Sell now or wait until prices again

kdowling

Hi
I brought a small one bed appartment at the height of the boom for €275,000. They are now being sold for €150,000 and being rented for €800/month.
I want to move into a bigger house so we are thinking of renting until the prices bottom out and then buy.

Any suggestions as to what to do with my 1 bed appartment. Should we sell now before it falls even futher or rent and wait until its value prices rises again.

We can easily afford to cover the difference between the rent money and the mortgage so i'm thinking the latter is the way to go.

any suggestions?

Mr. Loverman

Well, it is going to be a long time before prices rise again. Certainly your apartment will never sell for 275k ever again. (Perhaps in 30 years or something like that).

Renting it out is the way to go I reckon...

noxqs

Prices in Ireland will not go up for the next 20-30 years. You'll be waiting a long time.



Long way to fall yet. Also note that Japans house prices which boom started in 1982 is still below 1982 prices in Tokyo. Thats with population growth and a strong export economy far surpassing Ireland.

Sell now if you can.

Idbatterim

are you in negative equity?

Atlantic Dawn

The larger house will have depreciated more than your apartment has, sell now and move.

Monty Burnz

Prices will fall for years, then stay flat for years. As has been stated earlier, you may be waiting 30 years to break even on the apartment.

Treehouse72

OP, if you are in negative equity then the bank will not allow you to sell unless you can make up the shortfall between the sales price and the outstanding mortgage amount.

And as others have said, I don't think your apartment will be worth €275,000 again for decades. I am not exaggerating there by the way - my opinion (and it's only an opinion!) is it'll be 20+ years.

Finally, any amateur landlords I know all say that it is much, much more work and stress than they'd expected, and that they all overestimated their income from the endeavour. Don't forget you'll also have to pay income tax on the rent you receive, pay to register with the PTSB, pay the second homes tax, potentially pay CGT (maybe!) when selling in future, pay bin and water charges (depending on the type of lease you secure), pay for maintenance and redecoration and will need to allow for void periods and the strong possibility that the €800 rent may fall future.

3DataModem

If you have a cheap tracker that may make the case for keeping and renting a little stronger. Irrespective of what the sale price is when you repay the mortgage you will have an income generating asset. Maybe think of it as a pension?

kdowling

Thanks for all the advise so far.
I was on interest only for a few years so i have only €25,000 paid off the house. So if i sold for €150,000 I would still owe approx €100,000. I assumed that I would be able to pay off this €100,000 over the 25 years of the origional mortgage but on doing some futher research i think thats not the way it works.
would the bank be looking for the full €100,000 or would they give you a repayment scheme of 20ish years, or could you add it to the mortgage of another house?

Given this situation does that mean that selling is not an option?

Treehouse72

kdowling wrote: »

Thanks for all the advise so far.
I was on interest only for a few years so i have only €25,000 paid off the house. So if i sold for €150,000 I would still owe approx €100,000. I assumed that I would be able to pay off this €100,000 over the 25 years of the origional mortgage but on doing some futher research i think thats not the way it works.
would the bank be looking for the full €100,000 or would they give you a repayment scheme of 20ish years, or could you add it to the mortgage of another house?

Given this situation does that mean that selling is not an option?

No, the bank will not simply convert the NE into a unsecured loan or allow you add it on to another mortgage unless the circumstances are truly exceptional, for example if you have a very high income (and I mean very high with total job security). For most people in NE this makes selling nigh-on impossible.

kdowling

Treehouse72 wrote: »

No, the bank will not simply convert the NE into a unsecured loan or allow you add it on to another mortgage unless the circumstances are truly exceptional, for example if you have a very high income (and I mean very high with total job security). For most people in NE this makes selling nigh-on impossible.

Treehouse72 wrote: »

No, the bank will not simply convert the NE into a unsecured loan or allow you add it on to another mortgage unless the circumstances are truly exceptional, for example if you have a very high income (and I mean very high with total job security). For most people in NE this makes selling nigh-on impossible.

was speaking to the bank manager today and he says that we may be able to sell it and get an unsecured loan for the remaining €100,000. He is looking into it for me.
myself and the wife have a combined salary of €160,000 and good job security so maybe they will make an exception for us.

i'm thinking if this is possible we will cut our losses and sell but would like a bit of advise with my sums!

house cost €275,000, €25,000 paid off, selling now for €150,000 renting for €800/month.

At the moment repayments are €1,230 so could rent it at €800/month and make up the difference. If i thought interest rates would not change much i would not sell as the balance here is not much.


My worry is that worst cast senario interest rates rise to 7% and rent falls to €400/month means that the monthly repayments are €1,830 minus rent of €400 plus interest on rent etc which leaves quite a hefty monthly repayment.

what do ye think, sell up if the bank manager allows?

djmcr

It'll all depend on the rate of the unsecured loan, which by its nature will be higher than a mortgage

jmayo

kdowling wrote: »

Thanks for all the advise so far.
I was on interest only for a few years so i have only €25,000 paid off the house. So if i sold for €150,000 I would still owe approx €100,000. I assumed that I would be able to pay off this €100,000 over the 25 years of the origional mortgage but on doing some futher research i think thats not the way it works.

