Should we sell or rent?

Noteb

Is it adviseable to sell for €10K less than what we bought our Duplex 1.5 years ago. We just bought as friends to get on the ladder. Now we are moving abroad- (without the profit we thought we would make!)

Should we just rent it out via a management company??

Any advise appreciated!

m_stan

Depends on a lot of things.

• How long can you wait to sell if you decide to hold off ? The market may get worse rather than better in the short term.
• Will your rent cover your mortgage ? If not can you afford to pay the difference ?
• What is your situation re tax on rent - have you considered this ?
• Have you included any improvements, decorating costs etc in the 10k loss you are facing ? It could be more if you are undercounting these items.
• And I guess finally, do you have the 10k to pay the bank if you sell?

Noteb

Thanks M,

I cant really wait to hold off- I am moving in August! so its either sell if we can- or rent it out long term ie. a few years

Rent would just about cover the mortgage.

I havent really considered tax implications...
Thanksfully there are no other costs.

No I don't have the 10K. but I would get it if I thought it would be a lot more in years to come.

I think the government have a lot to answer for...

astrofool

The government didn't force you to buy a duplex with a friend to get on the ladder at all costs.

Noteb

That's true- thanks for pointing that out.

Gurgle

Noteb wrote: »

Is it adviseable to sell for €10K less than what we bought our Duplex 1.5 years ago.

Buying when prices are high and selling when they're low is generally regarded as a bad idea.

You see, that way you lose money.

In order to gain money, you should buy when prices are low and sell when they're high.

Noteb

Really- is that the way it works??

krinpit

I'd hold on to it. If you can rent it out and cover the guts of the monthly mortgage then you're building up your equity while you're away.

As you've only had your mortgage for a couple of years, most of your payments will be the Interest part of the loan, which you won't have to pay tax on from your rental income.

One thing to be careful about, make sure it's more than 2 years since the day that you drew down the mortgage, or else you'll have to pay stamp duty clawback. You're lucky that the stamp duty rules changed in the last budget - take advantage of it I say

Noteb

Good advice- thanks a mill Krinpit

gamer

the tax you pay is little or nothing, cos rent plus expenses less than mortgage,you can claim insurance,service charges ,maintenance ,agents fees as an expence, say rent is 900,mortgage 1000, means no tax due you are not making a taxable return/profit on the duplex, if you living abroad for 3 years,over 11months you still need to submit a tax return every year, to show your income,in eire ,even if your profit s are zero.
if you are coming back in 3 years ,then rent it out ,regardless of value duplex,you will need somewhere to live,if you live there 4 30years thepresent value is really irrelevant.GET a reputable agent ,to rent out ,collect the rent, specify professional/working tenants only,if its in a dodgey area it may be easier to sell it.
theres apartments in certain areas ,where landlords have to rent to rentallowance clients,as thats the only way to get a reasonable rent.
at least get good locks,alarm system fitting ,you should let insurance company know you r renting ,otherwise your policy may be worthless.

dewsbury

Bear in mind that you may buy again in years to come.

In this case you would no longer qualify as a first time buyer.

Therefore you could end up paying more in stamp duty in years to come.

krinpit

dewsbury wrote: »

Bear in mind that you may buy again in years to come.

In this case you would no longer qualify as a first time buyer.

Therefore you could end up paying more in stamp duty in years to come.

It's about 1.5 years too late to worry about doncha think?

beeno67

krinpit wrote: »

I'd hold on to it. If you can rent it out and cover the guts of the monthly mortgage then you're building up your equity while you're away.

This assumes property prices don't fall. If they do then you are loosing equity while you are away.
You have to look at the figures.
1 How much interest do you have to pay on mortgage
2 How much will it cost to keep property. Costs include managment company, furniture, repairs, general upkeep, letting agency fees etc
3 How much rent will you make. It is best to assume property will only be occupied 10 months of the year.
4 How much will property prices go up or down while you are away

If 1+2 is more than 3 then you are relying on property prices to increase to make any money.

gamer

if its in a good area ,chances are itwill maintain 90percent of its value over 3 years, you can rent 4 a year ,come back and sell it if you wish,take it the rent will pay 90percent mortghage costs,is itwise to rush into a quick sale now, to get a good price it would be on the market empty for 4months,plus 3months for sales,documents to go thru,thats 7months no rental income, is much safer with respectable tenants in it,otherwise how do you secure it 4 7months ,when you are in uk or wherever?you,d haveto get friend or relative to live in it rent free.ITS hard to sell a duplex thats boarded up.i notice some apartments in dublin have internal security bars on the windows ,on the lower 2 floors.

chump

i'd rent it if I was you

but some of your comments on here including your comment on the government - you need to be pulled up on. please explain how the government has a lot to answer for? Would they have had a lot to answer for if you had made 10k?

iguana

My advice is to put it on the market and make a decision on what to do based on the offers you get. There is little point in deciding whether you will accept a €10k loss if the offers you get are €30k under, or maybe if you are very lucky you could break even.

