Should I sell or rent out house???

spursfan79

Advice needed!!

I'm currently a homeowner on a tracker mortgage and have planning for a house. We have met with banks and assured we can afford to keep our home if we wish and access enough funds to build a new home.
We would probably make 30-40k if we sold our house now but I'm considering holding on to it a rent it out. The rent would easily cover the repayments on it plus help with tax at the end of the year and maybe other little issues that may arise!
I'm hearing horror stories though about some tenants and cost implications but maybe they are few and far between.....
Is it too much hassle?????
Should I just take the cash and lump it into the new build????

Any advice would be much appreciated

handlemaster

whats your tolerance for been pillared as the bad guy even when your been treated like dirty from a Tenant ? Do you know the rate of tax you will pay ?

spursfan79

I'm aware of the tax I'll have to pay alright. I'm not a city dweller so it won't be as cutthroat as the city!
I'm more concerned about a dodgy tenant over having no tenant for a period of time.
When I say dodgy I mean someone who stops paying and then leaves with the place in a mess.

handlemaster

spursfan79 wrote: »

I'm aware of the tax I'll have to pay alright. I'm not a city dweller so it won't be as cutthroat as the city!
I'm more concerned about a dodgy tenant over having no tenant for a period of time.
When I say dodgy I mean someone who stops paying and then leaves with the place in a mess.

If they leave that is. The ptrb is totally for the tenant

spursfan79

handlemaster wrote: »

If they leave that is. The ptrb is totally for the tenant

I've heard exactly that too! If you were in my position what do you think you'd do?

johnny_tractor

spursfan79 wrote: »

Advice needed!!

I'm currently a homeowner on a tracker mortgage and have planning for a house. We have met with banks and assured we can afford to keep our home if we wish and access enough funds to build a new home.
We would probably make 30-40k if we sold our house now but I'm considering holding on to it a rent it out. The rent would easily cover the repayments on it plus help with tax at the end of the year and maybe other little issues that may arise!
I'm hearing horror stories though about some tenants and cost implications but maybe they are few and far between.....
Is it too much hassle?????
Should I just take the cash and lump it into the new build????

Any advice would be much appreciated

sell as fast as you can

that 30=40k profit could be minus next week

athtrasna

I wouldn't advise anyone to rent a property if there's a profit to be made by selling it. One of the happiest days of my life (and equally heartbreaking when we saw the state of the place) was the day our last tenants moved out.

Sleeper12

You'll pay capital gains tax on the difference of the house value when you start renting it out and the value on the day you sell.
My sister sold a house last year & had to pay 75k capital gains tax. She was renting it for around 15 years.
Just something to work into your equation

evolving_doors

spursfan79 wrote: »

Advice needed!!

I'm currently a homeowner on a tracker mortgage and have planning for a house. We have met with banks and assured we can afford to keep our home if we wish and access enough funds to build a new home.
We would probably make 30-40k if we sold our house now but I'm considering holding on to it a rent it out. The rent would easily cover the repayments on it plus help with tax at the end of the year and maybe other little issues that may arise!
I'm hearing horror stories though about some tenants and cost implications but maybe they are few and far between.....
Is it too much hassle?????
Should I just take the cash and lump it into the new build????

Any advice would be much appreciated

The bolded above is not without cost too.
If you had taken that 30-40k and thrown it to reduce the intial cost of your new house how much extra would that have saved you over the term of the new mortgage?
Could the extra deposit possibly reduce the loan to value rate!

mickmac76

I'd say sell the house. Being a landlord isn't worth the hassle and you don't know what the government will change next. The new rent pressure zones are short-sighted and even if you're not in one now doesn't mean you won't be in one in the future. Plus taxes could rise and that's before you have a problem tenant.

spursfan79

Gebgbegb wrote: »

The bolded above is not without cost too.
If you had taken that 30-40k and thrown it to reduce the intial cost of your new house how much extra would that have saved you over the term of the new mortgage?
Could the extra deposit possibly reduce the loan to value rate!

