Have an investment property but rent is falling short by €170/mth to cover my costs.

wino

Registered User
Messages
73
I have an investment property but the rent is falling short by 170 a month to cover my costs. The equity is worth about 150K. Would I be better off selling and puttting the equity to better use ,considering the current lack of growth in the housing market.

Wino
 
2

--2cents

Guest
Re: investment property

Use the money to buy below market value property and you should end up with big profits.

Kess
 
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z106

Guest
Re: investment property

Definitely don't sell.

How about you remortgage instead ?
E.g. Lets say you can release €100k in equity.

This would cost you a further c. €5k a year in interest repayments. Along with your c. €2k you have to supplement at the moment that would be an extra c. €7k a year you would have to supplement.

SO - let say you put aside €15k of that €100k that would see you through 2 years of these extra repayments.(And maybe longer if you contimue to supplement say €100 yourself each month if you can afford it).

In that time hopefully rents will continue to rise along with your salary which should make things easier in 2 - 3 years time.

That way you will also avoid paying CGT if you sell which should also save you at a guess tens of thousands.

ANd you aslo retain an asset which will rise in the long term.

ANd you still have the €85k leftover to invest elsewhere.

You can tweak the fugures above to suit your situation but you get my point.
 
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z103

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover

How about you remortgage instead ?
E.g. Lets say you can release €100k in equity.

This would cost you a further c. €5k a year in interest repayments. Along with your c. €2k you have to supplement at the moment that would be an extra c. €7k a year you would have to supplement.

SO - let say you put aside €15k of that €100k that would see you through 2 years of these extra repayments.(And maybe longer if you contimue to supplement say €100 yourself each month if you can afford it).

Are you suggesting that the OP should re-mortgage in order to pay back their mortgage?
 
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z106

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover my

Yes - read my post again - it says it all there.
 

Persius

Registered User
Messages
204
Re: have an investment property but the rent is falling short by 170 a month to cover my

And how do you avoid CGT in this scenario? I though top up morgages could only be used in such a manner if the funds are actually used to renovate the house and thus increase it's original value.
 
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z106

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover my

You only pay CGT when you sell.

SO - if you wanna avoid paying CGT then NEVER sell !!
 

moneygrower

Registered User
Messages
630
Re: have an investment property but the rent is falling short by 170 a month to cover my

is that not like saying if you've no income you don't pay income tax??
 
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z109

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover

And how do you avoid CGT in this scenario? I though top up morgages could only be used in such a manner if the funds are actually used to renovate the house and thus increase it's original value.
Does a top-up mortgage used in this manner also mean that the interest on the top-up is not claimable against income (i.e. it is not tax deductible), so while it may ease payment worries for a while, it will result in trouble further down the line (you will not get a decent yield as the after tax income will not be enough to pay the top-up mortgage). I haven't worked the figures out, but this is my gut feeling on this.
 

ClubMan

Registered User
Messages
44,506
Re: have an investment property but the rent is falling short by 170 a month to cover

Does a top-up mortgage used in this manner also mean that the interest on the top-up is not claimable against income (i.e. it is not tax deductible)
Interest on loans/topups can only be offset against rental income if the money is actually used to purchase/renovate the investment property.
 

kkelliher

Registered User
Messages
670
Re: have an investment property but the rent is falling short by 170 a month to cover my

Another way to look at this is that for every €170 you are putting into the property someone else is putting in substancially more and the rate of return on your capital investment is not that bad at all.

You should only sell if you need to. there is a large surplus of housing but there is not a large surplus of decent (as most renters will tell you) well furnished and maintained rental properties.
 
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z106

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover my

Another way to look at this is that for every €170 you are putting into the property someone else is putting in substancially more and the rate of return on your capital investment is not that bad at all.

You should only sell if you need to. there is a large surplus of housing but there is not a large surplus of decent (as most renters will tell you) well furnished and maintained rental properties.

Good point.
 
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z109

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover

Another way to look at this is that for every €170 you are putting into the property someone else is putting in substancially more and the rate of return on your capital investment is not that bad at all.

You should only sell if you need to. there is a large surplus of housing but there is not a large surplus of decent (as most renters will tell you) well furnished and maintained rental properties.
Or indeed, you could say that you are subsidizing your tenants to the tune of 170 a month.

Are you on an interest only mortgage? If not, is the 170 more than the capital being paid off each month? If either of these statements is true (that you are paying some of the interest on the mortgage), you are leasing the house from the bank and sub-leasing at a loss to your tenants.
 
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z106

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover

Or indeed, you could say that you are subsidizing your tenants to the tune of 170 a month.

Are you on an interest only mortgage? If not, is the 170 more than the capital being paid off each month? If either of these statements is true (that you are paying some of the interest on the mortgage), you are leasing the house from the bank and sub-leasing at a loss to your tenants.

And your point is ?
That therefore they should sell?
 

Thomas22

Registered User
Messages
251
Re: have an investment property but the rent is falling short by 170 a month to cover

Another way to look at this is that for every €170 you are putting into the property someone else is putting in substancially more and the rate of return on your capital investment is not that bad at all.

You should only sell if you need to. there is a large surplus of housing but there is not a large surplus of decent (as most renters will tell you) well furnished and maintained rental properties.

This capital investment is terrible!
The person is on an interest only mortgage therefore the renters are paying nothing off his mortgage.

If the investor sold the property and released the €100,000 equity and put in a RISK FREE investment they would be better off by €524pm. Thats €6,300 per year.

Investing this money into a pension and assuming the investor pays tax at the higher rate this would be worth over €350,000 in 20 years. And they would still have the €100,000 in the bank.

Anyone seriously suggesting he should keep this investment needs to re-examine the figures because they just don't stand up.
 
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z109

Guest
Re: have an investment property but the rent is falling short by 170 a month to cover

And your point is ?
That therefore they should sell?
My points are:
1. There is insufficient information in the OP to decide if this is a loss-making exercise.
2. The lowest acceptable return is that the interest and running costs are being paid by the mortgage. If the OP has to top up the capital repayment, then at least he will own the house at the end of the mortgage term. If the running costs (interest/maintenance/fees) are not being covered by the rent, then the OP is subsidizing the cost of living in the house.
 
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