Sell investment property?

aristotle

Registered User
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820
I am considering selling an property I have rented out and I don't see a strong reason to not do that.
The main reason for selling is I might "trade up" to a bigger hour over the next 1-3 years and because supply is fairly limited I want to be able to buy without having to sell the primary residence (which I may rent our or sell later).

So investment property is:
- valued 310k
- mortgage remaining 140k, tracker 0.55% over ECB.
- rented at €1050 per month (market rent is about €1600-€1800)

If I sell then I save 1.5k-2k per year on insurance, property tax, mortgage insurance and upkeep. I avoid any big spends in the future like failed gas boilers, leaks or who knows what. If the current tenant moves out I would have to spend 5k at least to paint\redecorate (the house hasn't been painted or done up in anyway for 20 years). There are a good few other issues that would need addressing within a few year, at least another 5k and probably more.

If I sell then I pay less tax so I think I can free up maybe 7-8k in cash per year.

And I can buy a new primary residence without being in a chain so I think that has advantages.

As an investment property it doesn't make much return?
 

aristotle

Registered User
Messages
820
Last tax year shows 7,500 profit before tax (I had some extra maintenance expense).
So about 3,750 net profit give or take? I have been maxing my pension AVCs to generate a tax credit to lessen the overall tax bill.

I am thinking I want cash to be able to change primary residence, reduce exposure to Irish property, interest rates, tenant issues. With that context that it doesn't seem a strong investment?
And I might be able to reduce the AVCs down a bit too.
 

Brendan Burgess

Founder
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44,624
Hi Aristotle

It seems that selling the property is the right thing to do, even though it's a very profitable investment.

The most important thing for you is to have the cash to be ready to move on the trade up when the opportunity arises. That is more important than making €4k a year after tax.

The only issue is timing.

If you have the deposit already, would a bank give you a mortgage without selling either of your houses?

If so, then you should not put your existing profitable investment on the market until you have gone sale agreed on the new house.

Brendan
 

aristotle

Registered User
Messages
820
To trade up to what I would see as a long term and maybe "forever" house would mean I have to sell either investment or primary residence.

I thought I was leaning to selling as I didn't think it was really a good investment, it does make 4k after tax but I need think about the other things like upcoming costs if I keep it and particularly if I have to re-let if tenant moves out.

If it wasn't for needing the cash I would keep it as it is until the tenant moves out and then reconsider.
 

Brendan Burgess

Founder
Messages
44,624
Certainly if the tenant moves out that would be a good time to sell.

If you do decide to sell, maybe let the tenant know so that they have plenty of time to look around.

Brendan
 

NoRegretsCoyote

Registered User
Messages
3,013
rented at €1050 per month (market rent is about €1600-€1800)

Why don't you raise rent toward market values? Even if it's in an RPZ you can increase by 4% pa.

I can see you're tired of being a landlord but you are building up serious equity every year and it's not leaving you short of cash either.

When did you buy and for how much? If you ever lived there, when did you move out? CGT could be an issue when you sell.
 

aristotle

Registered User
Messages
820
If you do decide to sell, maybe let the tenant know so that they have plenty of time to look around.
Based on the legislation they are entitled to 6 month notice period anyways given the length of their tenancy.

Why don't you raise rent toward market values? Even if it's in an RPZ you can increase by 4% pa.
When did you buy and for how much? If you ever lived there, when did you move out? CGT could be an issue when you sell.

Yeah I have been increasing 4% per year for each of the last 4 years. I bought in 2005 and currently I would have very little CGT, the house value is about 10k more than what I paid for it.
 

RedOnion

can edit posts
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5,989
Rent that much lower than market could interfere with the re-sale value then.
Yeo, it's effectively ruled out investors as the rent caps the value at around 220k.
And not many people looking for a home want an ex-rental that's poorly maintained.
 

aristotle

Registered User
Messages
820
Yeah sale would likely be as a primary residency, I am happy enough it will sell. I am expecting 310, market rates for a up to spec house would be 320-325 so I am factoring in getting a bit less.
It isn't really poorly maintained, just needs a paint inside and few other things that 10k-15k would cover easily enough I would think.
 

RedOnion

can edit posts
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5,989
It isn't really poorly maintained, just needs a paint inside and few other things that 10k-15k would cover easily enough I would think
Sorry, I was basing on your own post that it hadn't been painted for 20 years and there are a number of jobs to be addressed.

While 10-15k might not be huge in the scheme of things, it could rule out a lot of your target buyers. It might be more beneficial for you to spend the money and look for 325k.

To explain: it's a lot easier for first time buyers to come up with a 10% deposit of 325k than coming up with 10% of 310k + having 15k to do the work (32.5k Vs 46k cash required).
 
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