Ye I know could save a lot of money putting it in the new house alright... The vibes I'm getting here is to sell it off, get the few pound and put it into the new build...
I wouldn't deal with the stress to well if things got messy so maybe this is the way to go!!
Anyone suggest otherwise??

newacc2015

spursfan79 wrote: »

I'm aware of the tax I'll have to pay alright. I'm not a city dweller so it won't be as cutthroat as the city!

If it was a decent 4 bed house in Dublin I would do it. I personally wouldn't take on the BS of being a Landlord in the country where you might rent a house for €600-700 a month. If the boiler goes, that is €2,500. The washing machine goes, there is another €500. Renting a country house is not worth the hassle for me

Although you have a tracker, which is basically free money. It might pay to be a landlord since you have such a cheap mortgage.

You have to ask yourself are you ok with getting up at 12am to deal with a burst pipe or having to deal with the personal issues of the tenants ie I know a landlord whose tenants ended up being addicts and the landlord had to get the Gardai to go collect rent with him.

The cons of being a landlord outweight the pros for most landlords

Samuel T. Cogley

You're also very unlikely to be allowed to keep the tracker. Although most do. If you are going to pull a fast one on the tracker that's one less bank to get a mortgage from.

evolving_doors

I investigated the possibility of doing a 10yr lease to the council before -not the RAS scheme BTW- but didn't go through with it in the end (just stayed in the house).
Guaranteed rent every month, generally they offer about 80% of whatever is on the most recent daft report in your area, add an extra bedroom if you can.
Hand keys to council start of year one, get keys back end of year 10.
Never meet the tenant.
Never any calls to fix stuff.
Takes a little bit to get the house up to spec but tempting alternative to being a regular hassled landlord.

quadrifoglio verde

Op, what situation would you be in if there was a 2% increase in interest rates over the next 3 years? How does the repayments stack up compared to the rental income.
Especially if the rent increase gets capped at a Max of 4% per annum

Water John

I think it depends on you. The option Geb is a good one if renting, otherwise sell.

pocketse

It all depends on what your motivation is. I bought a house as an investment with a friend of mine 10 years ago. The house covers itself. All above board it costs us a bit in tax every year. There is a bit of upkeep over the years also. I'm self employed. I view this as my pension and not going to apologise for it. In 20 years time, the house will be paid off and I will have a monthly rental income and own an asset. I have been lucky with tenants. They've all been pretty decent and we have treated them pretty decently also. Its my view that reading boards and the national news would scare you off everything. Im of the opinion that most people are decent. Yes there are horror tenents and landlords out there but id put it at a figure of 10% (this is in no way scientific and just of the top of my head). I read these threads and hear horror stories of unreasonable landlords raising rents and bullying people and then of horror tenants trashing houses an refusing to leave. I have no doubt that this does happen but i don't think its a prevalent as you hear in the news and online.

As i said, we have been really lucky. The house hasn't been a huge hassle. There is wear and tear and we have had to do a bit of work over the years but all of this getting a call at 5 on a Sunday morning to say that the boiler is broken/pipe is leaking stuff isn't really a huge issue.I can count on one hand the number of big issues we've had over the years. I wouldn't let unknowns like that scare you off.

Some things to consider

Like i said, whats you're motivation? If its get rich quick just sell it. But as an investment, providing is in a decent rental area and you can afford to pay for it in lean times then it a decent investment.

We're in a rental bubble at the moment. Rents are very high. Its supply and demand. The only way I see to fix this is to increase supply. Thats not going to happen over night. Government have to be seen to do something. What that something is, is a bit scary to think about. Its an unknown. Time is what it will actually take to fix this crisis but it won't stop them meddling. Landlords are the villans these days and an easy target.

Just my opinion, I'm sure many differing and equally valid ones out there. Best of luck with the new house and the big decision.

