Which one to sell ?

L

Listen67

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Hi

We are looking for advice selling and the buying a property. (it feels complicated :()

We would like to purchase a property in Donegal for approx. €270,000 however we are wondering which property makes more sense to sell and use to put towards new property.

Both properties are rental properties.

Property One: Apartment in Dublin.

Mortgage AIB Tracker
Mortgage remaining: €90,000
Term remaining: 8 years
Current estimated value: €280,000
Rental (before expenses) €1250


Property Two: House Cork.
Mortgage Ulster bank Tracker
Mortgage remaining: €175,000
Term remaining: 22 years
Current estimated value: €280,000
Rental (before expenses) €1300


Both of us are working in good jobs but have pretty bad pensions in the sense that we are late starters. (i.e. contributing for approx 10 year only)
We have decided that one of the properties should be kept as a pension fund contributor for the future.

I am 51 and my wife is 45, so we really need to get the pensions on the right track. We both earn approx €50K. No outstanding (non mortgage) Loans.
We have twk kids below 12 years of age.

My feeling is that we should sell the apartment which will release more capital. We should then reduce the terms of the Cork house property so that it is paid off faster i.e from 22 years to 14 year (my retirement year)

But we are not sure if these are the best and most sensible options. Any guidance would be very much appreciated.
 
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Sorry, We are currently renting a property in Donegal (€800 p/m) so both of the owned properties are rental properties.
We both earn a Salary of approx 50K each and we have two kids below 12 years
 
Are jobs in Donegal secure?

Will it be your forever home?

The 22 year mortgages gets you to 73 so that's not good.

Would you pay CGT?

Give us a feel for the Cork and Dublin properties, locations, price rises. Rental issues, property issues. I'm guessing you moved from the Cork property to Donegal.

How much will the new home cost, deposit, montly etc. More details.............
 
Are jobs in Donegal secure?
One is public sector and is secure. The other is less secure but is in IT with in-demand skills

Will it be your forever home?
It will be at least a 10 year home.

The 22 year mortgages gets you to 73 so that's not good.
If using the 8 year mortgage/property to purchase the new, then we would increase the payments to the 22 yr mortgage to pay it quicker.

Would you pay CGT?
The Cork House no.. as it is still worth less than what we paid for it.
The Dublin Apartment we bought in 2001 for 165,000 Punts. So I imagine there is a profit there which would incur CGT.


Give us a feel for the Cork and Dublin properties, locations, price rises. Rental issues, property issues. I'm guessing you moved from the Cork property to Donegal.
Yes we moved from Cork house to Donegal. Both the Cork and Dublin properties command high rents and are easy to rent out. the Cork property is more hassle as it is a house and therefore has more maintenance compared to an apartment. It is also farther from Donegal and so difficult to get to. It would be more difficult to vacate the Cork property compared to the Dublin apartment. (i.e. it contains a family and they have no reached the end of their 1 year lease as yet)

How much will the new home cost, deposit, montly etc. More details.............
We would hope to purchase a house in Donegal for approx €270,000 - €280,000. Deposit depends on what we sell.
We would like our monthly mortgage to be circ €1,200.
 
Hi Listen

Did you buy either of the investment properties as your family home?

If so, then the lender will allow you to move the tracker to your new home and charge you an additional 1%. You don't give the rate but it's likely to be around 1%, so keeping the tracker is important.

To buy a house for €280k, you will need 20% or say €60k which would leave you with a mortgage of €220k.

€220k @3.5% over 20 years would be around €1,300 a month. So selling either property will give you more than €60k, so from that point of view, it doesn't matter which you sell. You will have enough either way.
 
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So, it's very clear. Sell Dublin as it's lower yielding.
 
Another way to look at it.

They are both yielding €5,000 net profit, so at first sight, it might not look as if it matters which you sell.

But by selling Dublin, you will have a deposit of €170,000 which will save you about €6,000 interest on your home loan at 3.5%.

If you sell Cork, you will save only €3,500 interest at 3.5%.

So sell Dublin.

Brendan
 
Listen67 said:
The 22 year mortgages gets you to 73 so that's not good.
If using the 8 year mortgage/property to purchase the new, then we would increase the payments to the 22 yr mortgage to pay it quicker.
Click to expand...

As this is an investment property, it does not matter that it lasts a further 22 years.

Whichever you sell, you should not use the proceeds to pay off the other mortgage quicker. You should use the proceeds to reduce the mortgage on your home.

By paying off the mortgage on your home, you are saving around 3.5% interest.
By paying off the mortgage on your investment property you are saving only 0.5% interest ( 1% interest less tax relief of 50%)

Brendan
 
Thanks for the reply Brendan.
Both of the properties were bought as family homes. (b4 we got married we each had a property)

If we were to sell the Cork property and use that to purchase the new property (albeit with an additional 1% above the tracker) we would have a reduced term to say 14 years (my retirement year). So we would be looking at €180,000 mortgage over 14 years @ 2% interest which would be €1,230

A question is, is there a better property to keep from an investment POV. Given that the Dublin mortgage completes in 6 years time. Is this tax efficient or is keeping the peropert with the longer mortgae a better option. (mayeb there is no difference in the gran
 
So I think that the decision is clear.

Sell Dublin.
If you lived in it at some stage, try to transfer the mortgage to your new property.
But if it's not allowed, don't worry too much as it has only 8 years to go.


Brendan
 
No, you should keep Cork and the 1% tracker rate without the increased margin.

There is also the outside possibility that at some stage, Ulster might sell your loan off and the buyers might give you a discount for repaying a cheap tracker early. Very unlikely, but worth keeping as a kicker.

Brendan
 
Listen67 said:
have pretty bad pensions in the sense that we are late starters. (i.e. contributing for approx 10 year only)

We have decided that one of the properties should be kept as a pension fund contributor for the future.

I am 51 and my wife is 45, so we really need to get the pensions on the right track. We both earn approx €50K. No outstanding (non mortgage) Loans.
Click to expand...

You need to max your pension contributions at your age. And that is through a proper tax-relieved pension fund and not through a property owned in your own name.

You could contribute up to around €30k a year between you and you should do so.

The sale of Dublin will allow you to do everything.
  • Buy your new house with a small mortgage
  • Leave enough cash to max your pension contributions for a few years
When you run out of cash, then you should sell Cork and use the net proceeds to continue maxing your pension contributions.

Brendan
 
Brendan can you explain about this pension contributions. What are the advantages abs how does he get the money out with he turns 65? Tax free lump sum???
 
Clique

I don't want to turn this interesting thread into a basic lesson in pensions - Here is a summary. If you want to tease it out further, start a new thread

They put in €30k gross now.
The get €12k tax relief
So the cost is €18k net.
It grows tax-free in the fund.
On retirement, they will get 25% of the fund tax-free in a lump sum.
The balance will be taxed at their marginal rate as they draw it down.
 
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