Selling a house in Limerick to buy an apartment in Dublin?

isaac azimov · 29-10-2018 7:35pm #1

Looking for input on this one…

I work and live in Dublin.
Have a house on the outskirts of Limerick city that was bought a long time when I lived and worked there. I rent out the rooms in that house but, after tax, the net rental income each year is just over 5000 a year. That’s after I’ve paid about 3500 of tax on the gross amount.
The rent I pay in Dublin, in an apartment, is lot more than 5000 per year. It’s more than twice that.
The house in Limerick has a tracker mortgage. The house is probably worth about 270000. There’s 70000 left on the mortgage.
The bank has told me that it’s possible to keep the tracker if I sell the house in Limerick and buy something in Dublin, by transferring the remaining mortgage across.
I won’t be back living in the house in Limerick myself again, as far as I can see. I will probably be working in Dublin for the foreseeable future or maybe Roscommon where I’m from. But the Roscommon option could be a long way in the future.
Whatever the case I doubt I’ll be living in the house in Limerick myself again.
Cashflow wise it would make sense to sell the 3 bed semi D house in Limerick and buy an 1 bed apartment in Dublin. What I’d lose in after-tax rental income in Limerick is a lot less than I’d save on not having pay rent for myself in Dublin, even factoring in an apartment company’s management fee if I bought.
The question I’m asking is if it’s a bad move to have the 270000 tied up in an apartment in Dublin instead of a semi D house on the outskirts of Limerick city? The money is tied up in the fortunes of the property market either way but they’re different risks.
I am aware that 270000 doesn’t buy much in Dublin but it would buy an apartment in a challenging area in the north inner city or something further away from the city centre but still inside the M50.
If needs be I could add about 20000 to the existing 60000 mortgage to buy something around 290000.
I wouldn’t see the Dublin apartment as a very long term or forever home, maybe 5 or 10 years. I don’t see the house in Limerick as a long term keeper either. I don’t see it as a home again in the future.
Is it better to hold on to the house in Limerick? Would an apartment in Dublin, priced the same at the moment but obviously smaller, be a much bigger risk in terms of the losing its value down the road?

hmmm · 29-10-2018 9:12pm

A few observations & questions jump out at me.

If you're not intending to return to Limerick, that makes things a lot easier. You're speculating on property prices in Limerick, and your cash flow is a disaster due to paying tax on the Limerick property while paying rent using after-tax income.
Where would you prefer to have a property if there was a crash/economic downturn, and you were forced to live there for 15 years?
You seem more worried about keeping your capital safe versus looking for capital gain. It's good to be clear on your objectives.
A 1 bed in a grim area of Dublin doesn't sound like an attractive place to live.
A 2 bed would give you the option of renting a room, and possibly easier to rent if needs be.
Personally I think apartment living is a lot more acceptable to a younger generation, and older retired people downsizing. This would have to be a well-run, well-built apartment block which are not easy to find.
Would it be possible to add a substantially higher amount to the mortgage? e.g. 50 or even 100k. You could look at a 2 bed apartment in a nicer area, or possibly a house in a not so nice area.

markpb · 29-10-2018 9:38pm

Whatever about anything else, I'm really surprised that a bank will let you keep your tracker mortgage when the underlying asset has been sold. Have you got that in writing from them?

isaac azimov · 29-10-2018 10:14pm

Re: transferring the mortgage over, I have spoken to the bank about this over the phone but not in writing. I've been told that I have to essentially reapply, which I'm doing, and I have to sell the existing house first (they won't do bridging finance) and then purchase the next property.
Haven't gotten confirmation of that in writing but have spoken to them several times over the phone about this to run through the process.
They did caution that if I port the mortgage across to a different property, that the interest rate switches to a higher rate, by 1%, but it's still a tracker.
They also said that they will only transfer the existing tracker mortgage once, so if I port it across to a different property now I can't do it again at another time in the future.
They also said that if I'm borrowing additional mortgage money, to buy a more expensive property, additional to the 70000 left owing on the tracker, then that additional money wouldn't be on the tracker rate. That additional money would be at new mortgage terms/rates.
At this stage I've only discussed all of this with them by phone.

Samuel T. Cogley · 29-10-2018 11:00pm

270K will get you into some of the okay areas of D8 in a 2 bed, albeit a small one. I personally lived in the area for ten years and loved it. Handy for town and the Pheonix Park, Temple Bar just down the road.

Edit: Wrong Malthouse.

morcombe_wise · 29-10-2018 11:51pm

limerick is still a cheap market and limerick has improved a lot in the past few years across the board , depends on your priorities but i see limerick as a solid place to have an asset for the foreseable future .

davindub · 30-10-2018 12:03am

Don't forget capital gains tax on the increase in value of the limerick house (if value has increased), see the revenue site for how to calculate a former PPR.

OP I would be inclined to get everything approved and then see what's happening. As we get closer to Brexit the future will be more certain, and prices may drop, but it could be harder to get finance at that stage.

Selling a house in Limerick to buy an apartment in Dublin?

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