Pockets

Ms Doubtfire1

I think a lot also depends on the location of the house you want to rent out.

pilly

My advice as a LL is definitely don't do it. I've done it now for 2 and a half years and can't wait for the current tenants to move out so I can sell. Their lease is up in March and the house is going on the market straight away. It has cost me a fortune and stressed me out no end.

Ms Doubtfire1

As long as LL and tenants are aware and adhere to the tenancy law, there should be no issues.issues ONLY arise if either one tries to pull a fast one.In my experience - thats usually the LL.

Bigus

If the house you're talking about seling is your current principal private residence, your financial gains are tax free, as of now.
If you rent it out you begin to lose this tax free status in increments, which you would need tax advice on .
However if it's a country property the chances of it rising in value are strong so maybe hold off a little while or simply ask for stronger money now.

the_syco

spursfan79 wrote: »

We would probably make 30-40k if we sold our house now

It may cost half that to do the place back up again after a problem tenant. The other half will be the rent that the tenant never paid you. Or you may choose to sell it at a loss to get rid of it at that stage.

Gebgbegb wrote: »

Never meet the tenant.
Never any calls to fix stuff.

Is there anything stopping the tenant making structural changes to the house?

spursfan79 wrote: »

We have met with banks and assured we can afford to keep our home if we wish and access enough funds to build a new home.

Maybe keep the current house until the new house is built, and then move into the new house and sell the current one, rather than having to rent in the interim period after selling your current house, but before the new one is built? Less stress as well, I'd say.

evolving_doors

the_syco wrote: »

It may cost half that to do the place back up again after a problem tenant. The other half will be the rent that the tenant never paid you. Or you may choose to sell it at a loss to get rid of it at that stage.


Is there anything stopping the tenant making structural changes to the house?


Maybe keep the current house until the new house is built, and then move into the new house and sell the current one, rather than having to rent in the interim period after selling your current house, but before the new one is built? Less stress as well, I'd say.

Well in theory the tenant can put a skateboard park on the roof if they want! But from what I recall the council have to return it to you as they found it (but with reasonable wear and tear which seems fair enough). You can put pre-conditions into the contract if the council are in agreement.
Seemed like a good deal at the time. Dunno if different councils have the same deal.

okiss

There are plus and minus points with selling or renting out this house

If you sell you have say €30,000 to €40,000 to put towards your new house.
Your repayments will be lower. Along with this your not dealing with tenents.

In your case I would pay for some professional advice in regards what to do.

Another thing to consider is long term is this house likely to go up in value? What are the employent prospects like near it or within a few miles of a drive? Has it a good primary or secondary school near by?
What are the rents in the local area? How quickly would you rent out the house?

Would the local council be happy to rent the house off you for x number of years? I know you would get less than market rent but you not dealing with tenents or having the place empty between tenents. I would ring the local council and see if they would be willing to rent out this house.

Long term what are your own plans? Do you have children? If you have children keeping the house could make sense long term. You could put any profit aside as long term savings for your children's education or it could be a good asset to have in the future.

You could sell this this house in 10 or 15 years and make a nice profit on doing this. Also if anything unforseen was to happen it could be used to help you or your family out then.

Grumpypants

Being a landlord isn't easy, and you are always just one bad tenent or broken down boiler from being in serious financial trouble. You wont make much money, if you have a mortgage on the house that is 600+ it is very likely you could lose money each month.

The idea is that rather than making loads of money each year you are building equity. It isnt all horror stories most people are fine and mind the place. But it can be stressfull as something constantly needs fixing/replacing.

