Hold or Sell Apartment

J

jonronan73

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Bought 2 bed for 248k in 2006.
Bank parked 102k at 0%
Balance of other half is 89k, paying 4.25% variable or circa 545 p/m
Net rent received of 790 after estate agents fees
Service charges and mortgage protection circa 1,600
Current value is approx 230k. Apartment is now giving problems with pipes corroding and excess on Block policy is 2,500 which wasn't enough to cover expense outlay on recent leak that needed to be repaired.
20 years left on mortgage.
No pension or investments.
I'd like if possible to sell and move to a house closer to where I am (apartment in Galway, Home is Limerick) and not worry about further leaks from this apartment that won't be covered by large excess on Block policy but reckon the bank won't allow it and will want the mortgage 1/2 that is parked to be redeemed.
I did an amortisation calculation and will pay €133k in payments over the next 20 years to pay off the €89k. If we say the apartment would be worth 350k in 20 years, would people sell or hold, bearing in mind the 102k will need to be paid in 20 years time. TIA.
 
jonronan73 said:
Net rent received of 790 after estate agents fees
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Per week? Month? Annum?
Apartment is now giving problems with pipes corroding
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The apartment itself or the common areas or both?
but reckon the bank won't allow it and will want the mortgage 1/2 that is parked to be redeemed.
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Yes, outrageously, the lender expects the money that was borrowed to be paid back.
Bought 2 bed for 248k in 2006.
Bank parked 102k at 0%
Balance of other half is 89k
...
Current value is approx 230k
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So you could sell now and clear c. €39k?
 
jonronan73 said:
Bank parked 102k at 0%
Balance of other half is 89k, paying 4.25% variable or circa 545 p/m
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It's a weighted interest rate of 2%. If you give this up you will never get a rate like this ever again.
jonronan73 said:
Net rent received of 790 after estate agents fees
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It looks like a gross yield of about 5%. That's pretty poor for an apartment in Galway. I assume you are unable to raise the rent more than 2% pa.

It all depends a bit on your broader financial circumstances and age which we don't have much detail on. I'd summarise as:

Hold: in 20 years you'll almost certainly have a six-figure gain after residual mortgage is cleared and you'll probably break even in cash terms along the way. There is risk however, both from a dud tenant and expenses related to property or building.

Sell: you take the risk out of your life and walk away in 2023 with a low five-figure sum with no CGT.
 
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JohnJay said:
if the apartment is falling apart now, what will it be like in 20 years?
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It could triple in value and prove a great investment even despite the spending on repairs. I'm not speculating on house prices but over a twenty-year horizon there is a wide range of possible outcomes and this is one of them.

There is risk and potential reward and the OP has to choose where to strike the balance.
 
If the repairs are extensive your tenant may have to leave.

If property is unrented for two years, you go back to market rent.
 
ClubMan said:
Per week? Month? Annum?

The apartment itself or the common areas or both?

Yes, outrageously, the lender expects the money that was borrowed to be paid back.

So you could sell now and clear c. €39k?
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790 per month (900 less mngt fees of 10% + VAT)

Underfloor and pipes in the wall corroded and caused leaks and while it is technically common area the excess on the Block policy is 2,500 so I had to foot the bill as assessment came back at 2,200

39k is before sols + agents fees so possibly 34k net

I would like to use the proceeds to move back to Limerick and an affordable house as opposed to this apartment in Galway. Excess on any insurance policy will be less, but when the bank see I have proceeds from a sale they are likely going to want the mortgage that is parked to be addressed as opposed to letting the existing mortgage carry over. Likely they would try and offer a new mortgage for the 189k combined at existing variable rates which I could not cover.
 
jonronan73 said:
790 per month Likely they would try and offer a new mortgage for the 189k combined at existing variable rates which I could not cover.
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Are you confident, given your difficulty paying this mortgage, that you will get a lender to give you a mortgage?
 
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