Continue to rent property or sell

GTRE

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6
Single
salary 80k public sector, no dependents
Bought a house in 2002 current morgage 73k valued at 200k interest rate 4.5% rented since 2006. Rent pays morgage
PPR tracker .8, morgage outstanding 300k worth approx 285/300k- just about back in positive equity
My query really is whether I should sell the rental and put some or all of it into the PPR. I would welcome some advice.
 
You need to lay out the information a lot better, property by property.

Home
Mortgage
Value
Interest rate

investment
Mortgage
Value
Interest rate
rent

Brendan
 
Apologies Brendan

Home Morgage 300k
Value 285/300k
Interest Rate 0.8%

Investment
Morgage outstanding 73k
value 200k (as per properties locally)
interest rate 4.5%
rent 960 which covers morgage exactly.
 
Investment
rent 960 which covers morgage exactly.
How much did you buy the investment property for. If you were to sell it tomorrow, how much cgt would apply?

Sarenco will be along soon to tell you that this 960 in rent will average out to 650-720 (before tax!) by the time you allow for expenses and risks.

OP, please disregard everything that follows, I don't have a clue. I'm just hoping the people who do have a clue will correct my homework.
Any way I slice it, the rental property's returns aren't great. I'm coming up with a best-case gross return of 4.3% after expenses, and 1.9% after (presumed) taxes and cost of finance.

To me, that says sell the investment property (unless CGT is a big factor).

I'm less certain about what to do with it afterwards. I wouldn't like to tie it up in another long-term or risky investment, in case the ECB up their rates in 6 months time. There's no way i'd be paying down the home mortgage today either. You could stick the sale proceeds in an instant-access savings accounts at 2% and get a better return than paying down the mortgage.

At current rates, and with 100k+ in liquid assets, this mortgage would be a bigger problem for the bank than for you. I'd be interested to see what kind of deal they would offer.
 
thanks for your reply. Yes Im definitely moving towards selling the investment property- I bought for 150k but lived there for 4 years so it shouldnt be too big when take away expenses etc. I dont understand your last line- Im presuming you are talking about the PPR when you mention a deal from the bank???
 
I dont understand your last line- Im presuming you are talking about the PPR when you mention a deal from the bank???
Yes. Your bank may be prepared to "buy" the tracker mortgage off you: write off a portion of the 300k you owe them in exchange for switching you to a standard ~4% SVR. If they were to offer you 50k or more, you'd have some serious calculating to do. I suspect the actual offers they are making are much lower - looking to take advantage of the desperate and mathematically challenged.
 
That's a great tracker and there is no way I'd be paying any off this off. In your circumstances, because a) your close to equity leval and b) you are a civil servant and c) you have only yourself to consider.

You surely can do better on the investment interest rate with your large equity to value. Have you looked into this.

I've noticed in the last while that everybody seems to think it's best to sell the investment as the returns are not great. When someone demonstrates where it is better to put your money I'll agree with them. There is also the possibility of capital appreciation. With the downside of CGT. Because it used to be your PPR you really must run the numbers, because in your case it might be better to cash out now and reinvest. CGT specifically.
 
I dont understand the meaning behind b- civil servant? What difference does that make?
 
If you're a civil servant you don't have to worry about losing a job and paying your mortgage out of zero income.

If you had dependants and were a normal worker I'd advise getting down the mortgage amount.
 
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