Rent property or sell in negative equity

tigershould

Just looking for some opinions.

Living in house which is in negative equity but on a tracker mortgage.

In a good position where I can buy a new house and either rent out the existing or sell it and take a hit on the negative equity.

I'm pretty sure I'd have no problem renting but not sure I want to deal with being a landlord. I've done some basic maths and the rent will easily cover morgtgage tax maintenance fees and understand that renting my ppr might affect the tracker rate. Im thinking in 10-15 years the mortgage will be paid on the current house and it could act as some kind of pension.

If I sell I've been advised I could carry the negative equity with my next mortgage.

Kinda torn... What would you do?

TLDR: if I buy a new house should I sell my current house in negative equity or rent it out?

TheDriver

Depends where the house is, if prices will rise or rent is certain. Do u want hassle of landlordism? Also carrying ne is grand but you may have to buy straight away. People may not want to buy a neg equity house, i run a mile if any bank consent is required. Lastly, if you're in that good a position, should u pay off the neg equity??

evolving_doors

Been covered here before but you could do a ten year lease to the council (NOT the RAS before anyone mentions it).

Basically :
* Initial outlay to get everything up to spec (electrics, BER, legal costs for contract).

*Hand them the keys.

*Rent review in 5 years.

*Money into bank every month regardless of occupancy or not. (we know a friend down the road and her house has been vacant for last 2 years but she still gets paid)

*The rent is about 80% less than market but if you were to go it alone or EA management then you would be factoring in repairs/vacancy periods anyway so might work out the same.

*Of course you would have to pay tax but you deduct costs (mortgage interest, solicitors fees, any repairs you did to get it up to spec, cost of new furniture, accountancy fees).

Worth looking in to, each council might have slightly different criteria so any electrician you get would want to have experience dealing with the regs for that council. Our council told us to do x,y,z and our electrician rang them and quoted the regs and saved us a good few quid.

A lot of maths to do but its better than buying a new house and buying negative equity imo. Some banks will only let some folk get a second mortgage if they sign up to the 10yr scheme.

You could also consider extending your current mortgage to offset the difference in rent income and mortgage...but again, do the maths on how much this will cost as opposed to paying off early.

Lots of maths to do ! Sorry.

tigershould

TheDriver wrote: »

Depends where the house is, if prices will rise or rent is certain. Do u want hassle of landlordism? Also carrying ne is grand but you may have to buy straight away. People may not want to buy a neg equity house, i run a mile if any bank consent is required. Lastly, if you're in that good a position, should u pay off the neg equity??

I'm only guessing what the negative equity is. I won't rent or sell until I find my new place and at that stage I'll know the amount (probably about €50k). Yes I could just pay it off at that stage or I could just treat it as a side loan.

tigershould

Armelodie wrote: »

Been covered here before but you could do a ten year lease to the council (NOT the RAS before anyone mentions

Thanks for the detailed reply. This sounds interesting and I'm going to look into it further.

Is it really 80% below normal rent or do you mean it 80% of normal rent.?

evolving_doors

tigershould wrote: »

Thanks for the detailed reply. This sounds interesting and I'm going to look into it further.

Is it really 80% below normal rent or do you mean it 80% of normal rent.?

Ya 80% of market rent (they use the Daft quarterly reports on rent)...Some cities it should be easy enough to calculate, however if you are out in the sticks there would probably a bit of haggling. In saying that they might want to locate families near other relations or schools the kids might already be in etc.

Another thing is you get a little more per extra bedroom so it might be a consideration if you feel like converting a 'dining room' or whatever.

So say on House with market rent €1000

EA/managent co charges might be say about €1000pa. Your income is €11k and they mouthy be looking after basic maintainance (broken washing machine etc. ) but could still be liable for new white goods etc. also you probably might account for a month between tennants. So say €10000 gross pa.

Being a landlord yourself. You get the full whack + mary ringing you to change lightbulb every week + potential of tenant just refusing to pay rent... Then again it might all go swimmingly, but I can't see how you would get away with no maintainence costs every year +unoccupancy period of say one month a year. You might come out the same as EA but with a lot more grey hairs with stress.

Council Scheme.. Market rate PA is €12000 , they give you 80% = €9600 pa no hassle-money always in the bank- no maintainence costs -no phone calls ever.

So looks like there might be a potential diff of 400 pa!..

Of course theres always caveats like if you want to sell during it(dunno what happens there). If there is major structural issues (would have to pay in any case!)

Depends on what the demand for housing is in your area by the local councils too, so they mightnt even entertain you in the first place! But the media are always banging on about affordable housing so the demand should be there.

tigershould

Thanks, it's certainly food for thought.

If I rent this sounds like a really good option (if the council/bank accept it).

It's a tough one because I still think maybe I should cut my losses, sell and be done with it.

But having a low 1% tracker makes me think I should keep the place.

MouseTail

tigershould wrote: »

Thanks, it's certainly food for thought.

If I rent this sounds like a really good option (if the council/bank accept it).

It's a tough one because I still think maybe I should cut my losses, sell and be done with it.

But having a low 1% tracker makes me think I should keep the place.

Check your mortgage documentation, you are trying to make a decision without the facts here. Check to see if there is a clause that the rate is conditional on the house remaining your PPR.
I for one cant give you advice or opinion until I know that information.

evolving_doors

MouseTail wrote: »

Check your mortgage documentation, you are trying to make a decision without the facts here. Check to see if there is a clause that the rate is conditional on the house remaining your PPR.
I for one cant give you advice or opinion until I know that information.

yes that's true , we rang the bank and there was nothing in the contract about letting the property affecting the mortgage agreement (tracker is with the PTSB). I still got them to write a letter stating that too though just in case, which they did. I have read other threads though with folk being passed from billy to jack about getting any type of confirmation from the bank.

I don;t think you'll ever have all the facts but it's worth investigating. If your property ends up washing it's own hands then I'd think you would be crazy not to at least look into it.