Building new house what to do with current home.

square ball

My girlfriend and I are looking to build a new home on a site I own on my parents family farm. Have deposit saved and have no problem getting a big enough mortgage to cover the cost of building.

We bought a house in an estate just outside a decent sized town nearly 4 years ago. Bought for €170,000 and similar houses in the estate have been sold in last few months for between €195,000 - €205,000.

We were wondering are we are better off selling or renting out the house. Our mortgage is around €650 per month and rent is currently making €1000 - €1100 per month. We both have decent paying jobs so wouldn't depend on rental income but don't want the house costing us money either outside of usual maintenance.

cruizer101

Are you sure you will be able to get a mortgage to build the house whilst you have a mortgage on your current home?

square ball

cruizer101 wrote: »

Are you sure you will be able to get a mortgage to build the house whilst you have a mortgage on your current home?

Yes, we had a meeting with the bank at the start of January and they said there would be no issue. Previously they used earnings from rental as part of calculations for income but are not doing this currently but having the second property will not have a negative effect on the mortgage for building once the rent covers the monthly mortgage payment which it should.

Sell. Being a landlord is not all milk and honey.

awec

Your mortgage is currently 650 on private residence interest rates.

What will it be when it moves to buy-to-let? Interest rates are a lot higher for that.

square ball

awec wrote: »

Your mortgage is currently 650 on private residence interest rates.

What will it be when it moves to buy-to-let? Interest rates are a lot higher for that.

I think between €750 - 800 a month.

ArrBee

rent.

That's an excellent rate of return.

Even if it doesn't go well you could sell later.

square ball

square ball wrote: »

I think between €750 - 800 a month.

So if half of that is interest and ye get €1100/month rent you are looking at a tax bill of €350/month unless ye have further expenses to deduct

My view is the pain in the arse outweighs the benefit on a property of that value, so I'd sell it personally.

awec

square ball wrote: »

I think between €750 - 800 a month.

I would think by the time you extract tax etc on rent it's not going to cover that mortgage. But, it's still a good return I'd think.

That said, I'd still sell personally.

The Undecided One

I think you will have enough on your plate with managing the new build withouth becoming a landlord at the same time.

It’s your decision at the end of your day but the less you have to think about the better.

seamus

Sell.

Sell Sell Sell.

If you're in the higher tax bracket that rental income will quickly whittle down to a net 100-200 a month after you've paid your mortgage and tax, and you will find it absolutely not worth the headache.

Government buildings

Sell. The hassle won't be worth one sleepless night.

Government buildings

Plus the fact that with so few houses to rent, your tenants will never leave, even if they run out of rent money.

square ball

awec wrote: »

I would think by the time you extract tax etc on rent it's not going to cover that mortgage. But, it's still a good return I'd think.

That said, I'd still sell personally.

I don't really expect to receive an income in the short term but once I can cover the mortgage and have the value of the property for the retirement fund once it's paid I'd be happy.

The Undecided One wrote: »

I think you will have enough on your plate with managing the new build withouth becoming a landlord at the same time.

It’s your decision at the end of your day but the less you have to think about the better.

We were hoping to stay here until the new build is finished and move straight in from our current home. Don't think either of us would be able to live with family for more than a week.

ArrBee wrote: »

rent.

That's an excellent rate of return.

Even if it doesn't go well you could sell later.

That's what I was hoping to do. OH wants to sell but we'd only squander any profit made if we sold now.

the_syco

square ball wrote: »

ArrBee wrote: »

rent.

That's an excellent rate of return.

Even if it doesn't go well you could sell later.

That's what I was hoping to do. OH wants to sell but we'd only squander any profit made if we sold now.

If the house is your only or main home you may be able to claim PPR Relief.

If you sell after having rented it, you may need to pay CGT on any profit you make.

Also, once a tenant is in the house for 6 months, they get Part IV rights, and can stay there 6 years. Doesn't matter if you only gave them a years lease; they can stay for another 5 years after the years lease is up.

discodiva92

Who owns the house?

Caranica

Sell, wouldn't recommend being a landlord to my worst enemy. Tenants have all the protections and it's heartbreaking to see your former home trashed by tenants. Been there

square ball

the_syco wrote: »

If the house is your only or main home you may be able to claim PPR Relief.

If you sell after having rented it, you may need to pay CGT on any profit you make.

Also, once a tenant is in the house for 6 months, they get Part IV rights, and can stay there 6 years. Doesn't matter if you only gave them a years lease; they can stay for another 5 years after the years lease is up.

Thanks for that info. So can the homeowner only remove tenants if they refuse to go if they are selling?

discodiva92 wrote: »

Who owns the house?

My girlfriend and I.

Caranica wrote: »

Sell, wouldn't recommend being a landlord to my worst enemy. Tenants have all the protections and it's heartbreaking to see your former home trashed by tenants. Been there

It doesn't sound too appealing now from the advice given above. All the rights seem to favour tenants which is understandable but little or no protection given to the homeowner if we got a nightmare tenant.

discodiva92

Only advice I'd add maybe check and see any benefits to being legally married?
Ye are in a very lucky position either way

square ball

square ball wrote: »

My girlfriend and I are looking to build a new home on a site I own on my parents family farm. Have deposit saved and have no problem getting a big enough mortgage to cover the cost of building. .............

square ball wrote: »

.............

That's what I was hoping to do. OH wants to sell but we'd only squander any profit made if we sold now.

Surely ye'd have the discipline to throw the cash at the new house?

discodiva92

Augeo wrote: »

Surely ye'd have the discipline to throw the cash at the new house?

Sounds like there comfortable

copacetic

seamus wrote: »

Sell.

Sell Sell Sell.

If you're in the higher tax bracket that rental income will quickly whittle down to a net 100-200 a month after you've paid your mortgage and tax, and you will find it absolutely not worth the headache.

I’d disagree, if it’s close to break even, then there would be no better investment than the property out there for your 6 or 7k profit you would make on selling.

Every year you come close to break even you have paid another chunk off your mortgage. So even if house prices stay static, you are building a decent nest egg. In 10 years you could have 70 or 80k equity in the house, likely 10k if you invested the money elsewhere.

Use a management agent, pay the extra to avoid 99% of the hassle and hope you don’t get that 1% of bad tenants. There is a risk to it, but good upsides in my opinion and since you seem to be comfortable enough otherwise you can afford the financial risk to a degree. You just treat it like a business and forget it was your home, replace things that break, do all maint via agent when needed and never go near the house again yourself.

copacetic

copacetic wrote: »

.................. In 10 years you could have 70 or 80k equity in the house, likely 10k if you invested the money elsewhere. ................

You can't invest equity.

BeginnerRunner

Augeo wrote: »

You can't invest equity.

I believe the point was if they pulled 6/7k out now it'd likely only rise to 10k ish over the coming years if invested somewhere now.


But if they do nothing and continue to run it, that 6/7k equity that's in the house will eventually rise to 70/80k as the mortgage is paid down and / or inflation takes house prices up. In theory.

ted1

ArrBee wrote: »

rent.

That's an excellent rate of return.

Even if it doesn't go well you could sell later.

But then they’d have to pay CGT.

OP, sell it once your new place is built.

ted1

copacetic wrote: »

I’d disagree, if it’s close to break even, then there would be no better investment than the property out there for your 6 or 7k profit you would make on selling.

Every year you come close to break even you have paid another chunk off your mortgage. So even if house prices stay static, you are building a decent nest egg. In 10 years you could have 70 or 80k equity in the house, likely 10k if you invested the money elsewhere. .

You are asumming prices in rural Ireland don’t collapse.