would be a problem ..

OK, so the originally figures are off by 40k?

So by your own reckoning

Value both properties = 750k
Loan (754-40) = 714k

So you have a combined LTV of 95.2%
Income circa. 95k p.a
Borrowing as multiple of combined gross income = 7.5x

Our economy is in (nearly?) recession
Some predict property prices to fall by circa. 20%
The most recent daft report suggests rents are in decline
The increase in unemployment is significant
Your current rental situation is losing you money

The risk is immense

What if either of you lose a job?
What if the rental market deteriorates further?
What if the capital value of the properties decline further?

Am I OTT here?

I don't mean to annoy you. To me the risk is unacceptably high and I would be looking to reduce it.
I suggest trying to sell the rental property asap.

If you can't sell it, at least it might set you straight about how you really need to think this through.

 

[mainasia]

You call this an investment property. Most of the other posters call this an investment property. However for the life of me I can't see how this is an investment. I don't see how it will ever make you any decent return, just a lot of trouble and huge risk. Just sell it for a loss, it is not an investment, it is much more likely to lose you money. Therefore it could more legitimately be titled as a 'loss-maker property'. Just like the term property ladder is still being bandied around, when it is not a ladder of any sort. You need to think about the way people label things and how you can fool yourself by wording and accepted ideas, I'm being objective for you, I don't have any interest in property but everybody can crunch the numbers, see the trends, it's shocking that everybody still terms this as an investment property. This is not a coincidence by the way, it's a very well known selling technique that works on subliminal programming to use a keyword in relation to an item to influence the purchaser.

Apart from this there's a nice post that outlines what influences cause this (conscious/unconscious-moral/immoral) here from another board: http://www.thepropertypin.com/viewtopic.php?t=6917 . Do you think you are making objective judgements, are you hearing objective information to make these judgements?

 

[Butter]

I'm not going to argue for or against keeping the house in Navan, but I will offer this...
It seems from reading your posts that you are renting out the house on a room by room basis. This is always much more difficult to maintain. The onus is always on you to get a new tenant when one moves out. If you rent the house out as a unit with the tenants paying a monthly rent for the whole house rather than on a room by room basis, then if one moves out the full rent still has to be paid. It is much less hassle in the long run.

 

[Purple]

Sell the rental property. It will only loose value over the next few years and rents will only drop. You will be paying to cover a bigger shortfall on a depreciating asset.

Whether you can afford to cover the repayments is not the issue; the issue is that you are subsidising an investment that is loosing value. That just doesn’t make any sense. Don’t hold onto a property in the misty-eyed hope that the glory days will be back; they won’t (or at least not in the next 15-20 years).


Take the hit and get out.

 

[frederic]

ok so we have decided to sell , spoke with estate agent and he will put it on the market if we wish .

the only problem we can see is if we are selling and we still have tenants how does that work ?

they have a lease , but are there less than 6 months .. and how do we pay the mortgage while we are waiting for it to sell , our mortgage lender doesnt allow us to put the mortgage on hold ...

any ideas ?

 

[cancan]

Sell the rental property. It will only loose value over the next few years and rents will only drop. You will be paying to cover a bigger shortfall on a depreciating asset.

Whether you can afford to cover the repayments is not the issue; the issue is that you are subsidising an investment that is loosing value. That just doesn’t make any sense. Don’t hold onto a property in the misty-eyed hope that the glory days will be back; they won’t (or at least not in the next 15-20 years).


Take the hit and get out.

While you are predicting the future with certainty over the next 15-20 years, any chance you could be a dear, and let us know the lottery numbers for next weekend?

Rents will only drop eh?
How about stocks, does your crystal ball mention whats a good buy for the next 5 years?

To the OP. There are some negatives to selling - a tenant is not going to want to stay in a house that is for sale, and with average time on the market at 211 days at the min, you could have no rent, and no sale for quite a while. Work out the cost trade off of a situation where you have no tenants, and people making low ball offers on your house too.
Buy low, sell high and all that jizz.

If you can afford to modify your expenditure and suck it up for a while, hold on. If not, be aware of the negatives of the sale too.
Given the irish mentality not to diversify beyond property and land, expect the same mistakes to be made in the future again, similar cycles to follow and all that, albeit, not to the same degree as the past...

Booms, bust and bubbles have happened since time began, human nature being what it is, people make the same mistakes over and over again.
You'd swear the current downturn was the first and only downturn in the world, ever...

 

[Mumha]

While you are predicting the future with certainty over the next 15-20 years, any chance you could be a dear, and let us know the lottery numbers for next weekend?

Rents will only drop eh?
How about stocks, does your crystal ball mention whats a good buy for the next 5 years?

To the OP. There are some negatives to selling - a tenant is not going to want to stay in a house that is for sale, and with average time on the market at 211 days at the min, you could have no rent, and no sale for quite a while. Work out the cost trade off of a situation where you have no tenants, and people making low ball offers on your house too.
Buy low, sell high and all that jizz.

