Sell or keep Rental Property

[lotus17]

Sell or keep rental property.



I own a rental property in a large town. Purchased the house in 2003 for €140K and spent €40K on renovations in 2010.

Rented on RAS scheme to the same tenants for the last 8 years. They are good tenants and I have had few problems.

House value circa €170K. Mortgage balance to be repaid is circa €47 K. On a tracker rate of .6% with term of about 7 years remaining. Mortgage repayments are €525 per month and rent received from the Council is €1050 per month.

I had intended keeping the house for another few years and then clearing my own PPR mortgage with the proceeds. However, a neighbouring house to the rental property sold in the last few weeks for a strong price and I’m thinking I might be better to sell now while the market is strong. The auctioneer says he has 3 interested parties.

Am I better to sell or keep it? Financially, I am comfortable with a safe job and pay higher rate of tax. I have no long-term ambitions of being a landlord. However, I would like to maximise my return on investment.

I am also considering trading up my primary residence. I have heard mention of a house coming up for sale in my area in the next few months. This house is very attractive to me. Its quite possible I would need to liquidate the rental property to assist with the purchase/renovation of this house. There is no certainty that said house will come up for sale.

Am I better to:
A. sell rental property now and reduce mortgage on PPR? or
B. Sell rental property and keep cash reserves for new PPR purchase? or
C. Keep rental property for another while and see how things go?


Advice appreciated.

 

[Lockup]

Personally I would sell any rental as the anti LL stuff will catch you in a way that it cant if you were a large investor. One bad tenant and it would be a nightmare

 

[cremeegg]

You are getting a return of €12,600 less costs, say €11,000 before tax on an investment of €123,000 that is a return of almost 9%.

There is potential for capital appreciation or depreciation.

You may have a deferred tax liability if you sell, depends on weather the €47k renovations is capital spending or not.

This is a great investment, subject to the usual risks of owning property. Wanting the money to trade up is not really a financial decision, more a lifestyle one.

 

[NoRegretsCoyote]

Am I better to:
A. sell rental property now and reduce mortgage on PPR? or
B. Sell rental property and keep cash reserves for new PPR purchase? or
C. Keep rental property for another while and see how things go?

I think you have two kind of unrelated questions:

1. Whether the rental is a good investment
2. Whether you'd be better placed to buy a new house having sold the rental

If you want to be in a strong position to buy the other house then you should liquidate now as selling a rental could be slow by the time you go through all of the necessary procedures. If you want to buy in short term don't pay down the mortgage and hold on to the cash. It might not be easy to borrow it back once you've paid it off.

Otherwise if you want to stay being a landlord it is a very good investment. Property prices could rise or fall but you're very well insulated and you will never get financing as cheap.