Selling my Rental Property

BoozyBabe

Hi all,
I know this is the absolute worst time to be considering selling your property, but I was looking for your opinions on the matter.

My tenant has just approached me & asked if I'd consider selling my property to them.

My initial reaction was NO, it's a terrible time to sell & the prices would be dreadful.

Then, I'm wondering, should I get it valued anyway, & see what sort of price region the house is now in & then make my decision.

The fact that my tenant approached me about it would be a good sign, yes?
Or is it just they're expecting to pay bottom dollar for it in the current market?

I'd never decided what I'd do with the property long term.
Keep for a pension in the future, maybe many painful years of renting & maintaining,
or sell quick & make a good profit. I know I've currently missed the boat on that one!

If I were to make €60-70k on the property that I've owned for 4 years, would you be inclined to go for the sell, or hold out until better times?

I would never even have been thinking about this, only the situation presented itself & I'm wondering am I silly to discount it completely, or is my initial reaction the correct one?

Thanks for any opinions you may have on the matter.

groom

Now is the best time to sell. Do you think you will get more for the property next year? When would be a better time to sell?

BoozyBabe

Hi Groom,

What I meant, is that if I'd had been thinking of making a quick buck then last year would've been better to sell than this year, & the year befroe that even better.
TBH, I'm not being forced to sell for any reason. I could quite easily hold onto it until the markets improve again, whether that be 5, 10, or 20 years.
Would it not be a bit foolish to sell the house now when prices are falling so much, when I'm not actually being forced to do so?
Would I not be better hold on?

I bought the property V cheaply, so I reckon I can make a nice bit of profit on it still.
For that reason, would you think I should atleast get a valuation done so that I can see where I stand, or should I just stay in it for the long haul?

I'm building next year, so the cash would come in V useful, on the other hand, I'll need a pension at some stage in the future, & the rent or sale profit would come in handy then too, so not sure which route to take.

As I said, only the tenant has approached me out of the blue, I wouldn't even be consirering it, so just looking for your thoughts on it.

groom

Sometime in 2006 would of course have been the best time to sell with the benefit of highsight. But property here is still overpriced and it requires crazy multiples of income to buy. Therefore it is my opinion that prices will continue to decrease for long to come and you would be wise to bank what you can when you can and earn interest on the deposit.

I think you need to understand that if prices do eventually recover to what you could get today in, for arguments sake, 10 years then that amount will be worth vastly less in real terms because of inflation and you could have be earning more in deposit interest than rent for the last 10 years. Plus you wouldn't have been paying interest on a mortgage.

Can you give more information about how much rent for receive and how much you realistically think the property icould sell for.

Of course you would be better off seeking a professional valuation.

jackal

Get a valuation done and see if the offer they make is in the ballpark. Go from there. You already know this. You are not under any pressure to sell, so you are not going to get done on the price unless you choose to do so.

groom

BoozyBabe wrote: »

Would it not be a bit foolish to sell the house now when prices are falling so much

That question would make more sense IF it were
" Would it not be a bit foolish to sell the house now when prices are RISING so much"

but if you own something that sells for €100 today and will probably sell for € 50 next year then doesn't it make sense to sell it now.

But most importantly if you do decide to sell you should sell it to the higherest bidder. If you sell it to your tenant be sure that you're getting market price for it. Selling to the tenant without advertising it might not be the right thing to do.

BoozyBabe

Bought property for just under €100k
Spent prob €6-7k on it.
When recently speaking to mortgage broker (last few months), he was certain that I'd sell it for €170k
I'm still a little dubious about this figure. I can't imagine it'd sell for that, but tbh, I've NO idea!! That's why I'm wondering if I should get a valuation done, so I know what I'm dealing with. How much does a valuation cost?
The rent covers the mortgage so I'm neither making or losing money on the property, it's currently paying for itself & has done for the last 4 years.

BoozyBabe

Thanks for your advice guys.
Appreciate it.

