Should I sell a property due to low rent?

N

nbc

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Hi guys
I have 2 properties rented below market rate due to me having been a nice guy back in the day
House 1- dublin 3 bed - €1475 pcm
Market rate €2400+
Mortgage free

House 2 - Country location- 3 bed- rent €830
Market rate €1400
Mortgage interest only- was €150 pcm now almost €500

I’m unsure if I should sell one or hold on
My concerns are
1- these will never achieve a normal market rate as I can only increase by 2% anually
2- I’m concerned about reports Sinn Fein will bar evictions and possibly prevent sales in favour of long tenancies

Related information- I’m based in UK so I will not get full mortgage interest relief against my rental income like Ireland - I get a 20 % credit against tax
Secondly selling first will result in 60 k capital gains tax- the second perhaps 10k

Thanks in advance

Nbc
 
nbc said:
2- I’m concerned about reports Sinn Fein will bar evictions and possibly prevent sales in favour of long tenancies
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If you have good tenants, then you shouldn't worry unduly about evictions. If the tenants leave, you could sell then.

But the potential ban on giving tenants a right to rent the property for life would be a real concern, so yes, you should sell.

Brendan
 
Unfortunately, I am in a similar position. It is currently not rented as we have been "thinking about" our situation for the past month as our previous tenants left. No mortgage, worth about 265 with about 10k CGT due and rent at €1200 v €1800-2000 market rent.
So I don't really have any advice but looking at this thread with interest.
 
Brendan Burgess said:
If you have good tenants, then you shouldn't worry unduly about evictions. If the tenants leave, you could sell then.

But the potential ban on giving tenants a right to rent the property for life would be a real concern, so yes, you should sell.

Brendan
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Cheers Brendan
You’re advising to sell as rent will remain low for the foreseeable and if locked in not good?
Even if I’ll pay 60k CGT?
If you could only sell one which one?
Do you think rent for life is achievable politically ? Even constitutionally?
 
nbc said:
I have 2 properties rented below market rate due to me
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Hi,
Have you sold the rest of your property, or just asking about these 2 in isolation?

I'd be more concerned about your overall concentration of wealth in Irish property, especially if you're going to renting in UK.
 
With all the anti landlord noise that is popular now I would agree that selling maybe the right thing to do. It could take a long time to get a result on an eviction notice in the current climate. It might be prudent to have one served and make sure it is valid incl. notifying RTB on the same date as the tenants. If you have not one served you cannot enforce it. You can withdraw it later if that is what suits you then
 
Kind of depends on your financial situation overall, if you are only selling because you are looking for a better investment / return on your money (as opposed to selling because you need to liquidate funds), then look at it purely as your investment vs your opportunity cost. What is your investment making you at the moment vs what it could be making. If you were to sell and invest in something else would you be any better off?

You might not be achieving the market rate, however, you're still making €1,805 per month after your mortgage repayments. How much would you get if you sold the properties? Then how much would you be able to get from another kind of investment with that money? If you can get more with your money from another investment, then sell. If you can't then don't.
 
Always Learning said:
Kind of depends on your financial situation overall, if you are only selling because you are looking for a better investment / return on your money (as opposed to selling because you need to liquidate funds), then look at it purely as your investment vs your opportunity cost. What is your investment making you at the moment vs what it could be making. If you were to sell and invest in something else would you be any better off?

You might not be achieving the market rate, however, you're still making €1,805 per month after your mortgage repayments. How much would you get if you sold the properties? Then how much would you be able to get from another kind of investment with that money? If you can get more with your money from another investment, then sell. If you can't then don't.
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I don't think that looking at the figures is enough currently. There is an inherent risk with the current situation if the legislation change in terms of evictions/selling with tenants in situ...
 
Thanks guys
My financial position is healthy. I own a property in UK with a loan to value < 50%.
I don’t need to sell- the reason for selling would purely be to avoid being stuck in a situation where I can no longer sell my rental properties - and also perhaps to invest the money in a more productive fashion. I am conscious that I would be putting two families in a difficult position and this is what has prevented me from doing anything till now.
 
nbc said:
I don’t need to sell- the reason for selling would purely be to avoid being stuck in a situation where I can no longer sell my rental properties
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I don't think this will ever be legislated for. I think the current legal framework is at the boundaries of constitutionality and will not go further.

nbc said:
I am conscious that I would be putting two families in a difficult position and this is what has prevented me from doing anything till now.
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Tenants will more than likely leave at some point of their own accord. You could give them a very gentle deadline: "if you don't have something else by 2030 I will be selling up".
 
Guys- I’m curious as to which of the two properties I described would you sell if you could only sell one??
 
Ok
House 1 Dublin
Value 375 k approx
Mortgage free
Purchase price 120k
Rent 1475 market rate 2250 plus

House 2 1 hr from dublin
Value 200 k
Purchase price 175 k ( 2005!!)
Mortgage 150 k outstanding - interest only 4 % currently
Rental income 830. Market rate 1400
 
nbc said:
House 1 Dublin
Value 375 k approx
Mortgage free
Purchase price 120k
Rent 1475 market rate 2250 plus
Click to expand...

Gross yield: 4.7%, capital gain €255k.

nbc said:
House 2 1 hr from dublin
Value 200 k
Purchase price 175 k ( 2005!!)
Mortgage 150 k outstanding - interest only 4 % currently
Rental income 830. Market rate 1400
Click to expand...

Gross yield: 5%, capital gain €25k.


There is not much difference in the gross yield. So it comes down to net profit calculation per property which will be different as one has a mortgage and the other doesn't.
 
NoRegretsCoyote said:
There is not much difference in the gross yield. So it comes down to net profit calculation per property which will be different as one has a mortgage and the other doesn't.
Click to expand...

I think it is a little more nuanced than that. The net profit is not a good comparison because of the mortgage on B so I think it is better to look at the OP's net position assuming that mortgage is cleared whether they sell property 1 or 2 and all CGT and costs are paid etc.

The OP's fear or risk they are trying to deal with is the inability to sell or potential for cash to be inaccessible to them. With that as their motivation and assuming the rest of their finances are in order, it makes sense to retain property 2 as in the worst case scenario, "only" €200k would be inaccessible if they were not able to sell in the future.

Selling property 1 and clearing the mortgage on property 2 would leave the OP with (ballpark) €130k cash and a mortgage free €200k property. They may even be left with more cash if indexation relief is available on the property.

Selling property 2 leaves the OP with ~€30k cash and the mortgage free property 1. No real change for the OP in terms of cash available but obviously de-risks a highly leveraged property.
 
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