Moving PPR|: Should I rent out my current house

S

spudulike

Guest
As the title suggest I am hoping to move house and am considering renting out my current house - what are the pro's and con's.

Current situation
- I am mortgage free on my current 3 bed house in West Dublin. The potential rental return is approx 900-1050 pm (based on similiar properties on daft).
- The estimated sale value would be approx 240-250K. With the market the way it is it could take a while to sell this property.
- I have a budget to move of approx 500K.

So based on the above would I be better off renting out my current house and using the income to offset against the new mortgage or should I just offload and borrow less.

I am assuming if I don't sell the best thing to do would be to re-mortgage the rental property so that I can offset interest against tax?

What are advice would you give based on things the way they are and potential future trends. What else do I need to be considering?

Thanks.
 
Offload and borrow less.

With no mortgage on the 3 bed, the entire rental income will be taxed at your marginal rate + levies. Is the hassle and risk associated with becoming a landlord worth 400 euros a month to you?

After a year the 3 bed will start attracting CGT.

Interest rates are only going in 1 direction, that you can afford a mortgage of 500K today in no way means you could afford the same mortgage in 2-3 years.
 
Depends if you want to become a landlord or not. You could pay an agent to manage the house lettings and maintainance etc but that would eat into the profits. Forthcomming water rates, property tax (if they happen) will further reduce the monthly profit.

Do you have a pension or do you want to hold onto the house as part of a retirement plan?
 
Was planning on taking a long term view - something to leave the kid/s. Help put them through college if/when the time comes.

As for the tax side - If i re-mortgaged the rental would I be able to reduce the tax liability - partially at least?
 
If you thinking about leaving that to the kids then just banking the 200k+ from the sale into a 3% deposit account over 20 years+ would be nice also!
 
spudulike said:
As for the tax side - If i re-mortgaged the rental would I be able to reduce the tax liability - partially at least?
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From your original post I think you mean can you borrow more on the rental because mortgage interest relief is higher on an investment property (currently 75%)?

If so then the answer is no. You can only deduct 75% of interest paid on a loan (or part thereof) exclusively for use in connection with buying or extending (or substantially improving) an investment property only.

To borrow say 500k on the rental and then try to offset this against tax due is tax evasion I'm afraid. You are mortgage free on your rental-you will therefor receive no mortgage interest relief in connection with it (apart from TRS on your new PPR if still entitled to it and you used the released funds to buy it, doubtful if you're already mortgage free).

Be happy you're mortgage free though! Many folks would kill just to be out of negative equity so you have a nice dilemna!
 
My thinking was to re-mortgage the rental to it's current market value - say 200K and then borrow the other 300K against the property i want to move to. From what you say though that might not be possible??
 
spudulike said:
My thinking was to re-mortgage the rental to it's current market value - say 200K and then borrow the other 300K against the property i want to move to. From what you say though that might not be possible??
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It would be pointless and require more paperwork and legal fees to do it and you'd get no financial benefit.

You can't claim any interest relief on your rental property because the mortgage has already been paid off!

The only way you'll ever be able to claim interest relief (if it's not axed altogether) is by borrowing money to extend your rental or convert the attic or something, a capital improvement.
 
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