renting out house to rent another? irrational or sensible???? :)

Hi There,

This may be a little long winded but please bear with me as I genuinely need some advice to help me make this decision!

I am a lone parent with two children I bought a house last year in Ashbourne for 295k I got it at a reduced rate as it had previously been advertised at 315k. I work in accounts full time but have recently started a course in physical therapy which i will be qualified in next year.

I am struggling with my 1300e mortgage at the moment and am awake every night worrying about how I am going to afford next months payment! I have decided that I would like to move out further eventually to Cavan to be precise as the houses are cheaper and you get more house for your money! I know I would save money by doing this and be able to live in a more affordable home so money worries wouldnt be so bad.

Yesterday I spoke to a lady selling her home in Cavan, she has a gym on the land that would be perfect for my business, we spoke for a while on the phone and she mentioned that she works in a local gym who are extending, the gym had asked her to do the exact course I am doing as they need a physical therapist next year! She said no as she is emigrating to Australia also the reason for selling the house!

If I put my house on the Market it will take forever to sell and I would more than likely be in debt to the bank of about 25k... I asked her how she felt about renting the house to me until I was in a position to sell mine...she agreed and I have made an apt to view the house.

Am I mad trying to rent my house out to go to Cavan only to rent another house? Would I be putting everything at risk? I have a boyfriend (not owner of house with me) - He thinks I am crazy for even thinking about and says he wouldnt have anything to do with it (we have decided to live together) He wont move to Cavan unless I have sold my house he thinks its too risky!

Any advice would be very very welcome, I dont have alot of people to turn to about this...

Thanks again

Aquaceri

The rent that you get for your house in Ashbourne will probably cover the rent that you have to pay in Cavan. So this seems to be a zero-risk ( financially) move. You can always reverse this move and be no worse off than when you started.

(CAVEAT: Be aware that you may have a Stamp Duty clawback on your house in Ashbourne if you rent it out. Check with your solicitor for the the exact rules that apply to your case)

Am I to understand that you will be getting a job in Cavan immediately? Bear in mind that while rural cost of living is lower ( esp. if you don't have to do too much car travel.), so are wages.

I don't understand your boyfriend's logic. Keeping your house allows you to back out if the Cavan move turns out to be a bad idea. This, to me, would reduce the risk of the whole thing. Perhaps he just doesn't want you to move to Cavan.......

Financially the big worry here is this - can you command a high enough rent on the house in Ashbourne to cover the mortgage (considering rents are falling).

You also need to consider the stamp duty implications. You will need to register with PRTB and take on the associated 'hassle' of being a landlord.

Hi MOB

Thanks for the reply, The Gym are looking for somebody self employed to work on the their premises renting a room as far as I am aware, Physical therapists usally operate that way. There is somebody doing physical therapy in Ashbourne in Jackie Skelly Gym already and also in Navan so my chances of competing with them when qualified are slim. Rates for a physical therapy session vary from 45 to 70 euro for a 45min session which even at the lower end is still more than double what I earn per hour now.

Obviously I would have to talk to the gym to make sure of all of this.

It just seems like a perfect oppertunity but I also feel like I am dreaming a little!

My boyfriend is worried that if I get tenants into my house and they move out and house is vacant for number of months that we will have to fork out both payments... I am considering moving because I am really struggling with bills and mortgage so he thinks I am jumping from frying pan into fire I suppose...

Hi Truthseeker,

I never thought about stamp duty implications i thought that was only if I had two mortgages, Houses the same as mine are renting right now for 1k per month so I would have a shortfall of about 250e per month but rent in Cavan would only be approx 650e per month...

Thanks

aquaceri said:

Hi Truthseeker,

I never thought about stamp duty implications i thought that was only if I had two mortgages, Houses the same as mine are renting right now for 1k per month so I would have a shortfall of about 250e per month but rent in Cavan would only be approx 650e per month...

