a New Home - Should We Sell or Rent Out Existing Properties

Dtp1979

Sorry if this is in the wrong forum. Please move if necessary.

I have a property worth may 170k. Roughly 100k left on the Mortage.

My partner has a property worth maybe 180k And 40k left on hers.

We’re looking at buying a home together around the 250k mark, as neither of our houses suit.

What are our best options? To sell both properties and buy a new place? Ideally we’d like to hold on to both places and rent them out and sell when we’re older.
Do banks allow this or is this unrealistic?

WeeCuppaCha

Having been an accidental landlord, it’s a ball ache of the highest order. If I were you, I’d sell all and live my life. Small mortgage, max your pension and just live.

DubCount

Sell up.

Even if you find a bank to allow you to get a new mortgage while keeping 2 buy-to-let mortgages, when you research the heartache of tax compliance, dealings with tenants, keeping up with ever changing legislation etc., you'll want to sell.

AaronMic95

If you decide to rent it out, just make sure you are prepared for it as it is not easy. Also, do the math to ensure that you earn substantially from it. If you have no time to manage the rental property, it's best to hire a company to do it to lessen the hassle on your part.

Dtp1979

Well each property would probably get 1k a month rent. Both mortgages are around the 400 mark each. Would there be much profit from whatever expenses come out of the remaining 600 per property? I’m a plumber by trade and fairly handy at all general repairs so the upkeep wouldn’t be an issue.

endacl

Could you afford your new mortgage, plus the two others, if you get incredibly unlucky and end up with no rent at all for 12-18 months, and have to deep clean and refurbish each?

Limpy

Sell one and pay off both mortgages. Start with a clean slate.

Who2

Dtp1979 wrote: »

Well each property would probably get 1k a month rent. Both mortgages are around the 400 mark each. Would there be much profit from whatever expenses come out of the remaining 600 per property? I’m a plumber by trade and fairly handy at all general repairs so the upkeep wouldn’t be an issue.

youll be taxed on the 1000, but depending on your circumstances it will probably be close to covering itself allowing for a small bit of mantainance. The property itself will be the profit at the end if all goes right.

Dtp1979

Who2 wrote: »

youll be taxed on the 1000, but depending on your circumstances it will probably be close to covering itself allowing for a small bit of mantainance. The property itself will be the profit at the end if all goes right.

If there was 600 being made from each property each month, how much would the tax and expenses be on that? The houses themselves are in decent condition and wouldn’t require much maintenance

Millionaire only not

Keep your freedom don’t, have all your eggs in one basket if relationship goes tits up !
Likewise being a landlord is no joke ,bar ivan get working people into your property and if there doing any good they’ll buy there own.

wench

Dtp1979 wrote: »

If there was 600 being made from each property each month, how much would the tax and expenses be on that? The houses themselves are in decent condition and wouldn’t require much maintenance

Very rough figures:
1000 - 200 interest = 800 taxable
Assuming higher rate payer, approx 50% taxes = 400
So about 200 left for you after mortgage and taxes, assuming nothing goes wrong.

headtheball14

You will pay tax on the entire 1000. So depending how much your tax rate is . If 40% you owe 400 every month just in tax. So out of 600 pay your mortgage. That leaves 200 a month. You have to pay property tax prtb fees etc.
You can claim some expenses from your tax . Interest paid on mortgage and some fees but this is assuming all goes well rent comes in and no massive bills.

Dee01

headtheball14 wrote: »

You will pay tax on the entire 1000. So depending how much your tax rate is . If 40% you owe 400 every month just in tax. So out of 600 pay your mortgage. That leaves 200 a month. You have to pay property tax prtb fees etc.
You can claim some expenses from your tax . Interest paid on mortgage and some fees but this is assuming all goes well rent comes in and no massive bills.

Dont forget the USC

Casati

You can offset all interest payments so on your one you can offset I’d guess 4000 a year

With the 6k remaining it’s taxed as normal income. Worst case tax will be 3k a year but you can get reductions for repairs too. It should easily pay for itself. Once paid off it keeps producing an income and over time capital appreciation.

In my mind it’s a no brainier to rent out your apartment. Second / third property like this that you make money from while somebody else pays your mortgage is miles better than any private pension imo.

If you have 20% cash and your income is solid then a bank should lend circa 200k to buy another house between you. If they do I’d keep the second one and rent that out also.

