Selling investment property, timeframe, thoughts?

Baby01032012

Hi all,

Sorry in advance as I'm just setting out my thoughts below.

I have a house which i have rented out for over 6 years to the one family. They are good tenants. I haven't increased the rent in 6 years.

I am considering selling it. I have another house in the same area with my now ex wife, the family home. However I'm seperated and don't live there and will not be selling that.

I'm not stuck for accomodation as my parents passed away recently and i am currently living in their house. I don't really want to sell that one.

However i want to move closer to the kids. I don't want to move back to the rented house as it was starter home and i'd like somewhere bigger for kids when they stay over. I intend to buy somewhere nearby once sold. And i don't want an interest in 3 properties in the same area!

Ideally tenant would buy house from me, i'll offer that, maybe at a discount or offer him sweetener. Notice wise I will have to give him minimum 180 days with the intention to sell within 9 months with a statutory declaration. Not looking forward to giving him notice.

My concern is if tenant takes the full 180 days, the market for selling could be very different in 6 months, it may also be harder to find a house to buy then.

A lot of random thoughts there, however i'd appreciate peoples views on approaching the tenant, giving notice, selling and buying in the current environment.

beauf

You're really at the mercy of the tenant. If they don't over hold, if they buy it, if they don't, then how long it takes to find a buyer and if it doesn't fall though a few times. Then if the banks don't pull mortgage approval or change the criteria.

Too many variables to say how long it will take.

Baby01032012

Thanks Beauf. Yeah that’s the reality, anything and everything can go wrong.

DubCount

One possible option would be to issue the notice, and then tell the tenants that they can move out with no notice with their full deposit (or maybe even a bit extra) during the notice period if they find somewhere else. This will give them an incentive to move out earlier, as well as flexibility to start looking for new accomodation straight away. If they decide they are staying anyway for the full term (or even longer if they overhold), there is nothing you can do.

Baby01032012

Thanks DubCount.

While the relationship for 6 years has been very amicable no one really knows what the reaction will be when given notice. Deposit of 1200 would be quiet small. I have a feeling they have sublet one of the 3 bedrooms too.

I happy to receive the rent for 6 years and it paid the mortgage for that period. I'd be willing to give them possibly up to 10k if they found somewhere else sooner. I could easily loose that if house values dip when we get into the recession.

beauf

I no someone doing something similar. Took 12 months to get tenants out. They over held for 3 months or so. Only leaving the day before the RTB hearing. House took 3 months to go sale agreed, a few bidders, though it looks like it's going to fall through and I assume take another 3 months to sell.

On another forum assume suggested going by daft it takes around 7 months to sell a house in Dublin at the moment. Don't know if that accurate.

Another option is the local authority. They are buying up houses. They might buy even with a tenant in situ. No experience of this though myself.

beauf

Last crash it took about 3-4 yrs to bottom out. Houses in my area seemed to drop 20-30% obviously it depends on the location some places lost more. But this is likely to be softer fall I reckon. As not everyone is doing worse in this crisis. Some are busier than ever. You can only assume it will be longer slower process this time. Who knows though. At some point the interventions for Covid will stop. Will we back to 80s Ireland then?

Billythekid19

Could you not put it up for sale now. The average house these days takes about 6 months to sell anyway so by the time the viewings are completed, finance arranged and contracts signed the tenants notice period will have lapsed.

brisan

Billythekid19 wrote: »

Could you not put it up for sale now. The average house these days takes about 6 months to sell anyway so by the time the viewings are completed, finance arranged and contracts signed the tenants notice period will have lapsed.

I dont think people will be interested in buying a property with the tenant in situ.
There is no guarantee that the tenant will leave on the agreed date
So it could be a wasted few months for a prospective buyer even if the vendor agrees to wait till the house is empty before signing contracts

beauf

Another problem with a tenant in situ is that bank want vacant possession for a mortgage and also you can't paint the house and show it in its best light light. So it may effect the price you are offered.

Baby01032012

Thanks all, yeah point taken, i'd be at a disadvantage trying to market it with tenants in situ. And after 6 years it needs a bit of TLC to achieve best price...I'll talk to the tenant this weekend to see where they stand before issuing formal notice next week.

Another option could be for me to move back in temporarily and let out where I am staying currently ( my parents house). I'd rather sell the property that has been let 6 years as its currently let at 1,200 per month and capped at that versus my parents house that I am living in now which which could rent at market rent for 2,200 + per month.

beauf

Seems like a lot of hassle for very little gain.

Sell the parents house buy something closer to the kids and keep the rental.

Baby01032012

Well 12 grand a year in rental income is the difference. Roughly same market value for the 2 properties. Looks like a big enough gain.

Downside is the time taken to sell ie notice plus sale process. Plus if I sell parents house I’ll have to rent somewhere until 1 find somewhere to buy.

beauf

Between the tenants leaving and actually selling you could be down a years rent before you sell. That will wipe out the difference all going well. Assume no over holding or damages.

But it sounds like you already have a plan.

Baby01032012

I might be down a years rent but say over next 10 years keeping my parents and renting at 25000 a year versus keeping current rental at 15000 a year thats a 100k over 10 years.

I spoke to the tenants yesterday. I may have played it too nicely nicely. They took it as a blow and nearly in tears. They really dont want to move from that house. 5 year old starting school, they thought they were there for life. They want to look into buying it, i dont think theyre in a position to yet. Then they want to do more like a rent to buy which i said id be open to but in reality I am not sure it will work. I've given them a couple of weeks to look at their options before i give formal notice. I've explained they will have 6 months anyway and that i know agents and can help them look for another rental and give them rent free period etc.