Thanks

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What if the physical therapy job doesnt work out in Cavan?
Im a bit surprised at your assumptions on payment to a physical therapist, I saw one yesterday in Dublin and was charged 60 euro for a 1.5 hour session. So thats only 30 euro for 45 mins (I thought it was kinda low, perhaps my next session will be shorter?).

Your BFs fears of having to cover both mortage and rent is definitely a possibility, but thats the situation anyone faces when they become a landlord. Its a risk.

I think you need to consider your quality of life. Lying awake worrying about mortgage repayments is not good for you.

Just a query, you mention 'we' in your last post re your BF paying towards rent/mortgage in the Cavan situation - is he currently contributing to your mortgage - and if not and he is willing to if he moves in then why not stay put and have him live with you (obv if he would like that too!!) and contribute half to household costs and pay you 'rent'? Then you would not be subject to any stamp duty implications and wouldnt have to worry about making the mortgage repayments alone each month.

aquaceri said:

It just seems like a perfec
My boyfriend is worried that if I get tenants into my house and they move out and house is vacant for number of months that we will have to fork out both payments... I am considering moving because I am really struggling with bills and mortgage so he thinks I am jumping from frying pan into fire I suppose...

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I think he is right to be worried TBH. What will happen if you can't rent the house? Do you have savings? I assume not as you say you are struggling.

Will the rent cover the mortgage? Will there be stamp duty issues as it becomes an investment property?

The rental market is flooded and rent is fall (because like you people can't sell at a price they "need", TBH this is going to take YEARS and YEARS to sort out)

Why do you think the lady is leaving the country? What do people cut back on in a recession........gym membership, treatments? (I'm suprise Jackie skellies isn't in trouble due to its rapid expansion at the peak of the market) Why do do think JS like to hire out rooms? Cos is struggling to get money from else where?

Whats your 3 year plan for yr new business? How many treatments a week/year (Turnover) do you need to 1) survive, 2) live, 3)make a profit and prosper?

How will you attrack custom in a new area with few contacts? Word of mouth is always a cheap way of starting a business will you still be able to do this in Cavan? What cost are involved....rent, advertising, tax? How many treatments a week/year to you need to breakeven? Is this realistic and in easy reach?


If you can't answer the questions above i'd say its better the devil you know given the current enviroment.
If you can give a confident and logical answer to the questions you seem to have done your homework and maybe you could make it work.


(I have just read your post about the rent not even covering the mortgage but rent in caven being 650. So all i all that 900 just in yr accomatation costs 650 + 250= 900= 4 treatments a week at €60 JUST to cover yr accomadation cost. (before tax etc). Then you have business cost, tax, living expenses. Is that realistic?)

Hi aquaceri,

Is your boyfriend helping you with the bills and mortgage payments at the moment? If so, and you are still struggling then it would make sense to move. If he is not, then his opinion is not really a valid one and you need to do what's best for you.

Hi there,

Just to clarify a couple of things, when I become qualified I have no intention of ripping people off, I gave those prices as a general guide because thats what I have seen advertised and what I have heard from people..obviously prices vary depending on lenght of session and the type of injury!

Also, I have a full time job which I do NOT intend to leave to start a new business on a whim, that would completely stupid, I plan to start off my business on a part time basis the reason I mentioned the Gym in Cavan was because it was just another option! I am still only bashing these ideas around in my head...

My boyfriend doesnt contribute to my mortgage or bills other than helping me out when I need it and he has it...we dont live together and my children arent his. We have discussed moving in together recently, I can make this move alone or with him...

Anyway thanks for all the advice there have been a few things mentioned that I hadnt even thought about for example stamp duty...

I think I am probably swaying away from the idea now as it may cause more STRESS in my life than i already have...

It is very difficult to figure out the right thing to do in these situations and I appreciate all your feedback

I dont think your idea is mad, but there is risk associated and that can cause a lot of stress if things dont work out.
If your BF moves in you will have a lot less pressure financially.

Great idea about starting the physical therapy part time, the one I saw yesterday also does personal training, so that might be an idea to incorporate into your new career as well?

