Another sell or keep investment property?

PebbleBeach2020 said:
The 7k profit there is a risk and the 2k profit if you want to call it that from paying 65k off his mortgage is risk free.
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True. But given the overall health of the OP's finances, it's appropriate to take that level of risk.

There's always a trade off between increased risk and increased return.
 
PebbleBeach2020 said:
The 7k profit there is a risk and the 2k profit if you want to call it that from paying 65k off his mortgage is risk free.
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True. But given the overall health of the OP's finances, it's appropriate to take that level of risk.

There's always a trade off between increased risk and increased return.
 
Thanks everyone for your views. In the process of organising for it to be painted, carpets cleaned etc so we will look to rent it and see if we like any of the prospective tenants! Agree with the view that the key is ensuring the tenant can afford the rent.
 
Update 5 years later. Our tenant has advised that they will be leaving in August. Now we need to decide if we put the property on the market or start a new tenancy. I haven't looked in detail into the new rules as felt that they weren't very relevant in the context of an existing tenancy and only owning one property. Do the new rules mean that it always makes sense to sell at this stage?

Property value - say €400,000
Original cost €475,000
Outstanding Mortgage - €115,000
Monthly repayment - €1,832
Monthly rent - €2,125
Tracker rate plus 2.25%
Another circa 6 years to run

Intention had always been to retain to give somewhere for kids to move to if they decide to stay in Dublin. We do live in Dublin but are both from the country and think it is good to get out of home for college if possible! We have been very lucky with our tenants always.

So do we now sell due to new tenancy rules?

Our personal pension plans are already being funded to the maximum every year.

Thanks in advance.
 
Kerrygrrrl said:
So do we now sell due to new tenancy rules?
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Your primary risk with the new tenancy rules is this one:

1. Your next tenant will be entitled to a 6 year lease after 6 months.
2. If you want the house for your kids in 6 years time or so, you might think fine, I'll evict then. But there may have been yet another rule change and that route will be closed, you may mess up on the paperwork and you'll be locked in for a further 6 years or your tenant may just overhold (it can take 2 and a half years or more and large legal fees to get an overholding tenant out).
3. As a small landord you can take back the house for immediate family use within the 6 year term. Again, that rule might have been removed when you want to use it, you might mess up on the paper work and find you have to repeat the whole process or the tenant may overhold.

Personally I think that the PRS is just too risky for the ordinary person these days. A sample of the risks; misbehaving tenants aided by the RTB, more rule changes, criminal prosecution for mistakes in forms, a devaluation of at least 30% if you have to sell with the tenant in situ, introduction of an onerous inspection regime, introduction of a requirement to increase the BER etc. etc.

It may make sense from a numbers standpoint now (rent v costs) to re-rent and stay in. But the risk is that you become locked into an investment that you can't get out of or can only get out of by selling at a significant discount. Likewise, just because we can increase the rent to market now does not mean that that rule will continue so you ultimately could have a worst case scenario of a long term tenant in situ that you can't remove, falling rent in real terms and increased costs. That is a liability and is not a risk I would take.
 
Thanks for the update.


Income €25,500
Interest €2,587.50
Other costs €4,000 say

Profit €18,900

Investment €400k - €115k=€285·K (using your €400k valuation)

ROI 6.6% (yes that's before tax, all profits are subject to tax)



So you have a good return and a potential tax free capital gain from here. Two good reasons to hold.

The hassle and legal uncertainty around being a landlord on the other side.

If it were me, the next question I would ask myself is, what would I do with the €285k I would get if I sold.

Note:
You bought it for €475k in 2008
You thought it was worth €360k in 2021
Neither of these accords with a value of €400k now.
 
How did the mortgage on the rental drop from €295k to €115k in five years? Did you pay it down ahead of schedule?

Also, is the mortgage on your PPR now cleared?

There are definitely risks involved with staying in the rental market but, as @cremeegg says, what else are you going to do with the money?

As against that, the property may now achieve more than you paid for it in 2008 so CGT becomes a factor with any future capital appreciation (although you still have partial PPR relief).

I suspect it’s going to be a finely balanced decision but you will need to get a good idea of (a) the market value of the property; and (b) the realistic market rent that can now be achieved.
 
How old are your kids now? Is the eldest about to start LC or has already started college just doing a rough calc?
 
Sarenco said:
Also, is the mortgage on your PPR now cleared?
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If it is not, use the sale proceeds to pay off the PPR mortgage. There is a guaranteed return and it is a far safer option than remaining in the PRS.

