Should I sell this property?

F

Foreright

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I have a property in a Dublin suburb . Mortgage free. Value E450. Market rent 3K. Current rent 1.7k. Rent pressure zone for many years.
Nice family there for 12 years.
I live between London ( 75%) and Dublin. Here I live in a small 2 bedroom property. I have it since my 20's- now mid 50's.
I would like to have a more spacious property for myself. I could sell my 2 bedroom house( 350 k) and along with some savings buy what I'd like.

However I'm wondering what you think about selling the rental property( I've not been keen for some years as I know the family will be in a bad way seeking alternative accom) . However it is underperforming and I'm getting older. I would have 350k after CGT and expenses so the same amount of money and then rent out my 2 bedroom property ( market rate 2.4 k)- so effectively replace an under market rate rental property with a market rate one. Of course I will have given the government about 85 k in CGT.
I'm confused and would like a detached person's opinion. I would feel a little guilty I have to admit but I'm wondering should I bite the bullet....
Many thanks guys!
 
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Sounds like you are in a good job and have a good salary. What is your objective with having an investment property?

Also do you need the rental income ?
Do you have any mortgages on any of the properties you own?
 
Foreright said:
Here I live in a small 2 bedroom property. ...
I would like to have a more spacious property for myself.
Click to expand...

Start with your own objective and work out how best to achieve that.

You are in your mid 50s. I presume "Here" means London? If I were living in London, I would be living in as expensive a place as I could afford. A location which is convenient to work and leisure and of a reasonable size. You want a more spacious property, so you should go for it.

Park the tax consequences for the moment. Do not let tax considerations stop you from achieving what you want.

If I understand you correctly, you can buy a suitable property in London either by selling the house in Dublin or your apartment in London?

It may be harsh, but you absolutely should sell your Dublin property. It is not your fault that the Irish political and media system penalises good landlords and drives them out of the market. Your tenants have benefited from low rent for years. You have done enough for them. It seems that you are not in a rush so give them plenty of notice. They will probably go into Threshold and after about 6 months find that you did not cross some t correctly, so your notice is invalid and you will have to start again.

It is important to do this now while you are allowed to sell it. A change of government or a change of policy and you might find a law that landlords who own another property are not allowed to terminate a tenancy with a view to selling.

So it's absolutely clear that you must sell that property.
 
When you are in Dublin where do you live? Do you need a place in Dublin? Would you consider buying a one bed apartment with the proceeds?

That would be the next issue I would resolve.
 
Assuming you don't need to buy accommodation in Dublin, then the next question is whether you should sell both places and buy the absolutely best you can afford.

Or alternatively, should you be maxing your pension contributions?

I don't know enough about the UK landlord rules, but my understanding is that they have got a lot more difficult recently and landlords are leaving the market. The UK government will look at Ireland's rules and probably adopt some of them to the UK. So I suspect you should not let your existing apartment either.


Foreright said:
Market rent: 3k
Current rent 1.7k.
Nice family there for 12 years.
...

However I'm wondering what you think about selling the rental property( I've not been keen for some years as I know the family will be in a bad way seeking alternative accom)
Click to expand...

Sounds to me as if you are not suitable material for being a landlord.

In the past good landlords got good tenants. Now they get demonised.
 
Foreright said:
Nice family there for 12 years.
Click to expand...
That is the problem.

They are nice people, but they have been there for 12 years, the rent is low, so they will never move. Very likely, they will still be there in 20 years time. With inflation, the rent will have fallen further behind, the house will need more work, you are responsible for that and costs will have gone up. The rules likely will have tightened again and you will not be able to evict to sell. You will be trapped, you'll have a liability on your hands which you cannot escape from. That liability will be passed on to your family when you die.

Whatever about your intentions, your only option is to sell. There is way much too risk here.

Buying a better place in London and/or maximising pension contributions is by far the better choice.
 
You are in your mid 50's living in relatively small accommodation in London. Your aim to have bigger accommodation by selling your London home and your Dublin home. You answered your own question so sell your Dublin property. Full-Stop!

But, the €85,000 CGT seems to be an issue with you (and deserving to be an issue) along with the Dublin property "underperforming." You have a social conscience, but as pointed out by BB you're not the conscience-of-the-state. I'm inclined to whittle your main problem to the €85,000. If you can get your mind around that, I think you'll have your 100% solution to your problem.
 
Many thanks Brendan and greenbook. I should have explained better. In london I have an Apartment and im happy with it. Its in a good location with a nice view. And this is where I spend most of my time.
When I return to Dublin I stay in a small 2 bedroom house in the same suburb as my low rent 3 bedroom unit.
I would like to have a more decent spot to hang in Dublin so Im wondering about sellinG the low rental rent controlled unit and with the proceeds and my savings buy a more suitable property in ireland for my myself. I would use it a couple of long weekends a month and I spend most of my holidays in Dublin.
I would however hold onto my small 2 bedroom house and rent out for 700 euro more than my current rent controlled property. To me it makes financial sense - I exchange 1 poorly performing asset with a better and I get to have a nicer place to live. I was just wondering id there were any downsides.
To answer a previous question my london property has a 200k mortgage and its worth 700k
I have 1 uk rental property. Worth 350k. Mortgage int only 200k 4.5%
Thanks guys
 
By the way, you could offer the tenants first refusal on buying the house.

They might even be able to chase the Council to buy it for them.

This is a mad country when it comes to housing.

