Building new home, what to do with current home?

Trammo

Almost finished new build which will be our new home. Have taken a small mortgage and used a lot of cash savings for the build and I have €70k to put into the new house finish. Also have almost €50k negative equity on our former home in Dublin which we had planned to rent out once we move to our new home.
Net rent after taxes and expenses will be about €1000 compared to monthly mortgage repayment of €1900. Value €300k, owe €344k. 22years remaining @3.8% SVR.

I had an idea lately that it might be better to just pay off the negative equity from our savings, sell the former home, make a “loss” and focus on finishing new house over time. The alternative is finish our new home to a high standard and continue to pay mortgage on former home as normal (would probably be out of NE in 2018/2019).
Have no real interest in being a landlord but at the same time would not struggle to pay the shortfall between rent and mortgage.

Any thoughts?

Thanks.

What is the difference in the finish of your new house? How important is that vs the stresses of being a reluctant landlord? Are you sure it will be out of negative equity soo soon?

I don't think any of us can make the decision for you.

Personally I would not keep the old house - too much potential for stress for something that is loss making. Is it near your new house?

Trammo

Thanks. Am not looking for anyone to make the decision for me. Am just looking for people's thoughts or if anybody had similar experience that would have been great too.

The difference in finish would be the difference in finishing the house and gardens outright or doing only a few rooms, enough to move into and then finish the rest of the house from monthly income over time. Mortgage balance is reducing by €11k per year. Will be out of NE by 2019 (unless prices decline again).


House is not near new house but net costs below included cost to use a letting agent.

ted1

Trammo wrote: »

Almost finished new build which will be our new home. Have taken a small mortgage and used a lot of cash savings for the build and I have €70k to put into the new house finish. Also have almost €50k negative equity on our former home in Dublin which we had planned to rent out once we move to our new home.
Net rent after taxes and expenses will be about €1000 compared to monthly mortgage repayment of €1900. Value €300k, owe €344k. 22years remaining @3.8% SVR.

I had an idea lately that it might be better to just pay off the negative equity from our savings, sell the former home, make a “loss” and focus on finishing new house over time. The alternative is finish our new home to a high standard and continue to pay mortgage on former home as normal (would probably be out of NE in 2018/2019).
Have no real interest in being a landlord but at the same time would not struggle to pay the shortfall between rent and mortgage.

Any thoughts?

Thanks.

How much rent can you actually receive, with might be allowing too much for rent and tax.
switching to interest only might be an option, then if the property increase in value you could sell it.

dori_dormer

Personally I'd finish the new house. It would drive me batty living in a half finished place. Maybe try and not spend all your savings though, reduce costs a little bit. I'd want to have about 10 grand buffer of savings if I was becoming a landlord again.

Then I'd rent out the old house, I wouldn't bother with an agent unless you are over an hours drive from the old house. They really just take your money, find a tenant and you then don't hear from them again until you need new tenants.

I'd be overpaying as much as you can on the old house to get it out of negative equity faster. Hope selling prices rise even a little bit. Then sell as soon as you can break even.

But that's just me!

Trammo

Thanks for the replies. I am edging towards what you are saying dori_dormer

I will have emergency fund ready for any unexpected expenses with the old house too.

Sleepy

Would a council's long term leasing option suit you? 10 years lease with no maintenance hassle. With the lower rent it'd obviously take longer to get it to a break even point but you'd avoid the stress of being a landlord and, at the end of the 10 year period, you'd get the house back in decent nick. It leaves you open to capital depreciation for a longer time-frame but the council's maintenance standards are actually pretty high so unless there was another price crash in the meantime, you could end up with a bit of capital appreciation too...

ted1

Sleepy wrote: »

Would a council's long term leasing option suit you? 10 years lease with no maintenance hassle. With the lower rent it'd obviously take longer to get it to a break even point but you'd avoid the stress of being a landlord and, at the end of the 10 year period, you'd get the house back in decent nick. It leaves you open to capital depreciation for a longer time-frame but the council's maintenance standards are actually pretty high so unless there was another price crash in the meantime, you could end up with a bit of capital appreciation too...

On interest only you could claim 100% of your monthly payment so the tax bill would be zero, ad anything over the repayment could be written off againest depreciation and other expenses

Moonbeam

Don't under estimate the tax liability on a rental property,my rented house is only a small house and my tax bill is a large proportion of the rental income.
http://www.irishlandlord.com/index.aspx?page=calculators_taxestimation

riclad

Your tax bill is only zero if the loan interest plus all expenses ,and landlord tax allowances , is more than your rental income .
And you still have to pay property tax and prtb fees .

handlemaster

I think I would rent out . Use an agency full management. As you say NE is just 44k approx. Ride it out for a few years . Prices will not fall back much if at all. Building in Dublin hadnt taken off and wont for a few years. So you can sell in 2019/2020

Other option is sell now. You can carry the capital losses over indefinately. Speak to an accountant. Also if you rent now his will that affect your capital gains if any when you sell. But you probably wouldnt be worried about that

searay

I would prioritise cash flow towards finishing the new house as that's what you and your family need.

What you do with the old house depends on what your household income is, what the likely appreciation of the house will be, who your bank is and what their policy on restructuring is.

I'd recommend you talk to a personal insolvency practitioner to give you advice based on your actual circumstances.

Trammo

Thanks all, good discussion and tips.

I was not aware of the long term leasing option with DCC.
I might indeed look into it.

From a cashflow perspective it's not a problem to have two mortgages, we are lucky that household income is fairly high.