If you'd an investment property, would you sell now, or keep it long term to use as a pension?
I know that's a long long long time off, but I'm afraid to sell now, then realise when it's too late that I'd a great safety net in place for myself

ZYX

What kind of a return are you getting on property ie how much rent are you getting less your costs? Anything less than 6% of current value and you should give serious thoughts to selling.

spockety

BoozyBabe wrote: »

Bought property for just under €100k
Spent prob €6-7k on it.
When recently speaking to mortgage broker (last few months), he was certain that I'd sell it for €170k
I'm still a little dubious about this figure. I can't imagine it'd sell for that, but tbh, I've NO idea!! That's why I'm wondering if I should get a valuation done, so I know what I'm dealing with. How much does a valuation cost?
The rent covers the mortgage so I'm neither making or losing money on the property, it's currently paying for itself & has done for the last 4 years.

What kind of property is it? (house/apt)
How many bedrooms?
What general area is it in?
How much are similar properties for sale at in the area?

groom

BoozyBabe wrote: »

Thanks for your advice guys.
Appreciate it.

If you'd an investment property, would you sell now, or keep it long term to use as a pension?
I know that's a long long long time off, but I'm afraid to sell now, then realise when it's too late that I'd a great safety net in place for myself

I would sell the investment property and put the money into a tax efficient pension fund - but again lots of independent advice should be sought. Alot of pensions haven't been doing great recently either.

BoozyBabe

Sorry ZYX
This is where I'm completely clueless & why I'm on here asking advice.
I've NO idea about that financial stuff.
Rent-Mortgage, insurance, tax etc = roughly 0

I'd have thought that was pretty good, if you're looking at it as a long term thing. Owning a house that costs you nothing & then sell it eventually & keep all the profit.
Or, if the mortgage broker is right & I could make about €70k on a house that hasn't cost me anything to have, would also be good, no?
I'm sure that's completely naive of me.

BoozyBabe

spockety wrote: »

What kind of property is it? (house/apt)
How many bedrooms?
What general area is it in?
How much are similar properties for sale at in the area?

It's a 3 bed, 2 storey terrace (ex council house)
Great condition.
In small rural village, with all amenities, less than 5 miles from main town
Don't know of any similar properties in the area for sale.
Have only seen 1 house for sale in this village since I bought mine. People tend to stay there.

ZYX

BoozyBabe wrote: »

Sorry ZYX
This is where I'm completely clueless & why I'm on here asking advice.
I've NO idea about that financial stuff.
Rent-Mortgage, insurance, tax etc = roughly 0

What I mean is how much rent are you getting. The property is valued at 170,000 so 6% of that is about 10,000 per year. If you are getting less than about 1000 per month rent then it is a bad investment (unless you believe the value of the property is rising). Therefore you should sell. If you are getting more than 10% ie €17,000 rent per year then you should definitely keep property.

BoozyBabe

Thanks ZYX,
Ok, then my rent is bad.
Rent is €600/mth, which is 7200 per year.
I thought that was ok though as the mortgage doesn't cost more than that.
So, from those figures, you think I should get it valued, & if the figures are good, I should go ahead & sell.

antoinolachtnai

How much cash have you actually invested here? Relatively little by the sounds of things. All of the money is borrowed. (This is a good thing.)

You don't necessarily need to get a 6 percent return for it to be a 'good' investment. It's 'geared', something you cannot do with a pension investment. If the rent is covering the expenses and interest and contributing towards paying off the capital of the mortgage, it's not necessarily a bad deal. At the end of the mortgage period, you will own the property outright and have an income from it.

This will still work, whether the property goes down in value or not. Of course, there is the possibility that rents will collapse. But this really depends on the particular area. (If tenants are looking to buy in the area, though, that is probably a good sign.)

Also, think about what you would do with the money if you took it out of the house. Do you have a better, alternative investment?

If you take your 60k and put it in a deposit-paying account, you will get around 2400 per year on it when the DIRT has been paid. If you leave the money in the account, you will have doubled your money in about 25 years. Your money will also be eroded by inflation, same as might have happened with the house. The 120k at that stage might pay you an income of 7,000 a year if you are lucky. That won't be much money in 2033.

A tax efficient pension should be a bit better.

I don't mean to be negative about selling. If you have a really good offer, you might want to take it. It really depends on what the guy is prepared to pay. But be sure to do out your cashflows and think hard about this.

Not that it matters what other people do, but I would say that the vast majority of people who have property and can afford to do so are holding it at the moment.

