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Currently renting, considering selling - what would you do?

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  • 20-03-2012 12:14am
    #1
    DNG
    Closed Accounts Posts: 4 ✭


    1st time post.

    Currently in a bit of a dilemma and looking for any input from the brainiacs on here.

    Basically I own a second property which is rented out to a good tenant (in receipt of rent supplement). I am wondering if I would be better off getting rid of it.

    Here are the numbers
    Possible selling price = €80k - €85k
    Mortgage owing = €65k (Tracker at ECB + 0.95%)
    Years left on mortgage = 11 years
    Mortgage repayments = €550 monthly
    Rental Income = €450 monthly

    I know I get a decent return on it from rent, but have to weigh up yearly tax return, second home charge, property tax, insurance, upkeep, adding €100 per month myself. Of course if I was able to keep it rented out for the next 11 years (who knows) then I would probably be in a good position, especially as house prices may have recovered and I would own an asset worth maybe €100k.

    On the other hand if I was able to sell, and made €15k or €20k (minus solicitor/EA fees), I would be able to pay this off my PPR mortgage, and take away any potential worries about owning a second property.

    So what do you lot think?

    Would you sell, or keep it?


Comments

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    #2
    pawnacide
    Closed Accounts Posts: 228 ✭✭pawnacide


    Highly unrealistic to assume you'll get 80-85k for a property with a rental value of 450. Sounds more like a 55-65k property to me.
    I can point you to plenty of properties selling for 75k with rental values of 550 if you like.


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    #3
    the_syco
    Registered Users Posts: 37,299 ✭✭✭✭the_syco


    pawnacide wrote: »
    Highly unrealistic to assume you'll get 80-85k for a property with a rental value of 450.
    I see where you come from, but I've also seen good landlords drop their rents to keep a good tenant, so without an area and house type, it'd be hard to say what the OP could get for it.

    OP: do you have another house, or this your only house, and you're renting elsewhere?


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    #4
    pawnacide
    Closed Accounts Posts: 228 ✭✭pawnacide


    Where is the property ?


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    #5
    [Deleted User]
    Posts: 23,339 ✭✭✭✭ [Deleted User]


    pawnacide wrote: »
    ............
    I can point you to plenty of properties selling for 75k with rental values of 550 if you like.

    Please do :)


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    #6
    pawnacide
    Closed Accounts Posts: 228 ✭✭pawnacide


    These are just some from my county .. you can search ur own county. rents vary but so do prices.

    For sale
    http://www.daft.ie/searchsale.daft?id=638675
    http://www.daft.ie/searchsale.daft?id=639183
    http://www.daft.ie/searchsale.daft?id=639664
    http://www.daft.ie/searchsale.daft?id=631976

    To rent
    http://www.daft.ie/searchrental.daft?id=1073364
     http://www.daft.ie/searchrental.daft?id=1128823


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    #7
    the_syco
    Registered Users Posts: 37,299 ✭✭✭✭the_syco


    DNG wrote: »
    Basically I own a second property which is rented out to a good tenant (in receipt of rent supplement). I am wondering if I would be better off getting rid of it.
    If the property is an apartment, I'd get rid of it, as I can't see them going back up anytime soon, unless it's in a very good area with lots of jobs nearby with not many apartments nearby.


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    #8
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Personally, I'd keep it. That is an amazing tracker you have, you will never get its likes again.

    If you are struggling, or are finding being a LL a pain, then sell. If not, I'd ride it out.


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    #9
    DNG
    Closed Accounts Posts: 4 ✭DNG


    Good feedback so far - thanks all.

    I own a second home which I live in.

    The property is a 3 bed semi in Donegal. I really do not think that the price I hope to get for it is unrealistic at present. A similar house that was a bank repo recently sold for €10k more. OK I may not be as lucky, but I do think I will get at least €80k if I decide to sell it.

    The reason for my post was to ask if the sums make more sense to hold on to it. Although I think 11 years is a long enough time, in the great scheme of mortgages its not really, and if there is a good chance of having it rented out for all that time then I may have a decent asset for the future. Of course no-one knows what the future holds and whether it will always be rented out, or what charges the Government will think up in the future. At present I am not struggling as I am in a decent job, as is my partner, and adding the €100 each month and the extra charges are not too bad at the minute. Nor am I finding being a landlord a pain, but my tenant is very good to be fair. If I had a bad tenant I am sure it would make my decision easier.

    I was just doing a straw poll to see what some of you would do, as there is so much good knowledge on here.


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    #10
    CricketDude
    Closed Accounts Posts: 247 ✭✭CricketDude


    Dont forget to take into account that losses can be carried forward and offset against future profits.
    If you are not struggling with what its costing you now then id wait it out.
    These things are cyclical.
    Anyone saying property, rents or the economy will keep going down and never rise again, is as stupid as the people who used to say it would never go down years ago. We can all make predictions which may or may not come to pass. It doesnt make us experts, despite what we like to think.

    I dont think you are in a bad situation at all.
    I smoke more than twice what that apartment is costing you. I probably spend more on coffee too.


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    #11
    DNG
    Closed Accounts Posts: 4 ✭DNG


    CricketDude wrote: »
    Dont forget to take into account that losses can be carried forward and offset against future profits.
    If you are not struggling with what its costing you now then id wait it out.
    These things are cyclical.
    Anyone saying property, rents or the economy will keep going down and never rise again, is as stupid as the people who used to say it would never go down years ago. We can all make predictions which may or may not come to pass. It doesnt make us experts, despite what we like to think.

