Rent or sell my apartment?

katie275 · 06-03-2019 6:10pm #1

Hi All,

Just looking for some input here...

I bought my apartment in 2014, current mortgage is around e700 per month.
In the process of completing a house sale with my partner.
If i sold the apartment, I would probably make about 40-50k.
The house we are moving to needs a lot of work so selling is very tempting!
Several people have told me that I would be crazy to sell.
Apartment would yield about 1600 per month, I'd see around half of that after the taxman gets his share. Would just about break even after mortgage and management fees are paid.
Have also considered renting to SDCC and getting 80% market value rent with no 'hassle' of being a landlord. I'm conscious of the over-regulation for landlords and horror stories that I have read and the prospect does make me feel overwhelmed, although I have tried to educate myself as much as possible.
Partner and I have a good combined salary and I have a private pension.

My uncertainty - is hanging onto the apartment the best option?

Thanks in advance!

06-03-2019 6:13pm

If the €40/€50k would be of use to ye now I'd sell.

Admittedly €200K+ in 20 years time would be nice too but a bird in the hand and all that.

tretorn · 06-03-2019 6:20pm

The legislation regarding tenancy is very skewed in favour of the tenant and its getting more skewed.

For example its looking like very soon you will have to give tenants four months notice if you want to sell the apartment in the future. Some tenants wont leave, some for genuine reasons like they cant find somewhere else and in this case Threshold is telling them to overhold.Its a long expensive hassle to get them out and they could stop paying rent and damage your property and you wont be compensated for this.

Prices are very strong now and they could collapse. If they do collapse apartment prices will fall first and you could be left with something you cant get rid of.

You will pay a lot of tax on the rental income, you will pay property tax, costs of registering the property with the RTB, you will pay for all repairs to the property including things like replacing white goods that are abused.

I think property is a good investment if you have another property that you can write tax off against or if you are good with your hands and can do repairs yourself. If you pay someone to manage the property you will pay maybe 7% of the annual rent for this and this is on top of a full months rent every time you get a new tenant. Its not the cash cow its made out to be.

GGTrek · 06-03-2019 6:22pm

katie275 wrote: »

Hi All,

Just looking for some input here...

My uncertainty - is hanging onto the apartment the best option?

Thanks in advance!

Definitely not if you are planning to rent it. My suggestion is to sell, too much political risk. With the new laws on the horizon, you might never be able to sell your property vacant, causing a massive devaluation. Please check the threads on this forum about bills that are going through the Oireachtas. The 40-50k could be wiped out very quickly due to socialist regulations.

Thoie · 06-03-2019 6:23pm

katie275 wrote: »

Hi All,

Just looking for some input here...

I bought my apartment in 2014, current mortgage is around e700 per month.
In the process of completing a house sale with my partner.
If i sold the apartment, I would probably make about 40-50k.
The house we are moving to needs a lot of work so selling is very tempting!
Several people have told me that I would be crazy to sell.
Apartment would yield about 1600 per month, I'd see around half of that after the taxman gets his share. Would just about break even after mortgage and management fees are paid.
Have also considered renting to SDCC and getting 80% market value rent with no 'hassle' of being a landlord. I'm conscious of the over-regulation for landlords and horror stories that I have read and the prospect does make me feel overwhelmed, although I have tried to educate myself as much as possible.
Partner and I have a good combined salary and I have a private pension.

My uncertainty - is hanging onto the apartment the best option?

Thanks in advance!

I had a similar quandry when moving about 2 years ago. People said I'd be mad to sell, as the rents were high. Like you, I figured that after tax and other outgoings, I'd just about break even, but in the meantime I'd have to either become a landlord (with trips to the apartment as required), or pay an agent to manage it for me. Any "extra" thing happening (like pump/immersion/appliances needing to be replaced, or painting/decorating) would end up costing me money, even if I could reclaim some of it.

I also considered the SDCC option, but in the end decided against it, and just sold.

I moved 2-3 hours away from there - if I was living closer I *might* have considered it, but my heart wasn't really in putting in the effort to manage the place myself. I was also concerned that even if I had an agent (or SDCC was essentially the agent), if there were problems with the tenants, I'd still end up getting calls from my ex-neighbours, all of whom I liked.

Springfields · 06-03-2019 6:39pm

Sell up. That 40k will go a long way to sorting your new place. If you're just breaking even when renting it's not worth the hassle. Too risky and as previous posters has seated everything is in favour of tennants should a problem arise. Good luck

Samuel T. Cogley · 06-03-2019 6:43pm

Bad tenants etc. Is over reported but a real issue if you're the one caught out. It can cost you thousands to resolve. The other issue to consider is what happens when sanity returns to rents and you probably won't be allowed to sell unless it so happens the tenant leaves.

