Good time to sell ?

sunnyday1234

Hi everyone

Just looking for some opinions on this, i dont expect anyone to have a crystal ball or anything but just like to hear what you guys think

Bought house in 2008 in Mallow , Cork for 290k, mortgage remaining is 195k. Standard variable rate of 4.1% ish

Its rented for past 3 years and we have to top up the rent by 220 each month so its costing around 3k net per year (top ups / insurances / little bit of tax etc)

We definetely dont want to keep the house long term so we were thinking of selling it now

Two similar houses for sale at moment are for 220k and 230k. The one for 230k is nicer and refused an offer for 225k

We are looking at these costs

3500 auctioneer
1000 paint outside
500-1000 touch up inside
1500 solicitor
3300 (3 months extra mortgage payments while its selling, hopefully )

Thats about 10k in total which would leave us around 20k after all is said and done. We would be very happy with this ammount

Is it a good time to sell ? We dont want to be greedy and just want to get out in a rising market

Would the bank let us do interest only or anything like that while we are selling ?

Anything else i am not thinking of ?

Thanks for any help

Uriel.

You are still taking a considerable hit compared to original purchase price. But it depends on whether you are happy to live with that and whether you need to get out of the rental game or how much you desire to get out of it.

If it is rented out not causing you too many headaches at the moment, I'd imagine you'd be best to ride it out another while longer. Don't know the market in Cork but I can't see a significant immediate risk of price collapse.

Subject to local market conditions and current situation with regard to the rental circumstances, I'd stay as is and reevaluate in 12 months. Mortgage will be a years worth less and you'll have had some rental income for another 12 months.

sunnyday1234

thanks. I just dont want to get caught in a market where rents are falling and interest rates are rising causing a property market slowdown

Tenants are hassle free . I dont think this house would ever get back to the original purchase price. We had to put over 2k into it last year for heating issues

To be honest ijust dont like it as its too much risk, there are a huge number of issues that could cause us to have financial heartache. I would prefer to keep the 3k per year that we are pumping into it and pay down the mortgage on our primary residence

amcalester

The property is increasing in value more per year than it is costing you to keep so unless you need to sell I would hold on.

Possible 10% (circa €20K) against a €3K investment, thats not a bad return.

You could always re-evaluate when/if the current tenants move out.

sunnyday1234

amcalester wrote: »

The property is increasing in value more per year than it is costing you to keep so unless you need to sell I would hold on.

Possible 10% (circa €20K) against a €3K investment, thats not a bad return.

You could always re-evaluate when/if the current tenants move out.

But how do we know for sure if the value is increasing more than the 3k in a year ?

Isnt it better to sell to a hot market rather than wait to try and time the top ?

Uriel.

sunnyday1234 wrote: »

But how do we know for sure if the value is increasing more than the 3k in a year ?

You just need to monitor the market and have an eye to your own financial situation.
If you can get an extra 5k in 12 months, plus your mortgage is 3k less, plus you've made a rental profit of 1k and you've had no issues with tenants etc, you're 9k better off than you are today. There are risks of course and many variables. You need to weigh them up for your own situation.

If it was me l I'd be hanging on.

amcalester

sunnyday1234 wrote: »

But how do we know for sure if the value is increasing more than the 3k in a year ?

Isnt it better to sell to a hot market rather than wait to try and time the top ?

You don't know for sure but all indications are that prices will continue to rise for the foreseeable future.

There's a massive housing shortage and that won't change in the short term so highly unlikely that rents/prices will fall in the short term.

sunnyday1234

Uriel. wrote: »

You just need to monitor the market and have an eye to your own financial situation.
If you can get an extra 5k in 12 months, plus your mortgage is 3k less, plus you've made a rental profit of 1k and you've had no issues with tenants etc, you're 9k better off than you are today. There are risks of course and many variables. You need to weigh them up for your own situation.

If it was me l I'd be hanging on.

How do you mean a 1k rental profit ? We spend 220 a month just to top up the rent to pay the mortgage

If you are happy with those figures then go ahead and move on with your life.

You are paying out cash every month on a house you don't live in.

Do get some advice from a solicitor or accountant up front.

How long are the tenants there - will they have to go before selling?
Would they buy the house?

sunnyday1234

[Deleted User] wrote: »

If you are happy with those figures then go ahead and move on with your life.

You are paying out cash every month on a house you don't live in.

Do get some advice from a solicitor or accountant up front.

How long are the tenants there - will they have to go before selling?
Would they buy the house?

They couldnt buy it as they are on HAP

They are there for a year

Im surprised that no one thinks the inevitable increases in interest rates will cause the market to stall

Uriel.

sunnyday1234 wrote: »

How do you mean a 1k rental profit ? We spend 220 a month just to top up the rent to pay the mortgage

Im talking about rental profit, you said you pay tax on the rent which means you're making some level of profit. Outside of 80% of the interest on the mortgage, the mortgage repayment is not a rental cost.

