Should I sell or keep rental property

dingdong22

New Member
Messages
2
Hi
I have a investment property in D4. I am not sure to sell or keep. As I will have pay back loan in 13 years time.

Situation
House rents for 2600, mortgage interest only for another 13 years. Loan amount 420000 euro.

I could sell now for 770,000 getting 350,000 less capital gains. Lived there 10 out of the 20 years since I had it .

I would have approx 300,000 to invest in property which would rent for 1900 per month.

I am 50 with no mortgage on my principal. Married 4 kids, own business.

What do you think is best plan.
 

moneymakeover

Frequent Poster
Messages
585
1900/300,000

Is better yield than
2600/770,000

But are you sure you can get property for 300k that rents for 1900?

And if it's apartment, watch out for management fees.


You didn't mention the interest rate which might be important. If it's tracker you might keep it.

The problem you have is in 13 years you still owe 440k at which time presumably you have to sell.

But maybe you will find 440k by then?
 

Gordon Gekko

Frequent Poster
Messages
4,278
1900/300,000

Is better yield than
2600/770,000

But are you sure you can get property for 300k that rents for 1900?

And if it's apartment, watch out for management fees.


You didn't mention the interest rate which might be important. If it's tracker you might keep it.

The problem you have is in 13 years you still owe 440k at which time presumably you have to sell.

But maybe you will find 440k by then?
It’s 2600/350,000 rather than 770,000 though.

One would need to analyse the case and its finer details (e.g. the mortgage rate as you’ve highlighted). This could be a tracker case given its age. And it’s interest-only so the person has the greater flexibility with regard to how it’s repaid. And it has something of a CGT shelter. And the interest sounds like it’s deductible. And it’s in D4 so probably desirable enough.

And most importantly, there’s no mortgage on the PPR.

The picture sounds pretty enough; based on the information that’s there I’d be holding onto it.
 

moneymakeover

Frequent Poster
Messages
585
If you had 300k cash would you put all towards property? No leverage?

Also need to ask, is the tenant reliable?

If there are no issues then 2600 might be acceptable.

Say 2% mortgage interest on 420k that's 8.4k


Income 12x2600 minus expenses
Say 5k repairs
31,200 -8.4 -5 = 17,800

Now before you pay tax you deduct expenses

Net profit 4400
Keep 60% = 2640
So you're cash positive after tax
The big thing though is your appreciation conservative at 2.5% means your asset increased by €19.25k


Consider the 300k property

Rental income
22,800
Expenses 5k
zero interest

Gross profit 10,680

40% tax
Net profit after tax 6,408

However 2.5% appreciation = €7.5k

Ignoring the profit and compare capital appreciation after 13 years and using the 2.5% appreciation
770k could become 1.06m

Whereas the 300k could become 413k

So if you subtract your mortgage

Property 1 capital gain: 640k
Property 2 capital gain: 413k

Property 1 has reduction in cgt of 10/33= 30%

Property 2, no reduction

So with property 1 you end up paying tax 640/3 x .7=149k
Keep 491k after tax

With property 2 you pay 413/3 = 138k
You get to keep 275k after tax
 

dingdong22

New Member
Messages
2
Thanks for response. I forgot to say yes I have a tracker interest only mortgage.
D4 house is easy let. Other areas not so sure if easy or not.
 
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