Revamp 3 bed semi vs sale

S

Susie2017

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Ok. A relative has a 3 bed semi. Tenants have moved out. Property is in a complete mess and needs considerable overhaul. Estimate 15 - 20 k for repairs (approx) including new kitchen and two new bathrooms. Outstanding mortgage 80 k. Current rental income 1200 pcm. Mortgage is 1150 pcm on investor rate with Pepper. If in good condition ie post revamp perhaps 1700 rent pcm is achievable. Not sure what term the mortgage is over but is less than ten years. It is in a RPZ. High demand for rentals. What do posters think sell or spend money to do it up ? He is not sure about the rules for RPZ and increasing rent but he thinks its ok if he spends this much is that true ? No profit for last ten years or so as until last year rent was only 900. He increased it just before RPZ rules applied. Dilemma to sell as last ten years has shown no profit and outlay is considerable to re let.
 
What's the value of property?

Don't confuse profit with mortgage payments. Unless he's paying over 10% interest, even at 900 per month he's making a profit on 80k mortgage.
 
Value 290k in current state. Best similiar house sold recently for 310 but in top notch condition. Mortgage is on two separate rates approx 40 k each. First 0.79% tracker. Second 4.25 %. Both are interest and capital. Repayments finish late 2023.
 
If it was me, I'd do the refurb and rent out again; I believe with what you have described you can go for 'substantial renovation' and let at higher rent, pitch slightly above current market rate - it has to stay pretty much at that figure for quite a while.

Don't overcapitalise on the repairs/renovations, keep in mind its a rental property, no expensive chandeliers/floor tiles & do as much as you can yourself.
 
He contacted the PRTB today re the situation. There has to be repairs that result in an increased value to the property and that justify increase in rent. They were quite vague other than this and suggested getting an auctioneer to do a valuation before and after although it was suggested to them that this would be extra expense for the landlord. They said that holding before and after images and receipts from tradesman should also suffice in lieu of obtaining valuations. Overall quite vague but as substantial renovations are required anyway perhaps this is irrelevant. Do the posters feel this is a worthwhile economic activity after all things considered. Landlord has no experience of stock market or other investment products so is undecided whether to get out or hold in there. There will be no expensive chandeliers but even getting materials at low cost the labour will be substantial as he is unable to do the work himself.
 
By my calculations, monthly you are paying more than €900 down on the capital each month.

That means in 6 years the mortgage paid off at which time you will be grossing 14k annually before tax and expenses

Not bad?

Why not reduce capital payments thus giving more cash today?

And more interest deduction down the line
 
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Say if they can get 1700 rent, that a 6.8% gross yield on a valuation of 300k. That's where the market is at the moment for good residential investment property - i.e property with a reliable rental market.

So the question is whether or not they want to be a landlord, or if they could use the money (200k equity) better.

Do they have any other debts? Do they already own their own home? Are they already retired, or if not do they have a good pension? If close to retirement, will the rental income be subject to tax at lower or higher rate?

Also, what's the position re capital gains tax if they were to sell?
 
He is a somewhat reluctant 50 year old landlord. He has a 400k mortgage on his PPR - a tracker. Is overpaying it slightly says it should be paid off in around 11 years time. He has a public sector pension but would like to retire early if possible at around 60. He felt the income from this property could help to bridge the gap between 60 and whenever he gets his public sector pension. At that point he may sell the property. He has been renting it out for around 10 years i think at low rates, which did not cover the mortage repayments. Rental income would be taxed at higher rate post reductions allowable for interest and repairs. He is interested in the comment re reducing the mortgage payment as it has been quite a committment - would he approach Pepper with a view to pushing out the term - would this not result in a less favourable interest rate ?
 
Susie2017 said:
would he approach Pepper with a view to pushing out the term - would this not result in a less favourable interest rate
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Is the mortgage with Pepper, or are they managing it for someone? That might determine what they can do.
The tracker rate would run out at end of original term, but it should be possible to reduce repayment substantially.
 
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