New legislation -sell or keep rental property?

Maya22

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Myself and my sibling inherited an apartment in 2015 valued at 130k.
Rent has been significantly below market value (about 60% or more) since then and back in October we issued a termination letter due to substantial refurbishments. We planned on doing significant renovations (knocking walls, new bathroom, floors, radiators, kitchen etc) to bring rent up to market rate and when we issued the notice, these changes would have counted to bypass the RPZ rules. Unfortunately, they have now changed the legislation and we will meet only two of the three required criteria (permanently altering layout and increasing BER). This is due to come in in two weeks and our builder is due to start the first week in July.

We need to decide whether we can still increase the rent to market rate before spending so much on renovations. How will this be policed? If my builder had started sooner would we be able to proceed with the rent increase?

Otherwise, we don’t know whether we should just get financial advice to see if selling it would be a better option.

After CGT, solicitors, estate agents etc we should come out with a minimum of €86k each (172k total).

If we manage to increase the rent we would both receive approx €4K after tax, PRSI, USC, management fees and expenses each year.

We are attached to the property as we inherited it but don’t want to make a stupid financial decision either.

Any advice? Or recommendations on where to get more info?
 

Sarenco

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5,432
Here's a link to the new Bill as passed by the Dail – it's currently before the Seanad and apparently is expected to be signed into law by the President within the next fortnight.
https://www.oireachtas.ie/en/bills/bill/2018/140/

The new requirements as to what will constitute a "substantial change" for the purposes of the relevant RPZ exemption certainly look very prescriptive. It looks like you're out of luck.
 

Maya22

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Thanks Sarenco, certainly looks like time isn’t on our side. I had hoped there might be an exception for hose who had already started to renovate or were waiting it out after serving notice.
 

NoRegretsCoyote

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That's incredible. Almost impossible for a landlord to increase rent after substantial renovations.

Did anyone think of the unintended consequences? What landlord will ever renovate now?
 

DeeKie

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It seems to really incentivise landlords to track market rent or else face a permanent depressed rent. That’s a biiit cracked isn’t it?
 

DeeKie

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Also if you buy a property that’s been rented you can’t renovate and then charge market if it’s been rented?
 

Bronte

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We are attached to the property as we inherited it but don’t want to make a stupid financial decision either.

Any advice?
Keeping a property because you're attached to it is the wrong way to make a financial decision. I presume this was a family home. So what. Let it go. I'm sure it's just an ordinary apartment that maybe you're hanging onto for all the wrong reasons.

Could you give us more figures. Cost of renovation. Current rent.

If you both purchased a property for around 172K plus the renovation money how much rent would such a property command.

Another consideration is maybe now is the time for you and your sibling to go your separate ways.
 

Maya22

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Thanks Bronte. We’re attached as it was our deceased parent’s wish for us to keep the apartment as an investment/safeguard for the future but I don’t think they foresaw what a mess the legislation could cause for landlords. It has always been a rental so I’m not attached to the actual property, more the idea of it as it was what my parent wanted for us.

Renovations will cost the guts of €20k
Property is renting at €800per month now but should reach €1600 or more in the current market as its in an excellent location with a parking space.

I suppose I just wouldn’t know what to do with €86k if I sold up or where to even invest it and if the return would be as good as a rental. I honestly wouldn’t know where to start whereas I’m pretty familiar with being a landlord and the taxes etc so it’s easier for me to calculate.
 

Sarenco

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I suppose I just wouldn’t know what to do with €86k if I sold up or where to even invest it and if the return would be as good as a rental.
Do you have a mortgage on your PPR that you could pay down?

Are you maxing out your pension contributions?
 

Bronte

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13,305
We’re attached as it was our deceased parent’s wish for us to keep the apartment as an investment/safeguard for the future
Ok I see where they are coming from. They want you always to have an asset that produces an income. Let's work with that.

Can you do the money makeover for us. We need a lot more detail on your status in order to advise.
 

Maya22

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No I’ll be clearing my mortgage next year anyway. I’m not too familiar with private pensions as I’m just in the public sector. In a unique situation as I might have to take ill health retirement so I do want some sort income, however small, from this property or 86k if I was to invest it elsewhere. I do have another inherited property I own outright that is renting for €1500 a month and going well so I wouldn’t be completely giving up on the idea my parent had for me with the security of that going forward.
 

Maya22

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Here’s my money makeover if that helps:

Age: 33
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: 56000

Annual gross income of spouse: 42000

Rental income per month after expenses, fees etc: 1700 approx (pre-tax)

Monthly take-home pay: Approx €6500 for both of us including child benefit

Type of employment: e.g. Civil Servant, self-employed: public sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving approx €2500 a month at the moment

Rough estimate of value of home: selling home and downsizing next year so will have no mortgage.

Other borrowings – car loans/personal loans etc. None

Do you pay off your full credit card balance each month? Yes

Savings and investments: €30000 in savings in credit union

Do you have a pension scheme? Public sector pension. Spouse pays 8% into pension through work and his employer matches it.

Do you own any investment or other property? Yes one property on my own and half a property with my sibling. No mortgages.

Property 1 valued at €220k with €1570 rent per month. Recently refurbished

Property 2 valued at approx €195k but at €800 per month (own half of this with sibling.) Planning €20k refurb

Ages of children: 1.5years

Life insurance: Not eligible due to health. Spouse has mortgage protection but we will be looking into other options now we are clearing the mortgage.
 
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