Sell or rent & hope for the best

M

millertime

Registered User
Messages
232
My brother has a house which he bought for €300K & is now worth probably €200K at best. His mortgage is €280K. He is moving in with his girlfriend who luckily has her own house and much lower mortgage ( no negative equity)

He's at a crossroads:

Sell and realise a loss carrying the debt fwd ( est €70-80K)
Keep and rent( & all that involves) and hope for some uplift (but in the meantime incurring the interest costs on the €280K.

The house is in a fairly desirable area of Cork city but the same area has significant over-supply so selling not very attractive at the moment.

Does anyone have a spreadsheet that captures all the opportunity costs of options A/ B. I'd like to advise him but don't want to forget anything in the calculations. Obviously assumptions on rent and value are entirely subjective!
 
No savings worth talking about.

Under the following assumptions, what would you do

  1. Mortgage €280K-term 30 yrs
  2. Est Value €200K - 37% fall from peak
  3. Monthly rental income €700- 800 per month
  4. Interest rate 3.8% fixed for nxt 2 years
It comes down to the opportunity cost of paying the balance of a mortgage ( say €70K) vs the cost of servicing the entire mortgage into perpetuity offset by rent etc....

Is there any other cost I should consider?
 
You need to consider the girlfriend also.
Is she getting rid of renters so your brother can move in? If so, that loss of income will need to be offset against the gain from the renters in your brothers house.

Is she going to be happy to be effectively subsidising him?
 
Renting is also a business. So there may be more work and expense in it, than expected.
 
millertime said:
No savings worth talking about.

Under the following assumptions, what would you do

  1. Mortgage €280K-term 30 yrs
  2. Est Value €200K - 37% fall from peak
  3. Monthly rental income €700- 800 per month
  4. Interest rate 3.8% fixed for nxt 2 years
Click to expand...
Your brother must have had a good income to get a €280K mortgage on his own in the first place.

He might not have that income now, but whatever income he has and the security of his employment would be very relevant in trying to determine his best way forward.
 
You must log in or register to reply here.
Back
Top