DubCount · 06-03-2019 6:45pm

Just a couple of things to consider. If you do rent it out, it will impact on your Capital Gains Tax when you do eventually sell. Also, your current mortgage repayments are based on Owner Occupier Rates - you need to declare your change of use to your mortgage provider, and mortgage repayments/interest will very likely increase.

Do your maths carefully considering everything from RTB registration fees to insurance before making a decision.

steamsey · 06-03-2019 6:50pm

So you'd basically make no money on renting - but would be out of pocket for repairs etc. What you gain is someone paying your mortgage - this is why it's such a long game. The question is whether you want an asset there for when you retire or not, and if you do - are you willing to deal with 20 years of tenants, repairs, fire and water damages (The Beacon) etc etc. If not - sell and never have to worry about tenants, rental income tax etc etc again.

Also think about:

- Will you be close enough to the apartment to get to it if you need to help tenants with something?

- Have you factored in TRS being withdrawn when place is rented? (assuming you were getting TRS)

- Renting privately is a generally a much safer bet than HAP / SDCC etc (I know that you legally can't refuse HAP)

- Who is going to do tax returns each year with preliminary tax due year one? They're not overly complicated but you want to make sure you're square with Revenue up front before it gets expensive and stressful

My general answer is sell. There can be a lot of stress in being a landlord, and a lot of risks. You have to rent very, very carefully - get good tenants and look after them. Better to pay a months mortgage yourself than rush people in who will break your heart.

steamsey · 06-03-2019 6:52pm

DubCount wrote: »

Just a couple of things to consider. If you do rent it out, it will impact on your Capital Gains Tax when you do eventually sell. Also, your current mortgage repayments are based on Owner Occupier Rates - you need to declare your change of use to your mortgage provider, and mortgage repayments/interest will very likely increase.

Do your maths carefully considering everything from RTB registration fees to insurance before making a decision.

Nah - you don't really have to declare this to the mortgage provider. As long as you're paying the mortgage on time, you'll never hear from them and they don't expect to hear from you

RTB and insurance are valid extra costs though

Browney7 · 06-03-2019 6:55pm

DubCount wrote: »

Just a couple of things to consider. If you do rent it out, it will impact on your Capital Gains Tax when you do eventually sell. Also, your current mortgage repayments are based on Owner Occupier Rates - you need to declare your change of use to your mortgage provider, and mortgage repayments/interest will very likely increase.

Do your maths carefully considering everything from RTB registration fees to insurance before making a decision.

Would the OP be able to benefit from the CGT exemption if property held for 7 years that was brought in approx 2013(?) to incentivise property investment?

bluetractor · 06-03-2019 6:57pm

40-50k "profit" and all tax free. If you rent it for a few years and price does not go up, part of that will be taxable (probably 50% of the increase). Far too much hassle for the small "accidental" landlords these days. One bad tenant can cost thousands on top of the hassle. Also, plenty of property being built and combined with central bank restrictions, prices have plateaued.

Remember too that improvements to a home qualifies for the HRI scheme (13.5% tax credit up to 30k spend) (HRI scheme is expired) and possibly SEAI grants.

I'd sell, take the profit and then if your can, also use some of your taxable salary for a pension fund and get the max tax relief on that. But IMO, renting is for the big boys these days.

katie275 · 06-03-2019 8:27pm

Thanks for the advice all, very helpful! Also I hadn’t thought about the CGT - yikes!!

So if I were to sell the apartment, any profit is exempt from CGT as it has been my PPR, is that correct?

Edgware · 06-03-2019 8:39pm

Stories about bad tenants do create doubts about renting but if you can hold on to it there is a good pension fund down the line.

06-03-2019 9:11pm

bluetractor wrote: »

40-50k "profit" and all tax free. If you rent it for a few years and price does not go up, part of that will be taxable (probably 50% of the increase). Far too much hassle for the small "accidental" landlords these days. One bad tenant can cost thousands on top of the hassle. Also, plenty of property being built and combined with central bank restrictions, prices have plateaued.

Remember too that improvements to a home qualifies for the HRI scheme (13.5% tax credit up to 30k spend) and possibly SEAI grants.

I'd sell, take the profit and then if your can, also use some of your taxable salary for a pension fund and get the max tax relief on that. But IMO, renting is for the big boys these days.

Correct me if Im wrong, but that scheme is gone

DubCount · 06-03-2019 9:31pm

katie275 wrote: »

Thanks for the advice all, very helpful! Also I hadn’t thought about the CGT - yikes!!

So if I were to sell the apartment, any profit is exempt from CGT as it has been my PPR, is that correct?