However I believe that prices will fall a lot more than they have and you could be waiting a very, very long time for prices to reach 2006 levels again. So you should seriously consider taking the best offer you could get.

Pa ElGrande

I tend to agree with Iguana.
This will only act as a drain on your resources for the next few years and become a source of conflict between you and the friend in this enterprise and I would guess that it's already simmering. I say write it off to experience and sell now (if you can) and take a small loss now rather than a larger loss later. Of course you will both need to make the shortfall with the bank, unless you can persuade them to accept a short sale.

gamer

the government have no control over the price of oil,gas interest rates,the credit subprime crisis,banks buying billions of derivitive complex products which have no proper pricing structure,it was predictable ,when x amount of houses were built, employment would decrease,prices could decrease , the economy will slow down ,this economy will be better when people realise a house is a place to live primarily,not a financial product to be borrowed against .
A real economy cannot be based on people buying/selling ,building houses, eventually the flow of credit slows down.This is a small country,interest rates go up, theres only a limited no of 1st time buyers who have an income to buy a house/apartment.

Noteb

Thanks so much for all the advice... all appreciated!

When I said govenment has a lot to answer for...
I felt that they were to blame for us panic buying somewhere quickly to get on the market before house prices were completely out of reach. ( wish i got on here before buying)
At the the time- we were outbid on so many houses etc.

Maybe they could have done something about mortgages been given out so easily... or highlighted the bigger picture regarding the economy...
It' only an opinion- not really what i wanted to discuss here tho. There are a lot of reasons I am in this boat- including my hastiness/ stupidity etc.

Gurgle

Noteb wrote: »

When I said govenment has a lot to answer for...they were to blame for us panic buying ...they could have done something about mortgages been given out so easily... or highlighted the bigger picture regarding the economy...

:eek:
There is someone out there who thinks we don't have enough of a nanny state already ?

Noteb wrote: »

There are a lot of reasons I am in this boat- including my hastiness/ stupidity etc

Serious advice:
The hasty and stupid thing to do now would be to sell the property at a loss.

Look into refinancing over a longer term so that the rental income will cover the monthly costs. If you can arrange it that way then no matter how long the term you will make a profit on the place.

johnnyskeleton

gamer wrote: »

the tax you pay is little or nothing, cos rent plus expenses less than mortgage,you can claim insurance,service charges ,maintenance ,agents fees as an expence, say rent is 900,mortgage 1000, means no tax due you are not making a taxable return/profit on the duplex,

You can deduct mortgage interest, not the entire mortgage amount.

If 10 months rent (i.e. assuming some tenants will move on and it will take some time to get new ones, or some tenants might not pay their last month's rent etc) will pay for the property (mortgage, letting agent fees, insurance, bin charges and all other expenses), then it's really a question of whether you want the hassle of taking care of this from abroad for no money so that you can come back and have a house that might be worth less than it is now, or whether you want to take it hit and go abroad hassle free.

If someone is offering 10% less than what you paid in final quarter of 2006, then I'd take it. That is the very minimum that houses have dropped in price since then (i.e. that's what PTSB/ERSI says).

Noteb

Thanks- the plan is to put it on market for same as we paid for it- while we contine to live there.. After 6 months will re-evaluate.
Thanks all...

beeno67

Gurgle wrote: »

:eek:
There is someone out there who thinks we don't have enough of a nanny state already ?


Serious advice:
The hasty and stupid thing to do now would be to sell the property at a loss.

Look into refinancing over a longer term so that the rental income will cover the monthly costs. If you can arrange it that way then no matter how long the term you will make a profit on the place.

No matter how you refinanceit, the interest stays the same. At present interest is 5%. You can expect to pay at least 1% of property value on expenses. That means rental income must be 6% of current property value every year. If you have a property that is eanring 6% rent on current market value then congratulations you have bought well. If you have not then there is no possible way you "will make a profit on the place" no matter how you refinance it (unless property prices rise between now and the time you sell it).

sparkyjo

just as a matter of interest were is the property and how much did you buy it for originally just wondering why people are saying take 10% loses and stuff like that as not all areas are droping at the same rate and you never know if someone wants to buy close to family you might be lucky enough to get your money back oh and by the way if you do sell the house for what you bought it for or even 10k less it will acually cost you a couple of grand more due to auctioneer fee and solicitor fee

i hope you do ok out of it

by the way if you do rent it just know rent has gone up considerably

Gurgle

beeno67 wrote: »

No matter how you refinanceit, the interest stays the same. At present interest is 5%. You can expect to pay at least 1% of property value on expenses. That means rental income must be 6% of current property value every year. If you have a property that is eanring 6% rent on current market value then congratulations you have bought well. If you have not then there is no possible way you "will make a profit on the place" no matter how you refinance it (unless property prices rise between now and the time you sell it).

