Sell or keep investment property

PortoBoy

Registered User
Messages
12
Age: 39
Spouse’s/Partner's age: 38

Annual gross income from employment or profession: c.42k
Annual gross income of spouse: c. 60k

Monthly take-home pay: No idea.

Type of employment: e.g. Civil Servant, self-employed: Self employed, varies wildly, spouse public sector.

In general are you:
(a) spending more than you earn, or
(b) saving? Spouse is saving, I'm spending all

Rough estimate of value of home €600,000
Amount outstanding on your mortgage: €241,500
What interest rate are you paying? 2.75% 23 years to completion.

Other borrowings – car loans/personal loans etc - 5 yr. Car loan €117 p.m. 9 months left to run

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? 0

Savings and investments: Spouse has c. 10k savings

Do you have a pension scheme? yes, private PRSA fund at c. €145k, adding c. 7k net per annum. Spouse v. generous defined benefit public servant pension 35 - 40k on retirement aged 62.

Do you own any investment or other property? yes, value c. 310k, mortgage 177k, rent at €1350 p.m, monthly mortgage at c. €900, tracker at 0.95%. 18 yrs remaining. Lived there for 8 years, bought for 330k.

Ages of children: 10, 4

Life insurance: only mortgage protection across both properties.


What specific question do you have or what issues are of concern to you?
Looking at options for rental property. Another year or so to run on the current lease, but weighing up selling after that and knocking c.140k off PPR mortgage, with a view to maintaining current repayment and being mortgage free in 8 years. My self employed income is erratic, and is likely to decrease as I approach retirement. Spouse is public sector and safe. Kids 10 and 4, no college fund yet. I've no rainy day fund either. Both myself and spouse likely in line for significant inheritances in the next 25 years, maybe 400k and 150k respectively. Any and all help/advice gratefully received.
 

Sarenco

Frequent Poster
Messages
6,262
You have roughly €133k in capital tied up in the rental. If you cashed in that amount and applied it against the PPR mortgage, you would save around €3,650 in interest payments ((€133k@2.75%).

Is the net profit on the rental, after all expenses and taxes, materially more than €3,650? I suspect it is more than €5,500 but you would have to review your own accounts.

As a secondary issue, you would have no CGT if you sold the rental for less than €330k and would have partial PPR relief over that amount.

So, on the face of it, you should probably hang on to the rental for now. But definitely review the position again in a couple of years.
 

PortoBoy

Registered User
Messages
12
Thanks Sarenco, that's pretty much along the lines of what I'm thinking. I know it probably makes more financial sense long term to hold onto it given the cheap finance, but the potential quality of life improvement by being mortgage free by our mid/late forties when we're young enough to enjoy it might outweigh having more money than we need in our 60s, given that all things being equal, we should have adequate pension provision, even without the likely inheritances.
Am I missing anything obvious in terms of pension though?
 

PortoBoy

Registered User
Messages
12
You said it yourself
I get that in absolute terms holding onto it will likely make us ultimately more wealthy, but I guess what I'm toying with is whether people think the trade off of less wealth from the investment but more time to enjoy the improved quality of life is worth it.
 

Sarenco

Frequent Poster
Messages
6,262
I know it probably makes more financial sense long term to hold onto it given the cheap finance, but the potential quality of life improvement by being mortgage free by our mid/late forties when we're young enough to enjoy it might outweigh having more money than we need in our 60s, given that all things being equal, we should have adequate pension provision, even without the likely inheritances.
Paying down your PPR mortgage would clearly improve your cash flow and that's certainly a valid consideration.

However, I think you should hang on to the rental for a few more years.

In your shoes, I would sell the rental if the market value rises to €330k or the equity in the rental equals the mortgage outstanding on the PPR.
 

bbari1

Frequent Poster
Messages
60
OP, I'm in the similar position as yourself except inheritance bit.
I had a decent tenants for the past many years who are now moving out. As soon as they are out, place will be up for sale. For the sake of €2K per year, i have decided not to keep the property. Equity will clear my PPR mortgage and I'll be done with mortgages.

In the other case, I'll save 2k pa for 20 yrs deal with potential tenant issues and I'm 95% inclined towards the 1st option.

Being mortgage free on my PPR will leave another 1k pm in my bank which i can potentially put in pension (2k pm before taxes).

The only bit concerns me is that I'm not sure what the property market is like these days.
 

PortoBoy

Registered User
Messages
12
4 bed mid-terrace around the corner from our investment property just sold at 400k, above the 370k asking, two weeks ago. We've a somewhat smaller 3 bed semi. Reckon it's reasonable to value the investment at a conservative 330k now? Or is covid playing havoc with valuations?
 
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