Don't focus on the 220, focus on the amount of your mortgage that someone else is paying for you.

Effectively, your 220p/m + property tax + tax on rental income is what it is costing you to maintain the mortgage on an asset worth 230k that seems to be at worst maintaining its value and better, appreciating each year.

I'm not saying there's a fantastic return on investment here, rather I am saying in current market conditions you'll likely be in a better position in 12 months compared to today.

However as I've said already there are of course risks involved. I don't see the main risk as being depreciation of house value. I'd expect your house will have a greater market value this time next year.

The level of risk you are happy with and your own needs/desires will dictate your approach here.

sunnyday1234

there are 15 years left on the mortgage. It would be nice to have a house to sell when we retire i suppose!

Askthe EA

Uriel. wrote: »

Im talking about rental profit, you said you pay tax on the rent which means you're making some level of profit.

Eh no, tax is paid before mortgage repayments. No profit needed to pay tax!!!!

Uriel.

Askthe EA wrote: »

Eh no, tax is paid before mortgage repayments. No profit needed to pay tax!!!!

What?
Where did I say anything about tax being paid or not before mortgage repayments.

Askthe EA

Uriel. wrote: »

What?
Where did I say anything about tax being paid or not before mortgage repayments.

"you said you pay tax on the rent which means you're making some level of profit"

My point is, it doesn't mean that at all.

Cuddlesworth

sunnyday1234 wrote: »

They couldnt buy it as they are on HAP

They are there for a year

You might find yourself in a very problematic situation if you try a legal eviction. HAP tenants find it very hard to get property's and if faced with eviction, they are told to over-hold in most cases.

Askthe EA

I wonder would a call to the council and offer to sell it to them be an idea?

Fian

Uriel. wrote: »

Im talking about rental profit, you said you pay tax on the rent which means you're making some level of profit.

Tax is paid on rental income not on rental profit. Many expenses are not permitted to be written off, which would be deductible against profit.

Having said that of course you are entirely correct that principal repayments on the mortgage are not a rental cost and should not be tax deductible.

OP - if you are paying that mortgage interest rate it sounds like it is not a BTL mortgage. I imagine perhaps you originally bought the house to live in yourself? A PPR mortgage carries a lower interest rate than a buy to let, they also contain clauses obliging you to live in the house. You may therefore be in breach of your mortgage covenants allowing the bank to exercise rights under the mortgage in terms of higher interest rates, foreclosure etc.

They are not likely to seek to repossess the house but they might up your interest rates.

You should bear this in mind in weighing up whether to retain the property.

Hmm, just looked at bonkers.ie and see quite a few BTL mortgages at these sort of interest rates. I have 2 BTL mortgages at over 2% higher rates, must investigate switching.

Uriel.

Askthe EA wrote: »

"you said you pay tax on the rent which means you're making some level of profit"

My point is, it doesn't mean that at all.

Rental profit.

pilly

amcalester wrote: »

The property is increasing in value more per year than it is costing you to keep so unless you need to sell I would hold on.

Possible 10% (circa €20K) against a €3K investment, thats not a bad return.

You could always re-evaluate when/if the current tenants move out.

Why on earth would you presume property in Cork is going to up by 10% per annum indefinitely????

Very very unlikely.

pilly

You don't mind me saying OP, 290k is a lot for a house in Mallow? I presume that was at the height of the boom?

JimmyMW

sunnyday1234 wrote: »

Hi everyone

Just looking for some opinions on this, i dont expect anyone to have a crystal ball or anything but just like to hear what you guys think

Bought house in 2008 in Mallow , Cork for 290k, mortgage remaining is 195k. Standard variable rate of 4.1% ish

Its rented for past 3 years and we have to top up the rent by 220 each month so its costing around 3k net per year (top ups / insurances / little bit of tax etc)

We definetely dont want to keep the house long term so we were thinking of selling it now

Two similar houses for sale at moment are for 220k and 230k. The one for 230k is nicer and refused an offer for 225k

We are looking at these costs

3500 auctioneer
1000 paint outside
500-1000 touch up inside
1500 solicitor
3300 (3 months extra mortgage payments while its selling, hopefully )

Thats about 10k in total which would leave us around 20k after all is said and done. We would be very happy with this ammount

Is it a good time to sell ? We dont want to be greedy and just want to get out in a rising market

Would the bank let us do interest only or anything like that while we are selling ?

Anything else i am not thinking of ?