Renting out apartments is not a get rich quick machine but can work well over the longer term and works well if you are not paying tax at high rate. You do need to keep a fund to cover mortgages if you go through a period of no rent, and you have to really vet tenants

Seth Brundle

If you look at worst case scenario, can you continue making mortgage repayments for say up to two years if the tenant decides to not pay rent?

Dtp1979

Seth Brundle wrote: »

If you look at worst case scenario, can you continue making mortgage repayments for say up to two years if the tenant decides to not pay rent?

If we were both working (we are) then yes we could

Claw Hammer

the houses have to be insured for landlord cover and the outside maintained. Allow for 1 moths vacancy per annum for change of tenant. Income will be 22k. insurance and maintenance, capital repayment, income tax, PRSi, USC and capital expenditure have to come out of it.
You need to get a spreadsheet and carry out a cash flow exercise. You will be carrying oveheads on the new property as well as the mortgage.
1k per month is small for a rental property so you are obviously in a country area. Factor in additional commuting when you move in together and the fact that letting sometimes gets slow in country areas. A factory or two closing can play havoc with the rental market in a small town.

Dtp1979

Claw Hammer wrote: »

the houses have to be insured for landlord cover and the outside maintained. Allow for 1 moths vacancy per annum for change of tenant. Income will be 22k. insurance and maintenance, capital repayment, income tax, PRSi, USC and capital expenditure have to come out of it.
You need to get a spreadsheet and carry out a cash flow exercise. You will be carrying oveheads on the new property as well as the mortgage.
1k per month is small for a rental property so you are obviously in a country area. Factor in additional commuting when you move in together and the fact that letting sometimes gets slow in country areas. A factory or two closing can play havoc with the rental market in a small town.

It’s in Portlaoise and there’s a big demand for rentals. We’d prob get 1200

Claw Hammer

Dtp1979 wrote: »

It’s in Portlaoise and there’s a big demand for rentals. We’d prob get 1200

There is a big demand NOW in Portlaoise, which is a small tow and vulnerable to economic shocks. Remember if you start letting you have to keep it up for years. Letting is a cyclical business. The biggest mistake ever is to think the current situation will continue.

Graham

Mod Note

Thread title changed to something meaningful

JustMe,K

If you rent out the houses you will pay CGT on any uplift in the value of them both if you sell them down the line. Sell now as your PPR and your money is yours, plus no headache of being a landlord. Keeping the properties as your back up plan in case theres a problem in your relationship is all well and good until you end up in a situation where your tenant has more rights to your property than you do.

Dtp1979

JustMe,K wrote: »

If you rent out the houses you will pay CGT on any uplift in the value of them both if you sell them down the line. Sell now as your PPR and your money is yours, plus no headache of being a landlord. Keeping the properties as your back up plan in case theres a problem in your relationship is all well and good until you end up in a situation where your tenant has more rights to your property than you do.

Keeping the properties in case there’s relationship problems is not why we want to keep them!!
What’s PPR? Are we subject to capital gains tax on the properties if we sell now?

davindub

Dtp1979 wrote: »

Keeping the properties in case there’s relationship problems is not why we want to keep them!!
What’s PPR? Are we subject to capital gains tax on the properties if we sell now?

If you rent out the property and sell later, the gains made on the property will be subject to cgt and will qualify for partial PPR relief.

You need professional advice on the financials of the decision, just ask your accountant.

Personally, I think if you can retain the properties while buying another, it would be a good pension income for you later on.

headtheball14

Casati wrote: »

You can offset all interest payments so on your one you can offset I’d guess 4000 a year

They have mortgage payments of 400 euro each a month so 4800 a year , how do you possibly suggest that they are paying 3000 euro interest and can write that off a year.
The reality is at this stage the proportion of the 400 euro paid each month in interest is a lot lower so they can't write it off. I'm not saying they shouldn't consider renting one out but if they do it should be based on realistic estimates.

ldy4mxonucwsq6

Dtp1979 wrote: »

Keeping the properties in case there’s relationship problems is not why we want to keep them!!
What’s PPR? Are we subject to capital gains tax on the properties if we sell now?

PPR is your Principal primary residence.

You are not subject to capital gains now if you sell as its your only home but you will be once you have another home as it becomes an investment property and capital gains applies.

Capital gains tax is 33% of any profit gone (first €1,270 is exempt) when you come to sell the home.

Not worth it imo, tax/usc on rental income, capital gains on any profit when you do eventually sell, higher mortgage interest rates for investment mortgage, maintenance costs, LPT, management/agent fees, insurance, rent controls and legislation and that's if you have no additional hassle with finding and keeping good tenants.