If your costs are 6% of the property value (not going to bother arguing with the figures)and you rent it out for e.g. 4%, then you have to make up 2% in the medium term.

Rent and house prices, (your friends) are subject to inflation.
Capital and interest rates (your enemies) are not.

If you finance it over 30 years, and rent inflation averages over those 30 years at 3%, then by year 15 the rent covers the full 6%. By year 30 the rent is at 9.7%.

Over the 30 years, the rent more than covers the 6% costs. It will actually knock a fair chunk off the capital too.

So you've made a profit already, even if house prices rise at an average of 0% over those 30 years.

Even if there is a total crash now and house prices lose 50% of their value (highly unlikely), then rise at an average sustainable inflation rate of 3% over the next 30 years, that would put prices at 121% of current value at that time.

More profit.

Not speculation profit, investment profit.

Long term.

iguana

sparkyjo wrote: »

by the way if you do rent it just know rent has gone up considerably

No they haven't, there is a large glut of rental property on the market now in most areas.

OP, good luck with your sale. My advice in choosing an agent is to get a number of valuations done and choose the agent who seems most realistic about the market rather than the one who is telling you what you want to hear. And ask them for details of how many sales they are currently making and actual sale prices in your area.

beeno67

Gurgle wrote: »

If your costs are 6% of the property value (not going to bother arguing with the figures)and you rent it out for e.g. 4%, then you have to make up 2% in the medium term.

Rent and house prices, (your friends) are subject to inflation.
Capital and interest rates (your enemies) are not.

If you finance it over 30 years, and rent inflation averages over those 30 years at 3%, then by year 15 the rent covers the full 6%. By year 30 the rent is at 9.7%.

Over the 30 years, the rent more than covers the 6% costs. It will actually knock a fair chunk off the capital too.

So you've made a profit already, even if house prices rise at an average of 0% over those 30 years.

Even if there is a total crash now and house prices lose 50% of their value (highly unlikely), then rise at an average sustainable inflation rate of 3% over the next 30 years, that would put prices at 121% of current value at that time.

More profit.

Not speculation profit, investment profit.

Long term.

OK I will correct myself. There is no way you will make a profit if you keep property for less than 25 years even if we have growth property prices over that time. If you keep property for 30 years, and there is constant growth in rental income and property prices you may make 21% which will be subject to tax, making the gain 15%
Also you will have to pay tax on the rent you receive after year 20.
Oh and also you will have to make payments to the property every year for the next 20 years to make up the shortfall between income and expenditure. Approx 1% of current property value.
So if you are very lucky after the 30 years and we have this great growth in property prices and rental income you might actually break even.
But hey if you have grandchildren they will love you because in 50 years or so there may be serious profit to be made.

Phaetonman

Noteb wrote: »

Is it adviseable to sell for €10K less than what we bought our Duplex 1.5 years ago. We just bought as friends to get on the ladder. Now we are moving abroad- (without the profit we thought we would make!)

Should we just rent it out via a management company??

Any advise appreciated!

Don't make your home an investment. I had friends like you who were gloating at me for spending dead money on rent. Sell now and you might be lucky to only lose about 15K rather than 50k.

Noteb

I take it back about the government! I should have researched more!

We have put it on the market last week, and so far have had a great response. Two offers above asking price. So it seems to be the right thing to do!


Thanks for all the advice - and pulling me up on statement about government. I take it back. I wanted something to blame

Gurgle

Noteb wrote: »

We have put it on the market last week, and so far have had a great response. Two offers above asking price. So it seems to be the right thing to do!

Excellent, congrats.
Would you be so kind as to make a post in the 'Housing Bubble Bursting' thread, just to wind up the doom & gloomers.

dewsbury

Noteb wrote: »

I take it back about the government! I should have researched more!

We have put it on the market last week, and so far have had a great response. Two offers above asking price. So it seems to be the right thing to do!


Thanks for all the advice - and pulling me up on statement about government. I take it back. I wanted something to blame

Just a word of caution..

A bird in the bag is worth two in the bush!

People often make offers and subsequently withdraw them.
I have significant experience of this. The phenomenon is more likely to occur in an unsettled market.
Also I have known investors offer a price of X Euros and when it comes to the actual deal they offer X less 10%.

Sorry to be a bit negative but it can be reality.
Either way I wish you luck.