Time to sell?

Hi all,

Just to give a quick background.. My parents are both retired and own a second property which is currently rented. At present the rent just about covers the mortgage (leaving about a deficit of E80 per month - however does not include other incidentals, insurance, repairs, maintenance etc..) so they are running at a bit of a loss at the minute, and will more than likely remain this way for some time to come.

Whilst my parents are not in dire straits, they are finding it increasingly harder to rent said house, and I know that they can get stressed when the mortgage is due, making sure there's enough to meet it each month etc..

House is worth about 240k, mortgage is 80k with about 7 years remaining - on a tracker. So no negative equity.

They are considering selling now before house prices drop even lower. It's not on the market officially - not advertised, no signs etc.. however through word of mouth there are already there are 3 interested parties in the house.

2 parties have recently sold properties, so are cash buyers, not pending mortgage approval etc.. the third party would be seeking a mortgage and are approved and they know and love the area very well.

My parents are seriously considering selling at this point, as both are getting on in years and don't want the hassle and stress of renting, tenants not paying, leaving the place in disrepair etc..

Should they sell now whilst there's interest, pay off their mortgage and put the rest aside for their retirement, or would there be any point in hanging onto the house and continuing to rent it?

All signs point to sell - would love any opinions / other ways of looking at the situation.

Thanks!

Hi Martina,

Thanks very much for your response!

It's not that the property itself is anything spectacular - the location is fantastic however - my parents were thinking of moving a few years ago and were looking for another house on and off for about 5 years, however, location wise nothing could come close hence hanging onto the house.

The area the house is in - it must be at least 15 years since a house went for sale - it's the type of area that once people buy in, they don't ever sell. I've lived nearly 30 years in the location myself, and in all that time only 2 houses were sold - and even at that they were reluctant sales.

I don't think there'll be any problem with them needing to occupy their time, they're pretty sociable and they're always doing something - they're definitely not the type to be sitting at home all day twiddling their thumbs looking for something to do

They have been lucky rental-income wise up until about 2 years ago, in that the rent always covered the mortgage with a bit left over - on saying that though, they've had some nightmare scenarios too with noisy tenants, refusing to pay, leaving the house in need of major refurbishment, general hassle of collecting rent itself..

The current tenants are due to leave within the next few weeks, and when that happens, the rental income is likely to decrease yet again, leaving a further deficit between mortgage - rental income.

To be honest it's early days yet, they've only just come up with the idea of selling to pay off the mortgage (not in trouble yet, no arrears thankfully!) and these 3 parties have already come to view the house and expressed an interest within a week.

One party placed an offer before seeing the property. They have since viewed the house and have gotten an engineers report. Second party have also viewed and will be getting an engineers report done this week. Third party have viewed - no mention of an engineers report yet, but if dependent on getting loan approval, they will more than likely be getting one also.

I myself love the house and the area and in a way would hate to part with it, however I can see my parents reasoning what with the hassle with renting and the possibility of it being harder to maintain the mortgage for the next 7 years, it does look like selling now could be an option.

I think the idea would be to sell, put the money away safely (no risk) for the next year or two, and if house prices drop further within the next 12-24 months, perhaps purchase a small 2 bed apartment/townhouse with the remainder and be mortgage free. The idea being that a smaller/newer property would be easier to maintain and rent, with the rental income supplementing their retirement.

It's all early days yet though, so it remains to be seen what will happen and what would be the best course of action to take.

Again, all views appreciated! The more opinions the better!

I think from what you describe, this is a very valuable property - if 3 parties are already interested and the house not even on the market yet!

I have a strong feeling that if your parents sell now, they'll regret it later. Even if they do buy a smaller house/apartment in a year or two, it won't be as valuable as this property. In 7 years the mortgage will be paid off and the property will feed them forever after that. If they can hang on, I think they should.

If they don't want to bother with the hassle of renting out the property, they can get a letting agent to do so, at least after the mortgage is paid off.

As to a smaller house or apartment being easier to maintain and rent, the hassle of dealing with bad tenants would still be about the same.

well, thinking of my own parents, I wouldn't want them to have that hassle at this stage of their lives. I don't know how old your parents are but lets say they are in their late 60's/70's, I'm sure they would prefer to head off on a cruise than to be worrying if they'll have enough money to meet the shortfall of a mortgage every month. This isn't an investment for the future for them, they may want to enjoy the cash now! There is more to life than wondering if they wait another 5 years to sell that they might get another 5k . Who knows, they may be unlucky with their next set of tenants who may destroy the place and end up costing them more money! Just my tuppence worth....

The problem with "heading on a cruise" and enjoying the cash now is that it's very easy to outlive the cash to enjoy in this way, and that's when people begin to regret but it's too late, the cash is already gone...

As far as I understand, however, OP's parents aren't planning that (though it can easily happen with a lot of cash suddenly becoming available), they plan to buy a cheaper property in a couple of years time. That, in itself, seems more hassle to me - selling, looking for a another property, which almost certainly will need at least some repairs done before it can be rented out etc) than just keeping the property they currently have.

Also if they bought long time ago, there is likely to be some capital gains tax, which will reduce the cash they get.

Considering that they have 7 years left on the mortgage, they are very unlikely to be in their late 70's or even late 60's (banks don't like to give mortgages with repayment terms beyond the borrower's 65th or 70th birthday), 160K or so of cash isn't going to last very long if it's not carefully invested.