I'd sell the two of them and be done with it to be honest if I were in your position.

Casati

headtheball14 wrote: »

They have mortgage payments of 400 euro each a month so 4800 a year , how do you possibly suggest that they are paying 3000 euro interest and can write that off a year.
The reality is at this stage the proportion of the 400 euro paid each month in interest is a lot lower so they can't write it off. I'm not saying they shouldn't consider renting one out but if they do it should be based on realistic estimates.

I missed the post saying mortgage payments were only 400 quid, and was doing a quick interest estimate assuming circa 3% on the amount owed. The OP must be on a tracker with such tiny mortgage repayments.

Casati

Casati wrote: »

headtheball14 wrote: »

They have mortgage payments of 400 euro each a month so 4800 a year , how do you possibly suggest that they are paying 3000 euro interest and can write that off a year.
The reality is at this stage the proportion of the 400 euro paid each month in interest is a lot lower so they can't write it off. I'm not saying they shouldn't consider renting one out but if they do it should be based on realistic estimates.

I missed the post saying mortgage payments were only 400 quid, and was doing a quick interest estimate assuming circa 3% on the amount owed. The OP must be on a tracker with such tiny mortgage repayments.

OP actually if you are a tracker that is a consideration - do not go to existing bank you have the mortgage with looking for a mortgage, go to an alternative provider as the existing bank can move you off the tracker onto a buy to let if you tell them you are renting it out

Dtp1979

Nope not on a tracker. We’re kinda leaning towards selling both and pumping it into the new house and live with a reasonably small mortgage

JustAThought

Dtp1979 wrote: »

Nope not on a tracker. We’re kinda leaning towards selling both and pumping it into the new house and live with a reasonably small mortgage

Are you planning on having kids? Will those kids need houses when they grow up? Can’t imagine it will be easier to sabe s deposit or buy a house in years to come. +1 about risk and where a non compliant tenant who dosn’t pay rent would leave you.Then again you are a plumber & probably have handy fit mates -which is what you need in such circumstances. Age us also a factor - would the banks be more receptive to loaning you more if you didnt have a nice house with only 40k left to pay to leverage against another? Also with decentralisation/prison workers/HAP etc would it be smart to let someone else pay your mortgage while the house appreciates in value... banks arn’t loaning as much at the moment and noone is buying as they are afraid for their job security...

ldy4mxonucwsq6

Dtp1979 wrote: »

Nope not on a tracker. We’re kinda leaning towards selling both and pumping it into the new house and live with a reasonably small mortgage

For example if you sell both and churn the profit into your new joint buy of a property, crude calculations but:

If your calculations were close to what's in your OP and you wanted to maintain your mortgage payments as they are now i.e €400 each (€800 pm) borrowing €40000 at mortgage rates towards your new home then you'd easily be mortgage free within about 4 years.

Alternatively over a 20 year term you're looking at a mortgage repayment of approx €200 pm.

You'd save a lot in interest going shorter term but it depends on what suits your lifestyle among other things.

Arrange to speak to a financial adviser in your bank so that you have all of the options laid out and can make a fully informed decision.

brisan

JustMe,K wrote: »

If you rent out the houses you will pay CGT on any uplift in the value of them both if you sell them down the line. Sell now as your PPR and your money is yours, plus no headache of being a landlord. Keeping the properties as your back up plan in case theres a problem in your relationship is all well and good until you end up in a situation where your tenant has more rights to your property than you do.

Case in point


https://www.boards.ie/vbulletin/showthread.php?t=2058089147

JustMe,K

Dtp1979 wrote: »

Keeping the properties in case there’s relationship problems is not why we want to keep them!!
What’s PPR? Are we subject to capital gains tax on the properties if we sell now?

I haven't been online and see the PPR and CGT items have been explained
I was being flippant in relation to someone elses comment about having the properties as back up in case something went wrong as a couple. For me the biggest issue is that the longer you rent out a property to a particular tenant for the longer it takes to regain control of the property if you need it either to live in, or to sell or to do whatever it is you want to do with it down the line.
I seriously think that an individual needs to have a particular appetite for being a landlord because its not as easy as some people seem to think. If I were considering keeping the properties though, I would try put them both on long term let to the council as one of their schemes in particular returns the property to you in good condition, and you dont have the worry of chasing tenants for rent. Downside is that they only pay 80% of market rent and you agree to hand over the property to them for 10 years (I think).