Thanks for any help

Quick question I was wondering would you be liable for Capital Gains Tax? Assuming the property was your PPR until 3 years ago when you rented it out, it essentially became a buy to let property at that point. Would revenue look at any increase in value from 3 years ago to now as a gain despite the loss from the original purchase price?

pilly

JimmyMW wrote: »

Quick question I was wondering would you be liable for Capital Gains Tax? Assuming the property was your PPR until 3 years ago when you rented it out, it essentially became a buy to let property at that point. Would revenue look at any increase in value from 3 years ago to now as a gain despite the loss from the original purchase price?

Good question.

sunnyday1234

Cuddlesworth wrote: »

sunnyday1234 wrote: »

They couldnt buy it as they are on HAP

They are there for a year

You might find yourself in a very problematic situation if you try a legal eviction. HAP tenants find it very hard to get property's and if faced with eviction, they are told to over-hold in most cases.

I dont understand this. Its my house and if i provide  3 months notice then i can sell it. 
Yes it was bought at the height of the boom and 290k was / is crazy money for mallow
These houses dont seem to have increased in price in the last 6 months or so , thats why i think they could be reaching their max true value 
This mortgage is not on a BTL rate. I think CGT is only payable in the event the price goes above the purchase price ?

JimmyMW

sunnyday1234 wrote: »

I dont understand this. Its my house and if i provide  3 months notice then i can sell it. 

If they abide by the notice, this forum is full of stories of landlords trying to get tenants out after a valid notice has been issued. It may be a fight you need to account for.

sunnyday1234 wrote: »

These houses dont seem to have increased in price in the last 6 months or so , thats why i think they could be reaching their max true value 

I agree with you, most spending more than that will look to be closer to the city IMO unless living in mallow specifically suits them, however id say Mallow like Macroom has a lot of residents who commute to the city for work

sunnyday1234 wrote: »

I think CGT is only payable in the event the price goes above the purchase price ?

It may be worth getting someone in the profession to have a look at this so you don't face any nasty surprises, remember you have been declaring rental income from the property therefore the revenue know when it became a BTL property, the mortgage is separate to that.

amcalester

pilly wrote: »

Why on earth would you presume property in Cork is going to up by 10% per annum indefinitely????

Very very unlikely.

I made no mention of indefinite 10% growth, I even gave the "return" based on 12 months rather than years.

8-10% is the prediction for 2018, if the OP can afford to keep topping up the mortgage for 12 months (and assuming all other things being equal) then it is likely the property will be worth more than it is now.

I'd be more concerned with the tenants over-holding if the OP does decide to evict/sell than the risk of future price decline.

There are not many houses to rent in Mallow full stop, let alone houses within HAP limits.

Theboinkmaster

sunnyday1234 wrote: »

Standard variable rate of 4.1% ish

First thing I'd do is switch mortgage provider as that's insane.

KBC do 2.9% rate for your LTV band.

amcalester

Theboinkmaster wrote: »

First thing I'd do is switch mortgage provider as that's insane.

KBC do 2.9% rate for your LTV band.

Those are residential rates, the BTL rates are higher 4.5% to 5.25%.

sunnyday1234

Thanks everyone
Who could advise on the CGT ? Accountant or solicitor
What is tenant over - holding ? 
Also i cant remortgage as house is worth 220k and mortgage left on it is 196k so thats still over 80%

Donie75

I'd be interested to hear what the situation is with CGT on rental properties also. I bought a house 12 years ago and rented it out 8 years ago. I paid €319k for the house and it is worth around €250K now. I am considering selling the house in the next 6 to 12 months.

Also, are local authorities buying rental properties? My tenant is on rent allowance and is on the local housing list for 6 years.

pilly

amcalester wrote: »

The property is increasing in value more per year than it is costing you to keep so unless you need to sell I would hold on.

Possible 10% (circa €20K) against a €3K investment, thats not a bad return.

You could always re-evaluate when/if the current tenants move out.

amcalester wrote: »

I made no mention of indefinite 10% growth, I even gave the "return" based on 12 months rather than years.

8-10% is the prediction for 2018, if the OP can afford to keep topping up the mortgage for 12 months (and assuming all other things being equal) then it is likely the property will be worth more than it is now.

I'd be more concerned with the tenants over-holding if the OP does decide to evict/sell than the risk of future price decline.

There are not many houses to rent in Mallow full stop, let alone houses within HAP limits.

Without being pedantic you specifically said per year, nowhere did you say this year.

pilly

sunnyday1234 wrote: »

I dont understand this. Its my house and if i provide 3 months notice then i can sell it.
Yes it was bought at the height of the boom and 290k was / is crazy money for mallow
These houses dont seem to have increased in price in the last 6 months or so , thats why i think they could be reaching their max true value
This mortgage is not on a BTL rate. I think CGT is only payable in the event the price goes above the purchase price ?