If you can afford to modify your expenditure and suck it up for a while, hold on. If not, be aware of the negatives of the sale too.
Given the irish mentality not to diversify beyond property and land, expect the same mistakes to be made in the future again, similar cycles to follow and all that, albeit, not to the same degree as the past...

Booms, bust and bubbles have happened since time began, human nature being what it is, people make the same mistakes over and over again.
You'd swear the current downturn was the first and only downturn in the world, ever...

First and only in Ireland perhaps....

It is not unreasonable to assume that rents will drop over the coming months and years, given the exodus of Irish and Foreign workers, especially the foreign, to other countries.

 

[mainasia]

At least with stocks you can buy and sell in one day and they are usually not back by 20-40 year loans!

The property is situated in Navan, which has a large supply of houses/apartments if I am correct. If a large part of the population of Navan or future population predicitions of Navan are commuters that would also pose a problem for rents (new toll fees/time/traffic problems). The OP mentioned something about hospitals etc. but I don't pretend to understand the real local job situation there.
If the apartment was situated closer to Dublin or in Dublin City Centre might be a different story. I think Dublin or large cities can change more quickly.
Mumha's advice is you get booms and busts all the time and.....the point is, what? Is there a magical boom coming to Navan soon that we don't know about?

I think the OP is most likely going to take a hit now or later. There's a chance that he could make money over the long term (like everything), yet there's nothing that is pointing in this direction at all at this moment in time. If he wants to loosen up his income for something else downstream might be better to take the hit now. Since their combined wage is already quite high there is also a risk of losing some of that income stream in future, why not take care of the issue when they are in a relatively good financial situation.

This evaluation is based on my limited understanding of property and OP's circumstances.

 

[Purple]

While you are predicting the future with certainty over the next 15-20 years, any chance you could be a dear, and let us know the lottery numbers for next weekend?

What are you talking about?

Rents will only drop eh?
How about stocks, does your crystal ball mention whats a good buy for the next 5 years?

Rents are dropping and will continue to drop in the short to medium term. Are you suggesting otherwise (smart arsa comments not withstanding)?

To the OP. There are some negatives to selling - a tenant is not going to want to stay in a house that is for sale, and with average time on the market at 211 days at the min, you could have no rent, and no sale for quite a while. Work out the cost trade off of a situation where you have no tenants, and people making low ball offers on your house too.
Buy low, sell high and all that jizz.

House prices are dropping and, according to just about everyone, will continue to drop for the next year or two (at least). So the Op can hold off for a year or two and face the very real possibility or spending that 221 days with no rent etc but for a price that is a good deal lower.

If you can afford to modify your expenditure and suck it up for a while, hold on.

And then what?

If not, be aware of the negatives of the sale too.

How will they be different in a couple of years?

Given the irish mentality not to diversify beyond property and land, expect the same mistakes to be made in the future again, similar cycles to follow and all that, albeit, not to the same degree as the past...

Not the same degree as the past?... Kind of what I said, eh?

Booms, bust and bubbles have happened since time began, human nature being what it is, people make the same mistakes over and over again.
You'd swear the current downturn was the first and only downturn in the world, ever...

So?

 

[frederic]

going to reopen this thread as I have searched and searched and cannot find a definitive answer to my new question which is what to do . Brendan closed this earlier in the investment forum , so maybe hell lock me again ...anywho...

so i posted here in july of last year that I had two house , one of which was our original home which was to become an investment property.

I am now in serious negative equity on both houses , one is up for sale ( with three viewings since christmas ) we have dropped the price to below what we paid for it in 2004 and it is still not selling .

I have just recieved an offer from my employer to relocate to the US with my family , I have two small children .

At the moment I am paying two mortgages and struggling to survive , both children will be going into creche in a couple of months and we simply will not be able to pay for it..

I have applied for a moritorium with our mortgage lender , which they refused as we are both in full time employment. this means in order to get the moritorium I would need to make myself unemployed , doesnt make much sense to me.

Anyway , I am seriously considering this offer of relocation , which means I would either have to rent out both houses , which is a nightmare in my opinion or put them up for sale , which hasnt been working too well so far .

in short I am considering handing the keys back to the bank at this stage , they will survive , we wont if we continue as we are .

Anyone has any other advice / options I am open to ideas ...

Fred.

 

[thecretinhop]

I would fight on all fronts if i were you, go to citizens advise to get general idea, go to solicitor that specialises in this area (try to avoid the corrupt ones there are many) and I would talk to the bank again about possibly restructuring the loans, id say they are bluffing you, they will have little chance to sell or rent properties in this market, if you can offer them what you can they may accept, I would not mention the us angle though, id leave that untill you have looked at all options as above, after that if all else fails good luck in the USA, also what happened you on this website was a disgrace, good luck anyhow