To rent or sell?

Bythefire

A friend inherited a 2 bed house a few months ago. He had only bought his own place when this happened.

Having a conversation today, he's not sure to sell the inherited house or rent it. He said if he rents it he would only do short term rentals 6/9 months at a time. I don't think he wants to be a landlord but for whatever reason doesn't really want to sell it. My advice is to sell and clear his mortgage.

I told him I'd ask here if anybody else has been in a similar position and what they did?

davindub

Not a simple decision, your friend would probably need proper financial advice.

I would rent it out, the income and capital appreciation would far outpace any savings on the mortgage. Someone will come along now and say stick it in shares, the markets are extremely volatile at the moment..avoid.

Sunrise_Sunset

Personally I would want to avoid the headache that is being a small-time landlord.
It's a pain in the ass.
If it were me I'd sell it and clear my mortgage.

dennyk

He really would be better served by getting proper financial advice, but it definitely doesn't sound like he has the first notion about being a landlord if he thinks he can rent the place for 9 months at a time; that won't happen since tenants gain Part 4 security of tenure after six months regardless of any agreement that might say otherwise. If he does go the landlord route, he absolutely needs to get professional advice on that score as well, or he is no doubt going to make some very costly mistakes.

godtabh

sell, sell, sell, all the way

One bad tenant and any return you may have expected would be up in smoke

DubCount

As others have said, getting professional investment advice is always worthwhile when dealing with decisions involving large amounts of money like this. Without full details of financial situation of the property owner, my initial reaction is to sell. Invest the money into a pension scheme over time, which should generate a better return without the heartache of being a landlord.

Bythefire

I think he is contacting some accountants to get their advice.

I'm not sure how much he knows about tenants rights, he threw out 6/9 month rentals during conversation.

His own financial situation is he's a single guy, no kids, he doesn't have a huge mortgage - I don't know how much that is. He doesn't lead an extravagant lifestyle.

Thanks for your replies.

Samuel T. Cogley

Sell it. Being a one off LL is a mugs game these days. Life is too short.

Fol20

If he doesn’t want to be a ll, I would sell it. From an economic standpoint, the cash flow will not be that great as it’s a long game approach. You can have a lot of heartaches in between.

At least if he sells and pays off the mortgage. That’s a guaranteed return of x percent. On top of it, if he isn’t already doing this. He should max out his pension contributions. This is the easiest and least complex approach that would suit the vast majority of people. Have only one rents property without the economies of scale aspect his quite difficult to maintain.

Mad_maxx

He got it for free, lease it to the council for ten or twenty years

Rent guaranteed though they usually put animals in the place

Only joking, sell and pay off half the mortgage, put the other half in an equity fund after the next stock market correction and leave it there long term but seek advice, most funds require you sell after seven years, this state hates people investing in the financial markets

the_syco

Bythefire wrote: »

He said if he rents it he would only do short term rentals 6/9 months at a time.

Can't see anything stopping the tenant staying 6 years as Part IV after staying there for 9 months?

Tell your mate to pick the best house of the two, and sell the other one.

accensi0n

I'd sell. I'd rather gain a lump of cash than a massive pain in the hole.

Busman Paddy Lasty

Sell and pay off as much mortgage as possible. Follow through with professional advice first.

Bythefire

Thanks for the replies.

He says he is going to rent it for 6 months and take it from there.

the_syco

Bythefire wrote: »

He says he is going to rent it for 6 months and take it from there.

Tell him that if he doesn't like being a landlord after 4 months, get rid of the tenant. If he decides to evict them after them being there for 6 months, he'll either have to give a specific allowable reason, or the tenants will be able to stay there for many more years as a Part IV tenant.

the_syco

Bythefire wrote: »

He says he is going to rent it for 6 months and take it from there.

Also, have him check with an accountant about Capital Gains Tax; https://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_gains_tax.html

The 6 months of renting may knock a decent bit of change after he pays tax.

Sonny noggs

the_syco wrote: »

Tell him that if he doesn't like being a landlord after 4 months, get rid of the tenant. If he decides to evict them after them being there for 6 months, he'll either have to give a specific allowable reason, or the tenants will be able to stay there for many more years as a Part IV tenant.