If I were you I'd go with your gut. Too many people held out the last time prices rose hoping to make a huge profit, never panned out for them.

amcalester

pilly wrote: »

Without being pedantic you specifically said per year, nowhere did you say this year.

Fair enough, first sentence was related to the immediate past while the second was looking into the short term future.

I would have thought it obvious that I wasn't suggesting an indefinite 10% price increase.

Fian

Donie75 wrote: »

I'd be interested to hear what the situation is with CGT on rental properties also. I bought a house 12 years ago and rented it out 8 years ago. I paid €319k for the house and it is worth around €250K now. I am considering selling the house in the next 6 to 12 months.

Also, are local authorities buying rental properties? My tenant is on rent allowance and is on the local housing list for 6 years.

CGT is not an issue for OP Atm, since the value is below what he paid for it - there is no gain to tax.

In your example if you achieved a price higher than you paid (+ allowable additional costs) you would pay CGT on 8/12ths (75%) of the gain. And again in your case there does not appear to be a gain to tax.

amcalester

sunnyday1234 wrote: »

Thanks everyone
Who could advise on the CGT ? Accountant or solicitor
What is tenant over - holding ? 
Also i cant remortgage as house is worth 220k and mortgage left on it is 196k so thats still over 80%

Over-holding is where the tenant stays on in the property after the eviction date.

In the case of a HAP tenant this could be because they are unable to find alternative accommodation and have been advised (either by the council or Threshold) to stay where they are.

You as the landlord will then have to initiate legal proceedings route to get them removed can take months and is expensive.

Its worth checking the HAP limits for your area to see how your rent compares and if the tenant would be able to find suitable accommodation at the same rent.

Fian

sunnyday1234 wrote: »

I dont understand this. Its my house and if i provide  3 months notice then i can sell it. ?

In theory you are entitled to terminate tenancy for the purposes of sale.

If tenant chooses not to comply with eviction notice (and subsequent decisions) you face a very costly and prolonged battle to evict. You go to RTB, they adjudicate in your favour, then you go to court to get eviction order, then you go to sheriff to execute that order. As your tenant is on hap presumably they are not a mark for costs/damages.

No reason to assume your tenant will do any of that from what you have said though. Below market rent can increase the risk that people are reluctant to leave, not sure if your rent is below market rates.

sunnyday1234

My rent is market rates and they are actually very good tenants. So CGT isnt an issue at least

Will do the sums with the wife and decide then what to do. Its a tough decision. Even putting the 250 a month that we are currently using to top up the rental house off our own PPR would reduce the monthly payments on that so that would benefit also

JohnCleary

Why bother with an EA? I sold myself directly*

* I lived 500m from the property, I was in a lucky position to be able to show the property to people at any time, I like talking sh1te, the property was in turn-key condition, all paper-work prepped by me (MUD, Compliance, etc...).

If you have the 'love' for it, I highly recommend it. Great learning curve. Saved quite a few €€€ which I considered 'payment' for my work... better in my pocket than an EA's

grass_cutter

OP , your house will regain what price you paid for it originally , its in the cork city commuter belt , the economy of cork is one of only three economies which are bigger today than they were in 2007 , the other two being dublin of course and galway city

i sold an apartment in limerick city a year ago having picked it up for nearly 40% less only eighteen months prior to that , thought i was a great fella with my profit but the reality was i just bought it for nothing the first day , once you sell in rising market , you quickly discover everything else has risen along with your asset and you really have nothing to replace it with

if the tenants are not troublesome , i would hold on to it , its fashionable to give out about property these days but what other options are there , the government penalises investing in stocks due to the seven year rule

making money isnt easy no matter what you do

LirW

Either can give you advise.

Overholding means that the tenants are told to just ignore the notice and stay put. You can't just chuck them out after the notice period is up and if they don't leave you have a serious problem and it'll cost you time and money and all of your nerves to get rid of them.

Personally I'd get rid of it since it sounds like a burden and I don't like financial burden or commitments like that. Trying to ask the council isn't a bad idea since they might just keep the tenants in the house if they're on the housing list.

grass_cutter

LirW wrote: »

Either can give you advise.

Overholding means that the tenants are told to just ignore the notice and stay put. You can't just chuck them out after the notice period is up and if they don't leave you have a serious problem and it'll cost you time and money and all of your nerves to get rid of them.

Personally I'd get rid of it since it sounds like a burden and I don't like financial burden or commitments like that. Trying to ask the council isn't a bad idea since they might just keep the tenants in the house if they're on the housing list.

the council would not pay the colour of the actual market value , if a house was worth 75 k , the council would offer 50 K

Nermal

Imagine you didn't have the apartment. Would you buy it, putting down a €20K deposit and subsidising the mortgage by €230?

If not, sell it.