Yes. So far this property has been your PPR for the entire period of ownership, so you get full exemption from CGT as your PPR. If you rent it out, then any gain is apportioned based on the period held as an investment and the period held as your PPR. You pay GCT on the portion of the gain based on time held as an investment. I think you get an extra 12 months of the property being deemed as your PPR in the calculation. Best to do some google searches on partial PPR exemption from CGT !!

hmmm · 06-03-2019 10:37pm

We have a supposedly right-wing government in place, and landlords are getting completely screwed - what's going to happen when SF get into government in a few years? If it was me I'd sell, you could end up with a bad tenant and can't do anything about it.

The dice are loaded against landlords (and good tenants) at the moment, too much risk in my view.

katie275 · 06-03-2019 10:56pm

I appreciate the advice folks, I’m going to talk to some agents and get valuations to see what sort of take home money I could be looking at here

Woshy · 07-03-2019 11:23am

We were in a similar situation and made the decision to rent the property out. We're only 18 months in and have made the decision this week to sell. It is just not worth being a landlord - financially or otherwise.

We have found it very stressful (admittedly we have had bad luck with repairs needed to the house) but when we sat down and looked at the figures plus the hassle caused on top of us both working full-time, running another house and having a young family it is just not worth it.

My advice is to avoid the mistakes we made and to sell the place.

bluetractor · 07-03-2019 12:14pm

1874 wrote: »

Correct me if Im wrong, but that scheme is gone

whoops - yes HRI gone since end Dec.

katie275 · 07-03-2019 4:12pm

Got two valuations booked for next week, agent I spoke to today reckons I’ll get at least 50k more than I paid in 2014. I’d be delighted with that and could do so much work to new house. You’ve all helped me make a decision...cheers!

Mad_maxx · 07-03-2019 6:01pm

katie275 wrote: »

Got two valuations booked for next week, agent I spoke to today reckons I’ll get at least 50k more than I paid in 2014. I’d be delighted with that and could do so much work to new house. You’ve all helped me make a decision...cheers!

How much did you pay in 2014 and which city is the apartment in? 50k seems low

Is it South Dublin?

You should be up at least 35 % and that assumes you bought at the very end of 2014, otherwise you might be up 50%

katie275 · 07-03-2019 6:12pm

Mad_maxx wrote: »

How much did you pay in 2014 and which city is the apartment in? 50k seems low

Is it South Dublin?

You should be up at least 35 % and that assumes you bought at the very end of 2014, otherwise you might be up 50%

I bought in December 2014 and paid 160k. Agent reckons I'll get at least 220 for it (which is in line with recent sales according to property price register)

Brego888 · 07-03-2019 8:56pm

How much have you left on the mortgage?

07-03-2019 9:07pm

Brego888 wrote: »

How much have you left on the mortgage?

why? :eek:

Brego888 · 07-03-2019 9:23pm

To see how much cash she will actually get back if sold at the predicted price. Most likely getting 80k odd back not 60k.
The actual numbers on the potential sale are relevant when making the decision.

Mad_maxx · 08-03-2019 1:21am

katie275 wrote: »

I bought in December 2014 and paid 160k. Agent reckons I'll get at least 220 for it (which is in line with recent sales according to property price register)

On reflection, December 2014 was the very end of the first phase of the recovery from spring 2012 so by the time you bought, market had already recovered by 40%, market was flat from end of 2014 until brexit vote of June 2016, it then began another leg up and is up around 20 - 25% since, my mum bought a three bed house in Beaumont for exactly 300 k in December 2014, it's worth about 360 k today so agent sounds about right

katie275 · 08-03-2019 12:52pm

Brego888 wrote: »

To see how much cash she will actually get back if sold at the predicted price. Most likely getting 80k odd back not 60k.
The actual numbers on the potential sale are relevant when making the decision.

I have 135k left out of 145k

Brego888 · 08-03-2019 3:34pm

So you stand to get around 85k back out of the transaction, perhaps about 80k when you pay estate agent, solicitor fees etc. That money will go a long way to helping you in your new house.
It's a no brainer sell the apartment.

katie275 · 08-03-2019 11:17pm

Brego888 wrote: »

So you stand to get around 85k back out of the transaction, perhaps about 80k when you pay estate agent, solicitor fees etc. That money will go a long way to helping you in your new house.
It's a no brainer sell the apartment.

So my profit is sale price minus the sum of - remaining mortgage balance, estate agent and solicitor fees?

handlemaster · 09-03-2019 3:35pm

Edgware wrote: »

Stories about bad tenants do create doubts about renting but if you can hold on to it there is a good pension fund down the line.

Lots of bumps on that road.

Wesser · 09-03-2019 4:14pm

Don't sell it. Your not breaking even . You're making 700 e a month for very little work.
Consider it this way. Somebody is paying your mortgage for you. Over the next 25 years... someone is buying an apartment for you!

