[John Lowe, the Money Doctor, gives a Gazette reader invaluable advice on keeping or selling rental property.]
DEAR John, I am a reluctant landlord with a property in a large estate in Swords.
I bought the four-bed semi-detached property in 2004. I paid €375,000 and thankfully got a tracker mortgage.
I lived there until 2011, when I moved to Co Limerick with my family, renting there.
We put the property on the market in 2011, but despite dropping the price several times, it did not sell.
Thankfully, it has been rented by a very nice family who have looked after the house very well.
I was getting €1,150 rent per month. My mortgage is currently €1,308.56 monthly, but between other costs and tax, I’m paying about €2,000 per annum.
Now the tenants are moving out, and I need to decide if I should sell or hold onto it as a rental property, as we have no retirement plan or pension to speak of, and I know how valuable a tracker is.
Having spoken to an estate agent today, the house will realise between €260,000 and €280,000 [if sold at current market values].
I still have c. €190,000 to pay on the mortgage, with 12 years left. I should still be able to obtain about €1,000 rental per month.
Your advice would be appreciated.
JOHN SAYS: Thanks for the note. The first issue is tax relief at source. Since you first rented the property, you are ineligible to receive this – so, hopefully you have already stopped this.
You can still claim 75% of the interest as tax relief on your rental income tax liability.
Selling depends on your next move and career. If you can sell now, it would be cleaner – your full income would allow full mortgage entitlement on your next mortgage, plus you would not have to worry if it ever gets sold, or if you can continually find tenants to rent – not to mention the additional €2,000+ per annum to be found, and the “hassle factor” that is now a landlord’s lot!
However, keeping the house – fully rented all the time – means that inexorably your mortgage will be repaid … primarily by your tenant, so it is like a little mini-pension.
And what will the property be worth then? My guess would be, it would be worth a lot more than it is now.
If the €2,000 is not a problem at the moment, and you do not want to buy again, if you cannot sell the property, it won’t be a problem – but if you can sell now, I would.
Good luck with it …