You can get a few calculators online to work out the sell v rent difference.

spursfan79

quadrifoglio verde wrote: »

Op, what situation would you be in if there was a 2% increase in interest rates over the next 3 years? How does the repayments stack up compared to the rental income.
Especially if the rent increase gets capped at a Max of 4% per annum

Ok, I pay about 770 p/month mortgage on the house. If I were to rent in the morning I would get between 1250-1350, that's going by rates in my area. I'm not in the rent capped zone also. If there was a 2% increase over the next couple of years then, not ideal but might manage it just about!
That 10yr council lease sounds interesting but not sure if it's something I'd go for.
I've 24 years left on the mortgage so it's a lot of time for stuff to go wrong but maybe an appliance going here or boiler might go too, would it be that much hassle in the grand scheme of things????
In saying that, I don't want to struggle over the next 20 odd years and I'd like to enjoy my life with my wife and kids without worrying bout stuff going wrong!

spursfan79

Thanks for all the advice folks!
I'm not trying any get rich quick schemes.... basically I have 3 young kids and the idea for holding on to it is for them in the future.
The house is 20 mins from Dublin, small but growing town with a very high demand for rental properties. There is currently maybe planning for 400+ houses this year so don't know if that will effect me.

athtrasna

spursfan79 wrote: »

Thanks for all the advice folks!
I'm not trying any get rich quick schemes.... basically I have 3 young kids and the idea for holding on to it is for them in the future.
The house is 20 mins from Dublin, small but growing town with a very high demand for rental properties. There is currently maybe planning for 400+ houses this year so don't know if that will effect me.

It may not be a rent pressure zone yet but it could be very soon by the sound of it. I wouldn't bank on the rent not being affected by restrictions long term.

pilly

spursfan79 wrote: »

Ok, I pay about 770 p/month mortgage on the house. If I were to rent in the morning I would get between 1250-1350, that's going by rates in my area. I'm not in the rent capped zone also. If there was a 2% increase over the next couple of years then, not ideal but might manage it just about!
That 10yr council lease sounds interesting but not sure if it's something I'd go for.
I've 24 years left on the mortgage so it's a lot of time for stuff to go wrong but maybe an appliance going here or boiler might go too, would it be that much hassle in the grand scheme of things????
In saying that, I don't want to struggle over the next 20 odd years and I'd like to enjoy my life with my wife and kids without worrying bout stuff going wrong!

So after tax and before any expenses it would mean a monthly outgoing. It really depends how much you want to hold on to it. It could be a good idea for your kids alright but it will be a struggle I'm afraid, there's no denying it. Over 24 years you're definitely going to have problem tenants somewhere along a way unless you're very lucky. You'll also have to redecorate etc.

Going with the council might be a better option as others have suggested.

Grumpypants

spursfan79 wrote: »

Ok, I pay about 770 p/month mortgage on the house. If I were to rent in the morning I would get between 1250-1350, that's going by rates in my area. I'm not in the rent capped zone also. If there was a 2% increase over the next couple of years then, not ideal but might manage it just about!
That 10yr council lease sounds interesting but not sure if it's something I'd go for.
I've 24 years left on the mortgage so it's a lot of time for stuff to go wrong but maybe an appliance going here or boiler might go too, would it be that much hassle in the grand scheme of things????
In saying that, I don't want to struggle over the next 20 odd years and I'd like to enjoy my life with my wife and kids without worrying bout stuff going wrong!

Back of the envelope equation to give you a very rough idea of how it would break down.

Rental income @ 1250 x 12 = 15,000.
I presume you and your wife are working and earning, between you, around the 67K mark. So the above is considered PAYE and will be charged at the higher rate. 40% PAYE + PRSI + USC. About 60%.

I'm going to take 5K off that amount as you will be able to claim some expenses (75% of mortgage interest, painting, buying new stuff, wear and tear etc). So 60% of 10K is 6K in tax. So your income is down from 15K to about 9,000.

You also need landlord house insurance and Life Insurance for the house and mortgage. €600. And Maintenance will be about 100-200 per month, depending on if it is a young family or professionals. A Young family will go through washing machines, boilers etc faster. Lets say 1400. So knock another 2K for those two costs.

I'm leaving out a bunch of other costs PRTB etc. for now.

Income at this stage is down to about the 7,000 mark. Your mortgage on the house is 770 x 12 = 9,240. So that means you will be losing about 2240 a year/ 186 a month.

You will also lose tax relief at source if you are still getting that on the mortgage.