BoozyBabe

Thanks for that.
I will be building in the new year, so if I sell now, ALL the profit will go directly into the new build, more than likely by affording us a smaller mortgage.
So, with that in mind, would you sell?

ZYX

antoinolachtnai wrote: »

At the end of the mortgage period, you will own the property outright and have an income from it.

This will still work, whether the property goes down in value or not. Of course, there is the possibility that rents will collapse. But this really depends on the particular area. (If tenants are looking to buy in the area, though, that is probably a good sign.)

It also assumes that expenses do not go up. They almost certainly will go up with inflation. Also as a property gets older it starts costing more. So unless rents also start rising the property starts costing money.

antoinolachtnai wrote: »

Also, think about what you would do with the money if you took it out of the house. Do you have a better, alternative investment?

If you take your 60k and put it in a deposit-paying account, you will get around 2400 per year on it when the DIRT has been paid. If you leave the money in the account, you will have doubled your money in about 25 years. Your money will also be eroded by inflation, same as might have happened with the house. The 120k at that stage might pay you an income of 7,000 a year if you are lucky. That won't be much money in 2033.

You can easily get 6.5% for a lumpsum investment at present. This would be 5% after DIRT. This represents a return of €3,000. After 25 years the 60,000 would be worth just over €203,000.

antoinolachtnai

Interesting one. I should say at the outset that I am in the school of people who believe that 'property is a good investment, if you can afford to hold on to it'.

If you really need the money to do the build and you really want to do the build, I would sell it.

If you can manage to borrow the money, the borrowing rate isn't too high, the rental property has good prospects and you have plenty of leeway for paying back the mortgage on the new build, I would hang on to the rental property.

In money terms, you would save about 5000 euros a year or less in mortgage payments by selling. Would this money really be any good to build up an alternative nest egg for yourself? Over 20 years, it's going to amount to 130 or 150k if you put it in the bank.

It's just a general question of lifestyle, providing for the future and your attititude to risk. You have to weigh it all up rationally.

I am being pessimistic about lump sum returns, for sure. Rates are unusually high at the moment, and interest rates are only going in one direction for the next year or so. Certainly, the rate you can get will have a bearing.

Expenses are a small proportion of the OP's costs, in fairness, maybe 12 percent. Property maintenance is actually dropping in cost at present. But true, rents would have to increase at least one-eighth of the inflation rate for the OP to stay on the current even keel.

ManFromAtlantis

i'm no expert but if u are getting away with the property paying for itself and you have a long term tennant then i'd keep it. u dont sound like you need the 5o or whatever profit right now. u would spenf 50k fairly quickly and on what? and twould be gone. where as atl east u have the comfort of a nice wise investment at the back of you mind if u keep it. what i mean is that in 20 years you would have got a lot of rent and a paid off property, if u keep, but if u sell well, in 20 years u might just be asking yourself where is teh 50k???? ok sin e, i've lost it somewhere along the line, but u did ask. anyways sound like its a choice between a good choice or a better one.

BoozyBabe

Thanks everyone.
A lot of interesting points there.
I'm going to talk it over at home for a while too before I make my final decision.
Thanks again.
If anyone else wants to add their two cents, I'll be here reading, so feel free.
Much appreciated.
BB

ZYX

BoozyBabe. Lets say your property is worth €170,000. You are getting €600 per month for it. It is best to assume the property is let 10 months a year to allow for empty times. That means you are taking in €6000 per year. Lets be generous and say your costs are only €1000 per year (this is to include maintainance, repairs, furniture etc). That means you are eanring €5000 per year which is a little under 3% a year on your investment. Your investment at present is costing you money as it is not keeping up with inflation. Obviously this €5,000 is then eaten up by the mortgage leaving you with €0 left over a year. If you sold and used the profit on your new build it would save you about €3600 a year. This is €300 a month extra in your pocket and no worries about renting out a property.
Add to this the fact that property prices are going down and I am afraid it is a no brainer. Sell.
On antoinolachtnai's point that most people are keeping hold of their property, that does not mean it is the right thing to do. The smart people had already sold their investment properties prior to 2006 (like me).

