Better to sell or to rent out a property in Dublin 8

PeterTwo

Hello!

Myself and my partner are in the process of buying a new home, and our mortgage provider did not make the mortgage offer conditional on selling our existing house.

What we are trying to decide is whether it makes more financial sense to sell our current home once we've moved into the new house, or whether we should rent it out.

Our current home is in Rialto, 97sqm, three bedroom and 1 bathroom, and I think we could get about €525K-€550K for it if we were to sell. Rent-wise we are unsure, but thinking €2900/month wouldn't be too far off. The mortgage is about €1050/month, so with income tax taken into account, we could make a small monthly profit.

Where our main questions/concerns lie are around the market - are we at the peak of a bubble or will prices for this kind of property continue to rise. I know it is very much a guessing game, but we'd be really interested to hear people's thoughts.

Browney7

This is a property and personal finance question in one. How long would you plan to rent it out for? What is the current unrealised gain on the Rialto property - if you rent it out you'll start to dilute your PPR exemption from CGT the longer it is rented for.

Do a thought experiment for yourself - if you had 250k cash in the bank (this is a simplified example and a guess at the equity you have in property one and making a guess at what your mortgage is on the existing property), would you borrow another 250k, buy a house in rialto and become a landlord?

Presumably you're on a tracker? - worth remembering this is the cheapest money you'll ever get if so.

JimmyVik

Dont become a landlord.

There are people who have been doing it for many years and are getting out now.

Ask yourself why that is.

DubCount

Sell.

If you really want to become a landlord, and I'm not sure why you would, consider what kind of property you want to rent out and how much risk you can take on and afford. Dont just use your current property for convenience. Maybe other properties would provide better yields, or lower entry cost etc.

If you still want to be a landlord after researching current and proposed legislation, good luck. You will be braver than most.

jood22

We rented for 3 years and tenants did awful damage to our house. We're currently abroad so we haven't been able to view property in over 2 years due to COVID. Letting agent was useless, you've very few rights as a landlord once tenants are in your property more than 6 months. My advice - sell. Don't become a landlord if you can at all avoid.

ted1

Sell it, that 2900 will be taxed at 52% and you’ll have to pay CGT when you do sell it

mondeoman72

Landlords are no longer in control of their own properties. Tenants have more rights than you so people are getting out. It will only get worse. Get proper advice and sell. See you what you can legally write off and get out.

houseyhouse

You might find you don’t make any profit at all renting it out. Only the interest on your mortgage is tax deductible. Then you have all the costs of renting - prtb, insurance, annual maintenance (eg boiler, chimney), repairs to broken/damaged appliances/roof/fittings/furniture, plumbing/electrical issues, any garden maintenance, repainting/recarpeting every few years, cleaning between tenants, advertising on daft etc, replacing mattresses, garden care and on and on it goes. Some of this you can do yourself (eg painting, cleaning, garden care) but you can’t pay yourself for your time. If you’re lucky you’ll cover your costs and build up an asset for yourself but if you get a bad tenant or the market turns and property and rents drop, you could be in trouble. We’re accidental landlords with a similar property (albeit about half the size, value, mortgage, and rental income) and we’re going to sell despite having wonderful tenants. I’m increasingly concerned about all the talk of total rent freezes and not allowing landlords evict tenants when they want to sell.

.42.

My advice is to sell up.

have a go landlords needs to be phased out.

shatners bassoon

I'd sell every day of the week.

Off topic but curious to hear how you found Rialto and why you're leaving? I love the location but it still strikes me as a bit too rough.

PeterTwo

Thanks everyone, the advice has been eyeopening and we've decided to sell!

https://www.boards.ie/discussion/comment/117889504#Comment_117889504

Rialto isn't dangerous - we've never had an issue and don't know anyone who has in our 3 years here - but it isn't the prettiest, which is something that has gotten to us since lockdown started. Our main reason for moving is to get a slightly larger house in a leafier area.

Sierra Oscar

To add a counter balance, I was in a similar position and decided to hold on. The choice was between selling and having a negligible mortgage, or holding on and having an ordinary mortgage. For me it came down to this - what will I actually do with the cash I will inevitably be saving if I do have a small mortgage? Interest rates are shocking so sticking it in a saving account is useless. There are tidy returns to be had on the stock markets in terms of investments, but we have been on a bull run like never seen before and it is in no way guaranteed to continue.

So in the end, we decided to hold on. At least I've a hard asset that is still appreciating in value (for now anyway!) and the mortgage is being paid down month on month. The specter of inflation is looming large too which is worth bearing in mind.

People are right to mention the upkeep costs and the rental tax, but we are still making a notable profit yearly and that includes one months rent going towards the letting agent and a good chunk of money being put aside for long term upkeep. Far from breaking even and we are charging the average in terms of rent. We are lucky though, we have a long term tenant who respects the place. In saying that, if I ever ran into any issues I wouldn't hesitate to sell up and get out.

guyfawkes5

I see you've decided to sell, but just for others thinking similarly - since you mentioned that your original property was mortgaged and was your residence at some point, I would say it's very probable you're paying a residential mortgage rate on that property and not a buy-to-let rate which is quite a bit higher.