Thanks truthseeker...I think I need to have a long chat with BF about all of this because if he did live with me in my current home it would relieve alot of pressure but also dont want him to feel I only want him to move in so I dont have the stress!

The college I am in has alot of courses around the area of personal training, fitness and pilates but unfortunatley I dont come from a sports background and am not very fit myself lol lol I started my course not just to treat sports injuries as this would only make up a small percentage of my business but to help people who suffer from pain i.e elderly and people with accident injuries like whiplashh and back pain. I would love to go into business with somebody who has experience in the fitness area and combine the two that way....

Thanks

Good Luck with what ever you decide.
Great plan to start part time.....its just i see SO many people start things like this.........they really haven't thought it through....and fail.

But it looks like you are considering all the options and risks and taking a sensible approach.

(PS. I have a problem with my muscle in my arm.....it hurts when i pick things up/grip things. Can you help me out )

aquaceri said:

Thanks truthseeker...I think I need to have a long chat with BF about all of this because if he did live with me in my current home it would relieve alot of pressure but also dont want him to feel I only want him to move in so I dont have the stress!

The college I am in has alot of courses around the area of personal training, fitness and pilates but unfortunatley I dont come from a sports background and am not very fit myself lol lol I started my course not just to treat sports injuries as this would only make up a small percentage of my business but to help people who suffer from pain i.e elderly and people with accident injuries like whiplashh and back pain. I would love to go into business with somebody who has experience in the fitness area and combine the two that way....

Thanks

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Well maybe just bite the bullet with your BF and get him to move in. When I first moved into my own place I found it difficult financially and my BF was talking about moving in. I was open with him about how it would help financially but that obviously that wasnt the sole reason I wanted him to move in!! The reality is that it would be a financially good move for him as well, sharing living costs benefits both. Within a week of mine moving in he was saying he should have moved in years ago!! The burdens of housekeeping are so much easier shared - freeing up time to relax more. I recommend it!

Its never too late to get fit!! You can use all this extra free time when your BF moves in to work out and exercise more

Mr DT said:

Good Luck with what ever you decide.
Great plan to start part time.....its just i see SO many people start things like this.........they really haven't thought it through....and fail.

But it looks like you are considering all the options and risks and taking a sensible approach.

(PS. I have a problem with my muscle in my arm.....it hurts when i pick things up/grip things. Can you help me out )

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sent you a PM

Thats very true truthseeker... I will have a chat to him maybe he just found everything a bit overwhelming last night when i blurted out this plan of mine lol

aquaceri said:

Thats very true truthseeker... I will have a chat to him maybe he just found everything a bit overwhelming last night when i blurted out this plan of mine lol

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ah....always better to tiptoe up to huge life changing plans with potential live in Bfs - otherwise you just frighten the life out of them

Will the rent cover the mortgage? Will there be stamp duty issues as it becomes an investment property?

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Dont forget that you have to pay income tax on the rental income from the property you own. You can't just balance it off against the rent you are paying as from a taxation point of view they are two unrelated transactions. Also, you can only offset the interest portion of your mortgage and some expenses against your rental income.

So your rental income in Meath would have to be sufficient to cover the mortgage on the property plus the additional income tax owed for you to break even.

Only 75% of interest allowable as a deduction... plus stamp duty clawback. And uprooting 2 kids (this is definitely something to think about)

My concern is re quitting the accounts job for the therapist role.

Unimaginable in the currrent climate. Hard to make it work in the boom-times.

I have thought about uprooting the kids and I dont want to have to do that but i felt it would give them a better quality of life in the long run.... as for quitting my job to become a therapist I already said that wouldnt happen for a while and trust me I have done some research and alot of thinking about this..Arent we all better off doing something we love than something we hate??? and the current climate has affected every area of every sector...its a risk you take...also I would be keeping full time job until I was sure I had enough income to leave...this believe it or not is a good time to start your own business especially if you are passionate about something!

16 people in my company have been put on protective notice as and from last monday at least if it does trickle down to me I will have something to fall back on! (I have been told my job is safe)