Should we sell second property?

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MrsBeechRyan

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We have an investment property valued at €180K - €210K which has a tracker mortgage of €95k, repayment of €950/mth until Nov17 at which point repayments will drop to €580/mth.

Tenants that were long term were paying €770/mth are now moving on.
We should now be able to achieve a rent of €1100-€1200.
Although we struggled with repayments during the recession we can now see the benefit of selling and reaping the profit, however we can also see the income making capacity that this asset would have.
All advice welcome.
 
HI Casper. Speaking as a guy who paid up to 19.75% interest to AIB Home Loans and being as near to broke as make no difference for most of my days. Remember back in the day married women were forced to resign on marriage which didn't help much to us. I won't bore you with more of the details.

You seem to have it made. A property that yields much more than it costs. Simple arithmetic, Profit V Loss. You're to the good bigtime. Why change the way you can do business? Keep doing what you are doing and love it. You are luckier than you probably think.
 
Casper3 said:
Tenants that were long term were paying €770/mth are now moving on.
We should now be able to achieve a rent of €1100-€1200.
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Is it in a Rental Pressure Zone? Surely not if you can raise the rent by that amount

How long is left on the mortgage? What age are you ? Do you view the property as part of your 'pension'? How are the rest of your finances looking - do you have another mortgage with a higher interest rate.

If you increase the rent, you will be in a cash-flow positive situation with the investment. This is a good place to be. You also have 100k equity in it (before CGT), so its a case of do you want to have the windfall now or do you want the ongoing income.

How much did you pay for the property, as this will influence the CGT calculation?
 
Gnf_ireland
Not in a rental pressure zone just yet, and there in is the reason for the rental increase! Loosing good tenants as a result
Original mortgage ends in November thus reducing the loan.
Equity release mortgage remaining of €92.5K at 1.2% 2031
Wouldn't really view it as a pension, we have a three children due through college in the next few years.! 16,15 and 11.
Bought the property in 1997 for £57K

PPR mortgage €165K at 1.1% 2029, value approx €400K €1200/mth
Approx savings €60K in state savings and investments.
Every day living requires constant budgeting but comfortable.
Are we foolish to sell?
 
What's your position as a couple with regard to pension provision?

My sense is that you would mad to sell.
 
With regards our pensions, we have one private and one public sector.
Private sector one not performing very well I believe.
My belief too is that to sell would be a mistake but that possibly the gains we make will simply return to the tax man.
 
Seriously, you need to get sharper on the numbers before you even start to think about this. You have nothing to think about until you are clear on the figures.

Sell

Sale price €200k
CGT (€200-€57)*0.33 = €47k
Fees etc €5k
Repay mortgage €95k

Net sale proceeds €53k

Keep

Rental Income €13,200
Interest expense €1,140
Other expenses estimate €1,500
Tax at 50% €5,422

Profit after tax €5,138

That is an after tax profit of almost 10%.

It depends on what is important to you but to me this is a no brainer. Keep It.
 
Casper3 said:
Gnf_ireland
Not in a rental pressure zone just yet, and there in is the reason for the rental increase! Loosing good tenants as a result
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I think most people under estimate how reluctant tenants are to move out. I know someone who increased their tenants rent by almost 60% before Christmas and the tenants accepted it with no issue. Good tenants will see a recognise a good landlord and will accept rent increases. Tenants generally kick up an issue with rent increases if the landlord is an absentee landlord ie takes several months to fix/replace essential things.

If the tenants are about 40% under the market rate, increasing it to 20% under the market rate IMO won't cause them to move out if you are concerned about them leaving. They won't be able to find a similar property at a similar price point. You stand the risk of a Government introducing a national rent control and being stuck at that significantly under market rate for years to come.

You don't really appear to see it as a pension or an investment when it could be quite a decent one. When the mortgage is paid off, you will have about €1200 per month from it. There will be tax etc but when you are older and not in employment, it will be a decent source of income as your tax credits will go towards your rental income, rather than a regular job.

If you sell it to put the money in the bank or state savings, you might get around 0.3/0.5% per year which is basically nothing. I would increase their rent by 20% and invest the extra rent.
 
Casper3 said:
With regards our pensions, we have one private and one public sector.
Private sector one not performing very well I believe.
My belief too is that to sell would be a mistake but that possibly the gains we make will simply return to the tax man.
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Not performing well how? How is it invested? What's the party's salary and what does he/she put in annually?

What's the salary of the public sector person and how many years of service will they have at retirement?
 
Private sector salary €62k projected pension €18K in 16 years
Public sector salary €43k , with expected retirement age now 68 should have 40 yrs.
 
My sense is that you should keep the property and use the extra income to make Additional Voluntary Contributions into the private pension arrangement.
 
Gordon Gekko
€18K pension does not include the state pension.
The suggestion of AVCs is one that we had considered for the private pension.
The public pension pension has been added to with AVCs for the past 10 years.
 
I'm not an expert on public sector pensions, but you mentioned that they'll have 40 years service at retirement; do AVCs make sense in such circumstances?

I think you should keep the property and maximise your AVCs.
 
Yes true about the 40 years , but they are part time years so the AVCs should shore up that deficit.
Think decision is made to hold on to the property for another while and see if every day living becomes a little smoother.
Thanks for all your advice.
 
Casper3 said:
Bought the property in 1997 for £57K
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cremeegg said:
CGT (€200-€57)*0.33 = €47k
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One small point from the calculation above - the OP bought in 1997 so it is Irish Punts rather than Euro. £57k would be approximately €72k, so the CGT would be 42k rather than 47k. Small point, but just keep it in mind if you do decide to sell.

cremeegg said:
That is an after tax profit of almost 10%.
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That is a fairly impressive number, and has the potential to go a long way toward funding the kids college education (depending on whether they live at home or not). Definitely worth thinking about...
 
gnf_ireland said:
One small point from the calculation above - the OP bought in 1997 so it is Irish Punts rather than Euro. £57k would be approximately €72k, so the CGT would be 42k rather than 47k. Small point, but just keep it in mind if you do decide to sell.


That is a fairly impressive number, and has the potential to go a long way toward funding the kids college education (depending on whether they live at home or not). Definitely worth thinking about...
Click to expand...

Plus indexation up to 2003...the OP would be bonkers to sell the property...AVCs are the sensible play thereafter.
 
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