Renting out that property and living somewhere else would technically be breaking the terms of that rate, and if the bank were to find out they would move you to the buy-to-let rate which may wipe out any gains you have made fairly fast.

I wouldn't think it'd be too likely the bank would find out, although it is possible. The only example I can think of before was someone on this forum actually mentioning it to the bank over the phone who then started investigating it.

It's worth keeping in mind regardless, especially if your second mortgage or personal banking is with the original bank.

reubenreuben

https://www.boards.ie/discussion/comment/117888831#Comment_117888831

Can you explain more about how it can be difficult to evict tenants when wanting to sell as I thought that was one of the grounds that can be used to evict.

Caranica

You can give them notice but you still can't make them move. It can take years to get overholding tenants out.

riclad

Landlords pay 50 per cent tax on rental income usually, many landlords are getting out cos of high taxs and houses prices are very high. Caller on livelive today says shes selling up rental house , she said after expenses, taxs etc she could see no reason to continue as a landlord even though she had good tenants for 15 years its on rte ie, radio 1,livelive if you want to listen to todays episode

Another caller said it took 12 months to evict tenant who stopped paying rent first caller with 5 kids says she can't even get a viewing of an rental property she has 5 weeks to move out as she received. notice from her present landlord

DubCount

https://www.boards.ie/discussion/comment/117896544#Comment_117896544

In theory, the Landlord gives valid notice, and at the end of the notice period the tenant moves out and the Landlord sells the house. The problem arises if the tenant does not move out at the end of the notice period. This is called overholding. If you have a tenant who knows how to work the system, getting a legal eviction for an overholding tenant is a long and frustrating process. A complaint must be lodged with the RTB. There is an RTB hearing. This can be delayed by the tenant if the original hearing date doesn't suit (which it wont). Assuming the RTB hearing goes in the Landlords favour, the tenant can appeal, and you have another RTB hearing (probably rearranged again). After the Landlord gets an RTB ruling, then they have to go to the District Court to get an eviction order. After waiting for a court date, the case finally gets in front of a judge, who will probably give further notice to the tenant before you can evict. At the extreme end, you might need to engage bailiffs to enforce the court order. A tenant who knows the system can overhold for 12-18 months whether or not they decide to pay rent. Any mistakes by the landlord (miswording a notice etc.) and you can find yourself back at square 1 restarting the process all over again.

There is no impact on the tenant for overholding. Maybe they dont get a reference, but thats it. I've even heard cases where politicians, homeless charities and local authorities have encouraged overholding. If you think this doesnt happen, check out the number of overholding cases in the RTB.

JimmyVik

https://www.boards.ie/discussion/comment/117898050#Comment_117898050

12 - 18 months would be a dream scenario.

I know landlords who are over 3 years now trying to evict tenants. One hasnt paid a penny in rent ant owes several 10s of thousands.

One pays rent whenever they feel like it and still they are 10s of thousands in arrears.

All have been advised by threshold or the council to overhold since the beginning.

There is not a hope in hell of getting a penny off of these tenants. They might even decide to destroy the properties before they leave and the landlords still wont get a penny.

And if this indefinate tenancies thing comes in they will be able to stay in the houses forever. A landlord can then only sell to someone willing to take on that kind of trouble, so would be selling at a knock down price.

Mad_maxx

https://www.boards.ie/discussion/comment/117891019#Comment_117891019

If a tenant acts honourably, there is no reason owning a BTL can't be profitable.

Important however to set aside at least two years rent as an emergency fund to offset the risk of a tenant going rogue.

Mad_maxx

https://www.boards.ie/discussion/comment/117898076#Comment_117898076

And not even a whisper of it in the media

JimmyVik

https://www.boards.ie/discussion/comment/117898242#Comment_117898242

Yeah imagine the media putting up a story that shows that a huge amount of tenants acting the boll!x with immunity are actually a large part of the cause of the current crisis.

houseyhouse

https://www.boards.ie/discussion/comment/117896544#Comment_117896544

I was referring specifically to Sinn Fein's calls to end the right of landlords to evict tenants when they wish to sell a property. See article in the Indo here: https://www.independent.ie/breaking-news/irish-news/call-for-ban-on-evicting-tenants-to-sell-properties-in-homelessness-fight-40736837.html

It's also true that even now it can be difficult to evict a tenant who refuses to leave or, at the moment, can't find somewhere to go. I personally know at least two people/families who have to leave rental accommodation ASAP and have literally nowhere to go. Looking for months but can't get viewings or even responses from enquiries, don't have family in the area, etc.

reubenreuben

https://www.boards.ie/discussion/comment/117898050#Comment_117898050

Now I see why being a landlord could be a right pain