Ps don't forget for your next mortgage you are a second time buyer so you need a 20 % deposit... not 10 %. That might be a factor in your decision.

Wesser · 09-03-2019 8:03pm

Hi Katie. I got the figure if 700 e from your original first post.

Pawwed Rig · 09-03-2019 8:14pm

Why do you want to keep it? Is it for pension purposes?

katie275 · 09-03-2019 8:23pm

Pawwed Rig wrote: »

Why do you want to keep it? Is it for pension purposes?

I would have kept it to pass on to my children in the future, or sell for a lump sum

Calltocall · 09-03-2019 8:23pm

I would sell OP, there’s just too much risk with renting, I had a nightmare a few years back with tenant who stopped paying, took me an age to get him out and the stress of it put years on me, If you get a great tenant great BUT you’re rolling the dice and it’s an awful lot to manage if things go wrong

Pawwed Rig · 09-03-2019 8:28pm

katie275 wrote: »

I would have kept it to pass on to my children in the future, or sell for a lump sum

Just give your kids the cash and let them decide where they want to live.
You can sell it for a lump sum now so why wait? Unless you think that you will get more for it in a few years but that seems speculative to me.

katie275 · 15-03-2019 12:51pm

I rang TSB today to find out how much they would charge to pay off the mortgage in order to sell, they wouldn't tell me over the phone, have to wait on a letter (7 working days)
Anybody got an idea of a rough number we could be looking at here?

Thoie · 15-03-2019 1:14pm

katie275 wrote: »

I rang TSB today to find out how much they would charge to pay off the mortgage in order to sell, they wouldn't tell me over the phone, have to wait on a letter (7 working days)
Anybody got an idea of a rough number we could be looking at here?

If you take a look at your last statement, see what the last "interest added" figure was (for a year), then add that to the €135k and that would probably be the absolute max you'd owe.

It all depends on how the interest on your mortgage is calculated (daily, weekly, monthly, quarterly), the date of final pay down, what payments you'll make between now and then, etc.

The letter you get will only be precise as of "that day". When I sold my place there was a slight difference, but it was less than €100 (and I can't even remember in what direction - I think it was in my favour). It all depends on the exact closing date of the sale, and when the money to pay off the mortgage hits the bank. Between now and that date, you'll be making your monthly payments, and interest will be adding on.

katie275 · 15-03-2019 2:02pm

I spoke with my solicitor who reckons it will be 6-9 months interest at least, will have an exact figure when I get the letter

Thoie · 15-03-2019 2:38pm

No-one will be able to give you an exact exact figure yet, but roughly, if you're talking 9 months then if current balance is 135,000, and you make 9 months of payments at 700 per month, then the final balance will be around 128,700 + interest. If I was doing rough calculations in your position, I'd call it 130ish, give or take a thousand.

Having previously bought, you'll be familiar with the fact that there always seems to be a lot of "giving" a thousand, and very few "takings"

katie275 · 15-03-2019 2:58pm

Thoie wrote: »

No-one will be able to give you an exact exact figure yet, but roughly, if you're talking 9 months then if current balance is 135,000, and you make 9 months of payments at 700 per month, then the final balance will be around 128,700 + interest. If I was doing rough calculations in your position, I'd call it 130ish, give or take a thousand.

Having previously bought, you'll be familiar with the fact that there always seems to be a lot of "giving" a thousand, and very few "takings"

Thanks. If we're talking a couple of thousand, I can afford to lose that from the profit, I was just worried that I would have to pay a big chunk of the profit to pay off the loan early, didn't know what sort of money was involved

PokeHerKing · 15-03-2019 4:03pm

So much to consider imo. Where is the apartment, if its close to a hospital or college or is in DCC I wouldn't be in a rush to sell it.

In other words if its in a rent friendly area I wouldn't sell. If its on the outskirts of Dublin like saggart I'd be selling.

Location would very much be my driving decision to sell or not. It should be your driving decision when buying as well.

Another thing to consider for me would be if rents halved over night could you afford to pay both mortgages? If yes, again I wouldn't be rushing to sell.

Unless society hits a restet button property will always be an excellent long term investment, provided you chose wisely with your original purchase.

15-03-2019 4:09pm

Pawwed Rig wrote: »

Just give your kids the cash and let them decide where they want to live.
You can sell it for a lump sum now so why wait? Unless you think that you will get more for it in a few years but that seems speculative to me.

Lol.....speculative.

He has a mortgage currently and the rent is covering it. So the choice is sell it now and make €45k or wait until the mortgage is paid off and sell it then. The only way this is in any way speculative would be if the government suddenly built 200,000 houses a year and started giving them away.

@OP:

I'd rent it out. Think of it as a pension, what would a €45k investment do for your finances when you retire vs a €300k+ sale in 25 years time?

Rent or sell my apartment?

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