No your mortgage is secured on the actual property.
Once that is sold the remaining amount left unpaid after the sale would no longer be a mortgage, but a term loan and would be unsecured.
Unless as Treehouse has said you have exceptional positive cirumstances and can somehow guarantee a loan of that size it is going to be difficult.

kdowling wrote: »

was speaking to the bank manager today and he says that we may be able to sell it and get an unsecured loan for the remaining €100,000. He is looking into it for me.
myself and the wife have a combined salary of €160,000 and good job security so maybe they will make an exception for us.

house cost €275,000, €25,000 paid off, selling now for €150,000 renting for €800/month.

Also in your figures you need to factor in the selling costs and how much prices will have dropped by the time you actually sell it.
Is that 150,00 the current advertised prices for similar properties in the area because remember asking prices are as sure as hell above actual selling prices by about 5 to 10%.
Figure in legal fees of say 1200 plus advertising costs of another 400 and agent fee of about 1.75%.
Thus your 100,000 now becomes closer to 105,000 or more.

kdowling wrote: »

My worry is that worst cast senario interest rates rise to 7% and rent falls to €400/month means that the monthly repayments are €1,830 minus rent of €400 plus interest on rent etc which leaves quite a hefty monthly repayment.

what do ye think, sell up if the bank manager allows?

Sorry but I think the chance of getting unsecured term loan for that amount is not good.
Even if you get that facility, it will make it hard down the road to get a mortgage until that loan is paid down.

Either way you are going to be paying for this for a while.
As regards future factor in worse case scenario with regard to interest rates and add in things like property taxes.

Idbatterim

op could i ask where you bought the apartment? When you think of it now, 275k for a 1 bed apartment, its beyond madness! A lady in my office in 09, wanted to sell, prices had dropped from peak by then obviously, she though things would be back to normal in a few months or a year or two! could you imagine even if she sold in 09, how much she would have gotten compared to now!

monkeybutter

If you have a tracker and start renting you may lose it, if you move to variable which as present you'd see a 400 quid increase in the mortage repayments roughly (2.25 to 4.5 increase). That would be a disaster across the life of the mortage.

So unless you can cover the say 1400 a months - (800 rent - tax etc on the rent) you can't afford to move.

There may be other tax downsides to it as well.

So hang in there with what you have got

smelltheglove

The possibility of an unsecured loan may be low but I would jump at it if offered. You could decide to focus the next couple of years paying low rent somewhere small and as large payments as you can off the 100k, given the large income you have between you both you could have a HUGE chunk of that paid off in 5 yrs time and be looking at buying your dream home and starting again.

Rents will most likely fall, especially if rent allowance is reduced, interest rates may well rise also, it isnt a chance I would want to take. I thank God regularily that I sold in the boom as I really wouldnt want to have the NE so many people have. You are lucky enough to have good income, cut your losses.

Raskolnikov

kdowling wrote: »

was speaking to the bank manager today and he says that we may be able to sell it and get an unsecured loan for the remaining €100,000. He is looking into it for me.
myself and the wife have a combined salary of €160,000 and good job security so maybe they will make an exception for us.

i'm thinking if this is possible we will cut our losses and sell but would like a bit of advise with my sums!

house cost €275,000, €25,000 paid off, selling now for €150,000 renting for €800/month.

At the moment repayments are €1,230 so could rent it at €800/month and make up the difference. If i thought interest rates would not change much i would not sell as the balance here is not much.


My worry is that worst cast senario interest rates rise to 7% and rent falls to €400/month means that the monthly repayments are €1,830 minus rent of €400 plus interest on rent etc which leaves quite a hefty monthly repayment.

what do ye think, sell up if the bank manager allows?

Why not start overpaying the mortgage with every Euro you can spare until you can bring the negative equity level down to such a level that you can sell the apartment without the need for getting an unsecured loan? In the meantime, you can live in the apartment and at least instead of spending money on rent, you'll be using it to clear the mortgage?

I'd be nervous about an unsecured loan to cover negative equity. 100k @ 6% over 10 years will cost you €1,100 a month, then you're looking at rent which is going to be in the region of €1,200 a month for a bigger place.

I know people are suggesting that you sell now, but the market for apartments is truly dire at the moment. Even getting €150k might be unrealistic.

ricman

Theres a oversupply of apartments in most areas, young people are emigrating ,i dont think prices will ever go back up .Sell now and buy a house ,if you can afford to do so.We were in a bubble ,unless you are buying in killeney a 1bed will never be worth 250k again.In 2 years time it,ll be worth 100k.Buy an older house that needs redecorating and minor repairs.