The above is very rough, but a good high level overview. With some work you could probably tighten it up. But not by a huge amount. The main thing is to not get caught in the trap of thinking that because your mortgage is 770 and rent is 1250 that you would be making 400+ a month in profit.

But it is not all doom and gloom, on the plus you are building at least 5K in equity each year as the mortgage is going down by 7K and only costing you 2K. If prices keep tracking up this can be stretched. The tracker is the cheapest loan you will lever get so also a factor.

You need to look at your fiances including the new mortgage to build/buy elsewhere and see if you can absorb that monthly loss and keep aside 2-3K for emergencies. A boiler is about 2 grand for example, A tenant that just stops paying rent can take up to 2 years to get out and you are stuck with the bill, and repairs costs of any damage they do. If they are the kind to stop paying rent, they are likely the kind to not take care of your house. Can you afford to pay the mortgage without any rental income for that long?

It is a nice idea to keep something as a fall back for your kids but you are presuming that they will want to live in the area, in that house in 15-20 years time. Just looking at the recent history and where all my friends have ended up, there isn't one living near where they grew up. Will they need to travel for work, will that 20+ year old house be suitable for their needs? Is it near a college they will be attending and could help keep that cost down?

I'm in a similar boat, had to move for work and had a tracker so have rented out my old house to the council for a 5 year contract. Even though the tenant really minds the house it can still be stressful managing it from another county. I've a 10 year plan, rent it until the debt, equity and price balance out and then I'm selling. Fingers crossed I have about 100K after selling to then pay a lump off our second mortgage on the new house.

spursfan79

Ok folks, thanks for all the advice. I've decided to sell up and put most of the capital into the new build and put a bit aside for the kids down the road. There were lots of pros and cons but with the unpredictability of rates, tenants and other unforeseen issues I feel it's better for us in the long run.
The stress and managing of it would be something we can do without and didn't want to be penny pinching incase something happens down the road....
Thanks again

ted1

johnny_tractor wrote: »

sell as fast as you can

that 30=40k profit could be minus next week

Also I may be wrong but if you sell it later on it'll not be your principal residence so there will pay CGT.

See if the council will take a ten year lease on it , they'll pay you directly and maintain the property.

https://www.housingagency.ie/leasing

db

spursfan79 wrote: »

Ok folks, thanks for all the advice. I've decided to sell up and put most of the capital into the new build and put a bit aside for the kids down the road. There were lots of pros and cons but with the unpredictability of rates, tenants and other unforeseen issues I feel it's better for us in the long run.
The stress and managing of it would be something we can do without and didn't want to be penny pinching incase something happens down the road....
Thanks again

This is the best option. I was in much the same situation as yourself and was able to build a new house while still living in the old one. When we moved there wasn't much of a market for selling houses so we rented it out for six months just to keep the heating running and to have the house occupied. After the six months were up we sold it and knocked a good chunk off the mortgage of the new house.

Even though we had reasonable tenants, in those six months we got more hassle with having to make repairs to the house for problems caused by the tenant, paying 50% of the rent in tax, property tax. We would have loved to hold on to the house as an investment but we were delighted to be rid of it in the end.

byronbay2

spursfan79 wrote: »

Ok folks, thanks for all the advice. I've decided to sell up and put most of the capital into the new build and put a bit aside for the kids down the road. There were lots of pros and cons but with the unpredictability of rates, tenants and other unforeseen issues I feel it's better for us in the long run.
The stress and managing of it would be something we can do without and didn't want to be penny pinching incase something happens down the road....
Thanks again

A wise decision!

second74

Hi, I would sell. The government are totally for the tenant. I had a tenant who was onto the council saying my house was damp, the problem was she was not turning on the heating at all and she had the place full of rubbish, as soon as she left the house had no issue. But it helped her get a council house. I don't see why people should get a free house forever, get a cheaper house for about 5 years to give them a chance to get on their feet but then give the house to someone else who has hit on hard times.