Let’s hope the future tenant goes quietly. If the tenant chooses to over hold and stop paying rent them the 6 months could turn into 2 long stressful years.

Rows Grower

Mad_maxx wrote: »

He got it for free, lease it to the council for ten or twenty years

Rent guaranteed though they usually put animals in the place

Only joking, sell and pay off half the mortgage, put the other half in an equity fund after the next stock market correction and leave it there long term but seek advice, most funds require you sell after seven years, this state hates people investing in the financial markets

This would be my advice if it was a friend of mine.

He'll get 8% less than the current rental market rates but will never have to worry about tenants leaving as the council will take responsibility for having the house occupied.

There will be no sob stories when the rent is due, it'll be paid into his account on time every month without fail once he has an up to date tax clearance certificate.

He'll also get an annual 4% increase in rent every year once he remembers to write and ask the council.

8% is peanuts compared to the peace of mind it gives and the hassle it saves.

Spanish Eyes

Well the pluses are a regular income (taxed), but factor in house insurance, LPT, constant maintenance calls, the fridge, freezer, shower, electrics and so on. Need a deep pocket in reserve for all that, and it IS the responsibility of the LL to fix things.

It is also very difficult to evict a tenant for overholding/non payment of rent. Takes a year or more with costs attached to LL even if costs are awarded against tenant. Tough job.

I couldn't do it. Would be there over my head all the time. But each to their own I suppose.

westgolf

Rows Grower wrote: »

Mad_maxx wrote: »

He got it for free, lease it to the council for ten or twenty years

Rent guaranteed though they usually put animals in the place

Only joking, sell and pay off half the mortgage, put the other half in an equity fund after the next stock market correction and leave it there long term but seek advice, most funds require you sell after seven years, this state hates people investing in the financial markets

This would be my advice if it was a friend of mine.

He'll get 8% less than the current rental market rates but will never have to worry about tenants leaving as the council will take responsibility for having the house occupied.

There will be no sob stories when the rent is due, it'll be paid into his account on time every month without fail once he has an up to date tax clearance certificate.

He'll also get an annual 4% increase in rent every year once he remembers to write and ask the council.

8% is peanuts compared to the peace of mind it gives and the hassle it saves.

Where does it say that you get a 4% increase every year ? Not with the HAP scheme.

Samuel T. Cogley

Rows Grower wrote: »

This would be my advice if it was a friend of mine.

He'll get 8% less than the current rental market rates but will never have to worry about tenants leaving as the council will take responsibility for having the house occupied.

There will be no sob stories when the rent is due, it'll be paid into his account on time every month without fail once he has an up to date tax clearance certificate.

He'll also get an annual 4% increase in rent every year once he remembers to write and ask the council.

8% is peanuts compared to the peace of mind it gives and the hassle it saves.

Dublin's scheme is 80% (85% where there is a management fee) of market rent and 2/4 year rent reviews on 10/20 year leases respectively.

Rows Grower

westgolf wrote: »

Where does it say that you get a 4% increase every year ? Not with the HAP scheme.

The 4% annual increase is only in areas which are in the "rent cap zones", outside of those zones a bigger increase can be applied for.

Sonny noggs

Is the apartment up to HAP scheme minimum standard?

Rows Grower

Samuel T. Cogley wrote: »

Dublin's scheme is 80% (85% where there is a management fee) of market rent and 2/4 year rent reviews on 10/20 year leases respectively.

Wasn't aware of that as I don't own properties in Dublin, what are the % limits on rent increases with a 4 year rent review?

Samuel T. Cogley

Rows Grower wrote: »

Wasn't aware of that as I don't own properties in Dublin, what are the % limits on rent increases with a 4 year rent review?

Not sure if RPZ rules apply. The rent would be reviewed to 80/85% of market rate, that could be up or down.

nsi423

You mention that he doesn't lead an extravagant lifestyle. If he can maintain his current lifestyle even with this new asset/income, then it puts him in a very good position for the future regardless of what he does with it!

