Hi
Due to an expanding family and negative equity we are looking at renting out our apartment and then renting a house ourselves.
I am doing some calculations to see if this is feasible and would appreciate someone checking the maths and seeing if I am deducting too much/little etc. If this is more suitable to another forum please move.
Background Info:
Initial Purchase Price: €335000
Current Value (Estimate): €180000
Mortage Outstanding: €278000
Initial Term: 30 years
Term Remaining: 26.5 years
Current Mortgage Cost (Per Month) as Principal Private Residence:
Interest Rate: 3.5%
Interest Repayment: €813
Capital Repayment: €533
Total Repayment: €1346
Mortage Life Insurance: €75
Total Mortgage Cost: €1421
Less
Mortgage Interest Relief: €180
Effective Mortgage Cost: €1241
Now if I rent out the property.
Expected Rental Income Per Month: €900
Assume Occupied for 11 months
Annual Rental Income: €9900 (Updated)
Annual Mortgage Interest @ 3.5%: €9640
Deductibles
Deductible Interest Relief @ 75%: €7230
Management Fees: (Covers Bins, Insurance, Maintenance of Outside Common areas, Street Lighting): €700
Depreciation on Furniture etc: €300
Insurance: €300
Total Deductibles: €8530
Taxable Profit on Rental: €1370 (Updated)
Income Tax @ 41% €561.7
USC @ 7% €95.9
PRSI @ 4% €n/a
Tax Payable €657.6 (Updated)
Other Fixed Costs:
NPPR: €200
PRTB Registration: €70
Total Annual Liabilities: €947.6 (Updated)
Contingency: €500
Net Annual Rental Income: €8452.4 (Updated)
Overall Annual Cost of Renting out Property:
Interest Only = €9640-8452.4= €1187.6 (Updated)
Interest & Capital = (1346*12)-8452.4 = €7699.6 (Updated)
(or Approx €640 per month)
To Summarise
These are calculations based on data from a number of sources. If there are any ommission (glaring or not) please let me know and I will adjust accordingly.
The Interest only option if possible works out at close enough to cost neutral for the year. I have not spoken to the bank yet to determine if interest only is possible or not.
If not I am facing a shortfall of €600 per month to cover the interest and capital payments. This should work out at a net shortfall of approx €450 per month as rental on new house should be approx €1100 as opposed to current mortgage payment of €1241. I can afford to pay an additional €450 to move house but not a lot more. If the worst comes to the worst with problem tenants, non payment of rent etc etc we have savings that should cover us (although it would be a terrible waste of hard saved cash!)
If my calculations to date are correct I will update factoring in interest rate rises.
Thanks for any advice.
Tipping
Due to an expanding family and negative equity we are looking at renting out our apartment and then renting a house ourselves.
I am doing some calculations to see if this is feasible and would appreciate someone checking the maths and seeing if I am deducting too much/little etc. If this is more suitable to another forum please move.
Background Info:
Initial Purchase Price: €335000
Current Value (Estimate): €180000
Mortage Outstanding: €278000
Initial Term: 30 years
Term Remaining: 26.5 years
Current Mortgage Cost (Per Month) as Principal Private Residence:
Interest Rate: 3.5%
Interest Repayment: €813
Capital Repayment: €533
Total Repayment: €1346
Mortage Life Insurance: €75
Total Mortgage Cost: €1421
Less
Mortgage Interest Relief: €180
Effective Mortgage Cost: €1241
Now if I rent out the property.
Expected Rental Income Per Month: €900
Assume Occupied for 11 months
Annual Rental Income: €9900 (Updated)
Annual Mortgage Interest @ 3.5%: €9640
Deductibles
Deductible Interest Relief @ 75%: €7230
Management Fees: (Covers Bins, Insurance, Maintenance of Outside Common areas, Street Lighting): €700
Depreciation on Furniture etc: €300
Insurance: €300
Total Deductibles: €8530
Taxable Profit on Rental: €1370 (Updated)
Income Tax @ 41% €561.7
USC @ 7% €95.9
PRSI @ 4% €n/a
Tax Payable €657.6 (Updated)
Other Fixed Costs:
NPPR: €200
PRTB Registration: €70
Total Annual Liabilities: €947.6 (Updated)
Contingency: €500
Net Annual Rental Income: €8452.4 (Updated)
Overall Annual Cost of Renting out Property:
Interest Only = €9640-8452.4= €1187.6 (Updated)
Interest & Capital = (1346*12)-8452.4 = €7699.6 (Updated)
(or Approx €640 per month)
To Summarise
These are calculations based on data from a number of sources. If there are any ommission (glaring or not) please let me know and I will adjust accordingly.
The Interest only option if possible works out at close enough to cost neutral for the year. I have not spoken to the bank yet to determine if interest only is possible or not.
If not I am facing a shortfall of €600 per month to cover the interest and capital payments. This should work out at a net shortfall of approx €450 per month as rental on new house should be approx €1100 as opposed to current mortgage payment of €1241. I can afford to pay an additional €450 to move house but not a lot more. If the worst comes to the worst with problem tenants, non payment of rent etc etc we have savings that should cover us (although it would be a terrible waste of hard saved cash!)
If my calculations to date are correct I will update factoring in interest rate rises.
Thanks for any advice.
Tipping
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