Sarenco said:
There are definitely risks involved with staying in the rental market but, as @cremeegg says, what else are you going to do with the money?
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If Harris does manage to end the deemed disposal rule for EFTs, long term you should make a decent return on these and if you don't mind the volatility, again, a less risky investment than the PRS. A diversified basket of conservative shares is another suggestion. I have bought shares in CRH, Kerry, AIB, Ryanair and UK and EU insurance companies.

Honestly, I think that putting the money on deposit is less risky than the PRS at this stage. At least there you will only lose to inflation. If you have to sell with the tenant in situ, you will face a large loss on your capital and, depending on the rules and return when you have to sell, it may be difficult to find any interested purchaser.


misemoi said:
How old are your kids now? Is the eldest about to start LC or has already started college just doing a rough calc?
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If one of your children is close to college age, perhaps leave it vacant until then. The child can take up residence and do rent a room with the other bedrooms; tax free income and no risk of losing the house. That would also reduce your costs in so far as college fees and living expenses are concerned.
 
Greenbook said:
If one of your children is close to college age, perhaps leave it vacant until then. The child can take up residence and do rent a room with the other bedrooms; tax free income and no risk of losing the house. That would also reduce your costs in so far as college fees and living expenses are concerned
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This is what I was getting at...but note the tax free income would be for your adult child, not you OP. So you would still have to pay the mortgage. But then I think you could expect your child to live off the rent and then you don't need to give them cash support for college.
 
@ClubMan

Per the CSO, Dublin residential property prices are now 10% higher than their February 2007 peak.

In other words, I suspect the OP’s €400k estimate is very much on the low side.
 
Thank you everyone for your responses.

To answer all the questions asked:

Current rent is €2,050 which can be increased to €2,125 as it is in a RPZ. Or can I set to market rent now as new tenancy?
Our PPR is fully paid off.
We have been paying the mortgage on this rental property ahead of schedule.
Value may be on the light side - I haven't had it valued - I tend to err on the conservative side.
I have no idea what I would do with the net cash - my pension is fully funded and other half is making maximum contributions for age.
Eldest is going into 5th year so two years away from college.

Thanks
 
Kerrygrrrl said:
Current rent is €2,050 which can be increased to €2,125 as it is in a RPZ. Or can I set to market rent now as new tenancy?
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As long as the tenant actually leaves voluntarily in August, you can raise to market rent for the next tenant.

This is at the cost of being locked into a six year cycle under the new rules. You can only evict to sell every 6th year anniversary from the start of the tenancy.

Eviction for Immediate family / landlord move-in is the main anytime eviction method remaining.

For rent estimate, you could check the RTB register and it will give you a list of nearby properties and their rentals. You are required to use the information in the register to inform your decision on rent.

You have to pick 3 as representatives rents that match your apartment. The RTB are a little unclear what the actual rules are for rent setting.

They have said that just picking the highest 3 is not prohibited, but maybe it might cause issues.
 
LarryScott said:
Eviction for Immediate family / landlord move-in is the main anytime eviction method remaining.
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This is allowed, but the child must 'need' the property. If you are in Dublin and your child is goaving to university in Dublin, the tenant could argue that the child does not 'need' the house. Now, I've no idea whether that would succeed or not. It depends on what the pro-tenant RTB Tribunal views as being need. My point is really that there is no guarantee at all that you will get the house back for your child when you want it. The tenant could also just dig in and overhold. It is a long process getting the tenant out when they overhold.

You really can't be certain at all that it will be available for your child in two years time. Even if the tenant was willing to move out when you serve the NoT, the introduction of another eviction ban would mean that he doesn't have to.

LarryScott said:
They have said that just picking the highest 3 is not prohibited, but maybe it might cause issues.
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If you get the rent setting wrong, and this can just be a mistake in a form, you have the repay the 'overcharged' rent to the tenant and you could face criminal liability.

If you can afford it, and it sounds like you can, and you want to keep the house, the best option may be to leave it vacant for the next two years and then let your eldest move in.
 
Greenbook said:
but the child must 'need' the property
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Where did you get this from?

I think @Greenbook is being somewhat dramatic; having said that I think I'd agree with leaving it vacant for now.

You'll want to do some refurb anyway after 5 years tenancy & you can save a bit of cash & do it slowly yourself.

Subject to the various regulations you could airbnb for the tourist season.
 
DannyBoyD said:
Where did you get this from?
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The section (section 34 Table) uses the word 'requires' ie. to need something.

Now I am not saying at all that a tenant would succeed on that interpretation. I was simply trying to highlight that though there is a rule that you can take the property back if a child 'requires/needs' it, it may not be as simple as that. The tenant could challenge your NoT or the tenant could simply ignore the NoT or the rules could change yet again. Either way the child may be nearly finished their three year degree before you get the keys or you may not be entitled to get them back at all and you'll simply have to hope that your tenant will leave of his own accord at some point.
 
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