You could end up selling the house.
They could end up still living in it but at a much lower rent, with optional payment.
It is just us the taxpayers who would lose out.

Brendan
 
Foreright said:
I have a property in a Dublin suburb . Mortgage free. Value E450. Market rent 3K. Current rent 1.7k. Rent pressure zone for many years.
Nice family there for 12 years.
I live between London ( 75%) and Dublin. Here I live in a small 2 bedroom property. I have it since my 20's- now mid 50's.
I would like to have a more spacious property for myself. I could sell my 2 bedroom house( 350 k) and along with some savings buy what I'd like.

However I'm wondering what you think about selling the rental property( I've not been keen for some years as I know the family will be in a bad way seeking alternative accom) . However it is underperforming and I'm getting older. I would have 350k after CGT and expenses so the same amount of money and then rent out my 2 bedroom property ( market rate 2.4 k)- so effectively replace an under market rate rental property with a market rate one. Of course I will have given the government about 85 k in CGT.
I'm confused and would like a detached person's opinion. I would feel a little guilty I have to admit but I'm wondering should I bite the bullet....
Many thanks guys!
Click to expand...
4 properties?

Foreright said:
Many thanks Brendan and greenbook. I should have explained better. In london I have an Apartment and im happy with it. Its in a good location with a nice view. And this is where I spend most of my time.
When I return to Dublin I stay in a small 2 bedroom house in the same suburb as my low rent 3 bedroom unit.
I would like to have a more decent spot to hang in Dublin so Im wondering about sellinG the low rental rent controlled unit and with the proceeds and my savings buy a more suitable property in ireland for my myself. I would use it a couple of long weekends a month and I spend most of my holidays in Dublin.
I would however hold onto my small 2 bedroom house and rent out for 700 euro more than my current rent controlled property. To me it makes financial sense - I exchange 1 poorly performing asset with a better and I get to have a nicer place to live. I was just wondering id there were any downsides.
To answer a previous question my london property has a 200k mortgage and its worth 700k
I have 1 uk rental property. Worth 350k. Mortgage int only 200k 4.5%
Click to expand...
You're not the only one confused, is this correct?

Dublin

Property 1

3 bed Rental €450K Zero Mortgage Rent 1.7K monthly, market rent 3K RPZ Family Sell to buy a new Dublin property to live in

Property 2

2 bed house, used for Dublin visits, too small, rent potential is €2400 (700 more than you're getting for property 1)

London

Property 3

2 bed apartment, home, nice, 700 GBP or Euro, Mortgage GBP 200 - keep

Property 4

Rental Value 350K, mortgage 200K Interest 4.5% - keep


Questions

- Are those details correct.
- Can you confirm values are Euro's.
- what is the rent on property 4
- What is the value of property 2
- is your ultimate goal to retire to Ireland
 
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Foreright said:
I would however hold onto my small 2 bedroom house and rent out for 700 euro more than my current rent controlled property. To me it makes financial sense - I exchange 1 poorly performing asset with a better and I get to have a nicer place to live. I was just wondering id there were any downsides.
Click to expand...
The downside is that you may only be moving core problem to another property.

You will get market rent now, but you can only increase the rent by 2% max per year for 6 years. You reset to market rent at year 6, but the political system will very likely renege on that 'right' when the time comes. So if your tenant stays, your rent is falling again post inflation and your costs are increasing. You can evict to sell at year 6, but again the government of the day may 'temporarily' cancel that ability. Your tenant likely will not move in that situation. Why buy a house when you have a permanent tenancy, falling rent and your landlord has complete responsibility for repairs, furnishings and maintenance?

There is an exodus of landlords in Ireland and few new ones coming in for these exact reasons.
 
Thanks Bronte

- Are those details correct. Yes
- Can you confirm values are Euro's. UK properties in £
- what is the rent on property 4 £1500 per month
- What is the value of property 2 - €350k
- is your ultimate goal to retire to Ireland - yes
 
I would sell both Irish properties and buy an even nicer place to hang in Dublin. Alternately, stick to your original purchase budget and use surplus cash to reduce borrowings on your own apartment in London.

Unless you are very lucky, the 3-bed house will require a lot of work after 12yrs of rental. I had a similar situation (11yrs to same famIly). The house was left in a very grim state inside. It took me almost 3 yrs to get them out and they stopped paying rent shortly before leaving. Despite that, I know it could have been worse. @Brendan Burgess is correct when he says;

Brendan Burgess said:
This is a mad country when it comes to housing.
Click to expand...
 
I am in a similar situation with 2 rentals in Dublin with both hamstrung by RPZ restrictions where I am maybe at 75-80% of market. Both have been rented over 15 years. (I’m based in Europe)

I’ve just got the keys back on 1 (eviction to sell) and will do the same next year with the other.

It is a combination of low gross yields, all the regulation and the new 6 year minimum tenancy plus any profit is taxed in Ireland.

Also, there seems to me to be so many people etc getting a cut of the rent before I see any profit, namely agent, repairs people, rtb fees, property tax, accountant fees, mortgage provider, insurer etc.

I’ll get a much better gross and net return from euro high yield corporate bonds at 6.5% !!
 
Just an update
I called to my tenant yesterday and advised him that I was selling. He was very understanding.
I signed the statutory declaration with my solicitor today. She advised me that she had some clients recently in the same situation and the council ended up buying the property( They receive HAP) so this would be a good result for me and the tenant if things went this way.
 
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