DubCount wrote: »

Invest the money into a pension scheme over time

If it were me, I'd like to think I would do this. Sell the property, clear my own mortgage and then (the hard bit) start paying TWICE the equivalent of my old mortgage payments each month into my pension (unless I hit the tax free limit, based on age). Assuming he is on the higher tax band, his lifestyle won't be affected. Retire early!

duffman13

Depending on location and the kind of tenants you may get but a long term local authority let MAY suit. Could get 10 years of rent towards the mortgage but still hassle involved and obviously tax. Personally I'd rent but it really depends on the area your in tbh

Bythefire

I'll check with him tomorrow, I think he is looking at renting to hospital staff/teachers. It's not too far from hospital/schools. He did say that was his preference. It's not in a rpz but location wise it would be very easy to rent.

Would it be better for him to rent the 2 rooms out individually?

Grumpypants

Sell it and pay down/off their own mortgage. Imagine how much more enjoyable and hassle free their life would be with an extra grand a month in their pocket.

the_syco

IIRC, he'd be liable for repairs for the first 6 months, and if/when it gets inspected by the council, he'll have to update the house to whatever standard that they demand.

What BER is the house? Does it have recent insulation?

Bythefire

I get the impression he won't rent to council. He was quite adamant about teachers/hospital staff.

I'm not sure what the ber rating is but I know of the area and they are old houses. I don't know how much he intends spending to do it up, I'm sure he will have to do something to it.

Will see him later and ask him.

K.Flyer

Bythefire wrote: »

He was quite adamant about teachers/hospital staff.

Why? Certain job titles or professions are no guarantee that you will have ideal tenants.
If he is not familiar with letting out an apartment and everything else that goes with it, he would be better off giving it over to a letting / management company and let them do all the work.

Edgware

Bythefire wrote: »

I'll check with him tomorrow, I think he is looking at renting to hospital staff/teachers. It's not too far from hospital/schools. He did say that was his preference. It's not in a rpz but location wise it would be very easy to rent.

Would it be better for him to rent the 2 rooms out individually?

Depending where the property is renting to teachers could give him the short term tenancies i.e. September to June. Young teachers will disappear for two/ three months in the Summer.
He could have access to it during the Summer months to do any bit of maintenance or even use it as a holiday let. Its not for everyone but there are options

dennyk

Edgware wrote: »

He could have access to it during the Summer months to do any bit of maintenance or even use it as a holiday let.

Note that this is only legal if the tenant mutually agrees to end the tenancy and vacate the property when summer comes, as they will be under Part 4 by that time if they've been renting the place for the entire school year. A tenancy gives the tenant exclusive occupancy, so the landlord can't let the place out as a holiday home just because the current tenant happens to be away for a month or two, nor could they carry out works or even access the property at all without the tenant's permission. Also, if it's in an RPZ the landlord cannot let it out on a short-term basis at all if it isn't their principal private residence, unless they obtain planning permission.

Remember that tenants cannot contract away their Part 4 rights, so even an initial lease agreement stating that the tenant will vacate after 9 months would be invalid and the tenant would be under no legal obligation to leave when the time comes regardless of what the lease says, as their Part 4 security of tenure would override any such agreement. If that was the landlord's plan, he'd be entirely reliant on the tenant honouring their informal agreement and would have no legal option to compel the tenant to vacate for the summer should the tenant change their mind.

Rows Grower

K.Flyer wrote: »

Why? Certain job titles or professions are no guarantee that you will have ideal tenants.
If he is not familiar with letting out an apartment and everything else that goes with it, he would be better off giving it over to a letting / management company and let them do all the work.

You can say that again!

I had an accountant renting a place from me, he didn't drink or smoke but boy was he able to make excuses when it came to paying rent. It turned out the guy had a massive gambling problem.

The two best tenants I still have were just out of prison when they started renting from me.

They were straight up about where they had been the previous few years and why they had no recent references. I took them at face value and have no regrets.

They both keep the houses as clean as the day they moved in and never let me down with rent or bother me with mickey mouse problems.

I think they both have a touch of OCD when it comes to cleaning actually.

Caranica

We had nurses and the place was left like a disaster zone.

I really wouldn't recommend being a landlord to my worst enemy. Hope your friend doesn't live too regret their decision.

Spleerbun

Hypothetical question: if his mortgage was paid off on the main house, could he "live" in the inherited house and get a lodger in the second room, tax free up to a certain limit under that rent a room scheme. Then in reality he would actually spend most of his time in his own house, but would be getting decent tax free rent per month and the tenant acquiring no rights to stay if they turn out to be a d*ckhead?