dietcola

hay hay, personally i'd be looking at keeping the property for the lonf term, housing and the rentals market are often thought of as long term investments.... seeing as you have invested time and effort into the property, maintaining all the things that need and updating everything else, surely by now the house is in tip top condition... i.e you've fixed everything thats gonna need (fingers crossed) fixing for the next say ten years...

tennants wanting to buy says to me that you have some great tennants who'll prob want to stay in the property for a few years anyway unless they obviously have the money to go and buy else where, but then theres no great loss as not many others are in the buying position...

for me it would be a no brainer... hold on to the thing and potentially in 20 30 even 40 years time the loan will be paid off and youll have all that prfoit to spend as you wish... understandably you are expanding you lettings with this new build, so build that protfolio...

i think most people are in the property game are doing one of two things... either turning them round (renovation etc) for quick profits or holding onto them for decades and letting... personally i prefer to let them, allowing the tennants to pay off the mortgage. brill!

also i dont know how long the tennants have left on their contract, are you contemplating selling with sitting tenants? this can get complex...

Either way its completely your call, have you considered allowing the tenants to buy a share into the property.... say 40% over something like 10-15 even 20 years... this would garauntee your property is let, tenants pay a bit more rent, and you know theyll look after the home too. and when it comes to retire they pay you a lump sum which you can float round the algarve enjoying....

i hope it works out a ok!

penexpers

BoozyBabe wrote: »

I'm building next year, so the cash would come in V useful, on the other hand, I'll need a pension at some stage in the future, & the rent or sale profit would come in handy then too, so not sure which route to take.

Having your pension tied up in a house is utter madness.

dietcola

what makes you think that?

gurramok

ZYX wrote: »

BoozyBabe. Lets say your property is worth €170,000. You are getting €600 per month for it. It is best to assume the property is let 10 months a year to allow for empty times. That means you are taking in €6000 per year. Lets be generous and say your costs are only €1000 per year (this is to include maintainance, repairs, furniture etc). That means you are eanring €5000 per year which is a little under 3% a year on your investment. Your investment at present is costing you money as it is not keeping up with inflation. Obviously this €5,000 is then eaten up by the mortgage leaving you with €0 left over a year.

Not forgetting tax to the revenue out of that 5000, is it 41% rate now?

Dob74

BoozyBabe wrote: »

Hi all,
I know this is the absolute worst time to be considering selling your property, but I was looking for your opinions on the matter.

My tenant has just approached me & asked if I'd consider selling my property to them.

My initial reaction was NO, it's a terrible time to sell & the prices would be dreadful.

Then, I'm wondering, should I get it valued anyway, & see what sort of price region the house is now in & then make my decision.

The fact that my tenant approached me about it would be a good sign, yes?
Or is it just they're expecting to pay bottom dollar for it in the current market?

I'd never decided what I'd do with the property long term.
Keep for a pension in the future, maybe many painful years of renting & maintaining,
or sell quick & make a good profit. I know I've currently missed the boat on that one!

If I were to make €60-70k on the property that I've owned for 4 years, would you be inclined to go for the sell, or hold out until better times?

I would never even have been thinking about this, only the situation presented itself & I'm wondering am I silly to discount it completely, or is my initial reaction the correct one?

Thanks for any opinions you may have on the matter.

I would sell, if you still can make a profit. It will be a long time before prices start going up again.

Ste.phen

dietcola wrote: »

what makes you think that?

Because you need to sell it [and if it's your PPR - find somewhere else to live] and in the process incurr lots of hassle, taxes, possibly negative or no return on investment (what if the place turns into a slum in the intervening years?) etc.

It's a possibly good way to make money on capital appreciation, but if the market goes sour the exit route is slow, painful and possibly impossible (try selling a 1 bed apartment in Tallaght and see what sort of return you get on 2006 prices)

shoegirl

BoozyBabe wrote: »

If I were to make €60-70k on the property that I've owned for 4 years, would you be inclined to go for the sell, or hold out until better times?

Count yourself very lucky that you both have a sitting tenant, an offer on the house and haven't lost money. There are many buy-to-let landlords like you being stung on all 3 grounds.

60-70k is a nice profit, unless you paid 1.5 million originally.