    I dont think you are in a bad situation at all.
    I smoke more than twice what that apartment is costing you. I probably spend more on coffee too.

    Sorry don't understand what this means? Could you explain it a bit. New to this landlord stuff.

    You make exactly the points that are putting doubt about selling in my head. I have a relatively small mortgage and not a huge amount of time left like many other landlords. Thats why I think it might be a good investment rather than pumping money into a pension for some gambler to lose a lot of it for me.

    I also take a lot of the doom and gloom stories with a little pinch of salt. If you listened to many people in the media and on the net, you'd think the world is going to end over this recession. People always need decent properties to rent. My property is in good condition and in a good location which should hopefully always have a decent level of rental demand.


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    #12
    CricketDude
    Closed Accounts Posts: 247 ✭✭CricketDude


    for example. And this is just an example to show you he workings and not a prediction.

    Say you make a loss of €2000 a year for 5 years.
    You will have no tax to pay as its a loss every year. (Though you will be paying the 2nd property and household charge. Which is not really that much at all, even if it doubles.)

    So total of €10,000 in losses.

    Then rent starts to go up and you are making a profit of €2000 for the next 5 years after that. You take the €2000 each year of your profits until you use up the whole €10,000. Which means you dont pay tax on the profits for those 5 years. Basically you end up even.

    Im probably not explaining it right but you should be able to find worked examples on the web. Try askaboutmoney.com for examples.

    Since you have been making a loss the last few years you probably already have losses to carry forward anyway.


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    #13
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    CricketDude wrote: »
    for example. And this is just an example to show you he workings and not a prediction.

    Say you make a loss of €2000 a year for 5 years.
    You will have no tax to pay as its a loss every year. (Though you will be paying the 2nd property and household charge. Which is not really that much at all, even if it doubles.)

    So total of €10,000 in losses.

    Then rent starts to go up and you are making a profit of €2000 for the next 5 years after that. You take the €2000 each year of your profits until you use up the whole €10,000. Which means you dont pay tax on the profits for those 5 years. Basically you end up even.

    Im probably not explaining it right but you should be able to find worked examples on the web. Try askaboutmoney.com for examples.

    Since you have been making a loss the last few years you probably already have losses to carry forward anyway.

    Maybe I'm going a bit blind here, where did OP say they've been making a loss?


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    #14
    ted1
    Registered Users Posts: 23,520 ✭✭✭✭ted1


    Mortgage is 100 less than rent. Also maintenance costs will result in loss


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    #15
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    ted1 wrote: »
    Mortgage is 100 less than rent.
    Irrelevant, full rental income is taxable less any allowable expenses. 75% of mortgage interest is allowable. We don't have this figure.
    ted1 wrote: »
    Also maintenance costs will result in loss
    We also have no idea of maintenance costs so i wouldn't assume.

    EDIT: At current repayments (550 x 12months x 11years)= Total repayment of 72,600 which would be a total of 7,600 interest over the 11 years, so OP is unlikely to be in loss making scenario


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    #16
    Tigger
    Closed Accounts Posts: 16,705 ✭✭✭✭Tigger


    ted1 wrote: »
    Mortgage is 100 less than rent. Also maintenance costs will result in loss

    paying off a loan isn't an expense
    if i have a shoe shop and i borrow 50,000 then pay it back at 25,000 a year did i incur an expense of 25,000 a year?


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    #17
    CricketDude
    Closed Accounts Posts: 247 ✭✭CricketDude


    Tigger wrote: »
    paying off a loan isn't an expense
    if i have a shoe shop and i borrow 50,000 then pay it back at 25,000 a year did i incur an expense of 25,000 a year?

    Its incorrect to say that paying back a loan isnt an expense.
    With your shoe shop 100% of the interest on the loan would be an expense.
    With the OP 75% of the interest is an expense. About €900 a year using the figures they have given.

    Then im fairly positive they will have other expenses to add to that.


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    #18
    DNG
    Closed Accounts Posts: 4 ✭DNG


    Sorry, was not online all day.

    I always thought that all my rental income, irrespective of whether it covered my mortgage or not, was just added to the rest of my income for the year and taxed at the going rate? Is this not correct? (minus allowable expenses of course)

    What some are saying is that if the rent doesn't cover your mortgage then you owe Revenue nothing until you start to make a profit? Surely that can't be right?


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    #19
    Merch
    Closed Accounts Posts: 3,327 ✭✭✭Merch


    You may need to speak to an accountant or even the revenue for advice

    But you can only claim tax relief on the interest paid and then only on a certain amount, Im sure thats available on the revenue.ie website, think its only 75% now, so while you may make 450, cost you 550, you can only claim tax relief on the interest (open to correction) the thing is as it seems you pay out more than you make you cannot it seems claim relief, nor can relief from rental be transferred to PAYE or Self employed income as far as I am aware. In other words you can only write off losses either against future rental income profits or other rental income profits, which you say isnt the case for you.


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    #20
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    DNG wrote: »
    Sorry, was not online all day.

    I always thought that all my rental income, irrespective of whether it covered my mortgage or not, was just added to the rest of my income for the year and taxed at the going rate? Is this not correct? (minus allowable expenses of course)

    What some are saying is that if the rent doesn't cover your mortgage then you owe Revenue nothing until you start to make a profit? Surely that can't be right?

    Your initial thought is correct, you can check what expenses are allowable on the revenue website, and then the remaining rental income is taxable at your marginal rate


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