Advice on specific case please. Rent or sell?

Grasshopper

New Member
Messages
7
Hi all.
First time poster, long time user of site as a resource. I have been reading through a lot of posts on this subject, but I still feel well and truly confused as to what my next steps should be.
My fiancee and I just went sale agreed on buying a house together. We secured a joint mortgage which allows me to hang on to my current home (which I purchased alone) and rent it out, or I can sell it either. We are getting married this year which is going to make the next few months tight, and I am confused about what to do.
I have read and heard all about the current climate for LL's and I am not exactly thrilled about the idea of becoming one, but I can also see the long term benefits of holding on to the property as an investment.

The house is in a well sought after area with extremely limited rental properties on the market and plenty of demand. I am sure there will be no issues renting it out. In fact, I am actually considering renting it out unfurnished (if I go down that path) as I believe this will attract longer term tenants. I could be picky about potential tenants. Advice on this approach would be welcome also.

House bought for €300,000 in 2008, just as things started to go south
Current Interest Rate is 2.15% + ECB
Monthly repayments €877
29 years left on mortgage (40 year mortgage sheeesh)
€235,000 outstanding on mortgage
Potential rental income €1850p.m. (€22,200 p.a.)

I would expect to sell for €300,000 on open market.

What can I expect my tax bill to be, assuming €2-3k services and maintenance p.a.?

My fiancee and I have joint income of circa €180,000 p.a., so I know we are in a good place in that respect, but the new house will drain us in the next few months, and mortgage repayments will be in or around €1750. Let's not mention the wedding.

Thanks a lot in advance

I'm really stuck on what
 
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RedOnion

Frequent Poster
Messages
4,597
Current Interest Rate is 2.15% fixed until end of mortgage term (strange contracts back then)
Are you absolutely certain it's fixed for the full term, and not a fixed margin over ECB?
If that's fixed for the next 30 years it's a valuable thing.

Income 22,500
Interest (5,050)
Other expenses (3,000)
Taxable income 14,450
Tax at 52% (7,500)
Assumes higher rate of USC.
 

Grasshopper

New Member
Messages
7
Are you absolutely certain it's fixed for the full term, and not a fixed margin over ECB?
If that's fixed for the next 30 years it's a valuable thing.

Income 22,500
Interest (5,050)
Other expenses (3,000)
Taxable income 14,450
Tax at 52% (7,500)
Assumes higher rate of USC.
Apologies it is 2.15% + ECB
Any advice?

Thanks
 

cremeegg

Frequent Poster
Messages
3,351
If you rent it you will make a profit of just over 10% after tax.

It is cashflow positive to the tune of €4,100 per annum.

And you are confused !
 
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Grasshopper

New Member
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7
If you rent it you will make a profit of just over 10% after tax.

It is cashflow positive to the tune of €4,100 per annum.

And you are confused !
I never thought I would be, nor wanted to be a LL, but I guess it makes a lot of sense, provided I get decent tenants. Would you suggest availing of a good management company or DIY? I will be local enough.
 

luckystar

Frequent Poster
Messages
219
There’s a lot to consider. You might need to be a bit more conservative on the rental yield and take into account the house being empty. Plus 29 years remaining is a long time.

or you could get out now and have €60k in your back pocket.
being a landlord is not for the faint hearted. There’s a lot of regulations and possibly more coming down the line. You have to be prepared to treat it like a business.
And take into account paying 2 mortgages and possibly childcare (if that’s in your longterm considerations)
Also if you’re getting into debt for the wedding - be nice to have some cash.
 

RedOnion

Frequent Poster
Messages
4,597
Just remember, you're not making a 29 year decision here if you keep it. You can reassess at any point, or your major life events. As your equity increases (hopefully!) your after tax yield reduces, so it might very likely get to a point where it would be logical to sell.

The rent Vs market value seems a bit optimistic for your rent, but that friends on location.

I'm not usually a fan of property investments with debt, but this looks to make sense. We'd need to know more about your overall financial position to talk about risk, but a bank being willing to lend suggests you can make repayments in a stress scenario.
 