Is there some law making this situation not feasible?

Caranica

Spleerbun wrote: »

Hypothetical question: if his mortgage was paid off on the main house, could he "live" in the inherited house and get a lodger in the second room, tax free up to a certain limit under that rent a room scheme. Then in reality he would actually spend most of his time in his own house, but would be getting decent tax free rent per month and the tenant acquiring no rights to stay if they turn out to be a d*ckhead?

Is there some law making this situation not feasible?

What you're proposing is tax evasion firstly and secondly it would not be enough to stop the tenant acquiring tenancy rights as the landlord is not genuinely resident.

Bythefire

Just spoke to him. The house he bought (and lives in), he has a mortgage of 160k left on it. Cost 225k, he put savings into it.

The house he inherited is worth 110k. Needs 10k to renovate it. He could rent it for 700/800 per month.

If he keeps the inherited house, it could be an option to have when he is older butt he wants the option to sell if he ever needs the money. He would prefer to sell the house he lives in and buy elsewhere if he meets someone and they go on to have a family etc. He would like the option of building his own house in a few years if that all works out for him.

He said he won't rent to council. Renting for 9 months and doing air b&b or rentals for summer is what he had in mind or it was until I told him about Dennyk post above about the tenants rights after 9 months.

Edgware

Caranica wrote: »

We had nurses and the place was left like a disaster zone.

I really wouldn't recommend being a landlord to my worst enemy. Hope your friend doesn't live too regret their decision.

Nurses are noted for this. Apparently cleaning isnt their job

lunamoon

Sell sell sell.

I was planning on renting out a house I’m renovating but I’ve decided to sell instead. Too much like hard work.

K.Flyer

Edgware wrote: »

Nurses are noted for this. Apparently cleaning isnt their job

It's not only nurses.
My work takes me in and out of a huge amount of rental properties throughout the year and you would surprised at the condition of some places.
The bathroom in one high end apartment was so disgusting that it had to be cleaned and bleached before I could carry out the repairs.
In another I asked the L.L. what the weird staining was all over the shower walls and toilet after tenants had left.
He told me it was Fake Tan and that he was having a terrible job getting it off everything.
Then I go into some apartments and have to phone up the L.L. to see if I'm in the right one as it looks as if nobody is living there yet, the place is immaculate and nothing out of place.
A word of caution to all L.L.s, there is a big increase in tenants re-letting your apartments via AirBnB, so keep an closer eye on things, especially if the property is close to tourist areas.

Edgware

K.Flyer wrote: »

It's not only nurses.
My work takes me in and out of a huge amount of rental properties throughout the year and you would surprised at the condition of some places.
The bathroom in one high end apartment was so disgusting that it had to be cleaned and bleached before I could carry out the repairs.
In another I asked the L.L. what the weird staining was all over the shower walls and toilet after tenants had left.
He told me it was Fake Tan and that he was having a terrible job getting it off everything.
Then I go into some apartments and have to phone up the L.L. to see if I'm in the right one as it looks as if nobody is living there yet, the place is immaculate and nothing out of place.
A word of caution to all L.L.s, there is a big increase in tenants re-letting your apartments via AirBnB, so keep an closer eye on things, especially if the property is close to tourist areas.

That is true. Two main culprits. Tenants from the country who leave the apartment Friday morning, go home down the country and return to Dublin late Sunday or early Monday. They might not get back to the apartment until after work Monday so three nights Airbnb.
Also non Irish who vacate either to go sightseeing in Ireland over a few days or go to their own country. They make arrangements with friends to hand over keys etc

the_syco

Bythefire wrote: »

He said he won't rent to council. Renting for 9 months and doing air b&b or rentals for summer is what he had in mind or it was until I told him about Dennyk post above about the tenants rights after 9 months.

Tell him to talk to someone who is a one house landlord, as it seems your mate has a naive view when it comes to renting.

Bythefire wrote: »

The house he inherited is worth 110k. Needs 10k to renovate it. He could rent it for 700/800 per month.

Worth 110k, and rent would only be 700 for the month? I'm assuming it's not located in Dublin?