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Grasshopper

New Member
Messages
7
Thanks for the responses. Very helpful.
Yes repayments are not a huge concern, and I could deal with a few months of it being idle. It all boils down to what sort of tenants I can secure i suppose. If it turns out to be hassle and stress I guess I would not persist with it.
If the new house didn't come along on top of the wedding I wouldn't think twice about it, and would rent.

Anyone rent houses unfurnished? Seems logical in the current market.
 

Leper

Frequent Poster
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1,218
I don't have any financial qualifications; in fact, I have no qualifications whatsoever, but this is a no-brainer, so rent.
 

elcato

Moderator
Messages
3,476
Would you suggest availing of a good management company or DIY? I will be local enough.
Get a reputable management company that is local to the property (I'm guessing it's not Dublin). Their cost is tax deductible as well. All you have to do is fill in the form 11 every year or indeed hire an accountant to do so.
 

Thirsty

Frequent Poster
Messages
2,598
Almost all houses are rented with furniture; but these days you don't include bedding, crockery etc. Keep it simple.

Demand is such that you are unlikely to have an issue finding a suitable tenant.

Open a separate account for rental income and use a tax agent to do your returns.

Build in to your expectations that at some point you will get hassle, but that happens in every business.
 

Itchy

Frequent Poster
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374
If you rent it you will make a profit of just over 10% after tax.

It is cashflow positive to the tune of €4,100 per annum.

And you are confused !
As was said this property investment is financially profitable. Another perspective is that you are a high salaried (highly salaried?!) individual. How much do you earn per hour net after you put in all your hours (actual not just contracted). How much time do you expect to put in to managing the property (its not necessarily passive)?. Is this a healthy return for your time considering forthcoming commitments?
 

Alkers86

Registered User
Messages
116
Get a reputable management company that is local to the property (I'm guessing it's not Dublin). Their cost is tax deductible as well. All you have to do is fill in the form 11 every year or indeed hire an accountant to do so.
But be aware this isn't the get out of jail free card that many people assume it will be. Plenty of examples of people who used management agencies and ended up with nightmare tenants, with little recourse from the agency.
 

elcato

Moderator
Messages
3,476
Would the bank not want the mortgage switched a BTL at a higher rate?
As long as the mortgage is being paid they tend not to bother with any of this. On the other hand if you were to declare it to the bank they may decide to change it alright, if you catch my drift
 

Andrew365

Registered User
Messages
271
If you rent it you will make a profit of just over 10% after tax.

It is cashflow positive to the tune of €4,100 per annum.

And you are confused !
Is it really 4,100 positive per annum? Is it not only 1,462 because although you can offset the 3k in expenses against tax you still need to spend the 3k out of the rental income?

As an edit, a slightly more complicated item to include is that you will be generating 5k of Equity per year in the property.

Rental Income 22,500
Mortgage - 10,524
Tax - 7,514
Expenses - 3,000
Net 1,462.00
 
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Andrew365

Registered User
Messages
271
Are you absolutely certain it's fixed for the full term, and not a fixed margin over ECB?
If that's fixed for the next 30 years it's a valuable thing.

Income 22,500
Interest (5,050)
Other expenses (3,000)
Taxable income 14,450
Tax at 52% (7,500)
Assumes higher rate of USC.
What did you use as expenses?
 

Sarenco

Frequent Poster
Messages
6,368
How did you calculate the Interest?
We were given the interest rate and the outstanding principal amount.

In very round numbers, the OP could earn around €7k pa, after tax, by keeping the property as a rental. Alternatively, he could cash out the equity and apply it against the mortgage on his new PPR, saving around €2k pa.

So, I guess the question is whether €5k pa is sufficient reward for all the risk and hassle that goes with being a LL?
 

Andrew365

Registered User
Messages
271
We were given the interest rate and the outstanding principal amount.

In very round numbers, the OP could earn around €7k pa, after tax, by keeping the property as a rental. Alternatively, he could cash out the equity and apply it against the mortgage on his new PPR, saving around €2k pa.

So, I guess the question is whether €5k pa is sufficient reward for all the risk and hassle that goes with being a LL?
Apologies, I was trying to delete the post, I had missed the fact he gave the mortgage outstanding amount.
 
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