Couple separating - sell or rent family home?


I am trying to help a friend decide on whether he should sell or rent his family home. He is currently going through a separation and both himself and the wife are in separate rented accommodation. Their family home is rented now while they decide what to do with it. Here are the figures.

House Value €475,000
Selling Costs (1.5%) + VAT €8,764
Mortgage €306,000
Equity (after selling costs) €160,236
Potential Interest (4.29%) on Equity minus DIRT tax €4,679

Interest (1.85%) per annum €5,661
Interest (1.85%) per month €472
Rental Income per month €2,500
Yearly Rental Income €30,000
Maintenance per annum €1,000
Insurance per annum €400

Points to Note:
Great tracker (0.6% margin), would be a shame to lose that.
Tax on rental income
Very expensive to run - heating wise
Haven’t taken into account vacancy periods, letting agents fees,
Large house 4000sq ft - I would see this as a disadvantage in the future buyers will want smaller houses as they are less costly to run.

the way I am looking at this (and this is where I need the help in case I am missing something) is that if they sell they will have cash of approx €160k which could earn them approx €5k a year in interest.

if they rent they will be receiving approx 23k income (before tax) after deducting interest, maintenance and insurance. but they will be losing equity in the house every day for teh next few years

I would expect the price to drop to approx 380 - 400k in the next couple of years - which would be equivalent to a 60 - 65% drop since the peak.

Based on these assumptions I think he would be better off selling now. Any comments?

the money wouldnt be important to me. More important would be to make a fresh start, and start new lives without further commitments to each other. They will probably have a better chance of staying friends

your dead right…didn’t think of that.

Are there any legal issues around him selling a family home? Also sounds like they have both have left the family home, which is not what a solicitor would advise (unless there are other circumstances I suppose).

That aside, I would probably say to sell if possible and make a clean break so all have a better chance to heal and move on.

They have equity - sell and be done with it, house, marriage, whole lot - as per boomshackala’s post, better off just cleaning the decks and starting afresh

They won’t get to keep the great tracker if they rent the house out…

Indeed, but a clean break requires a settling of issues.
Money can raise its rancorous head at any time and if they are to remain friends its best to face this head on.

Imagine if one or the other meets a new partner and wants to move to the family home; thats when things get really messy.

Best both take legal advice and seperate amicably.

not least of which is liability to capital gains, since the house is rented out now

My thoughts exactly.
Money is of secondary importance in circumstances such as this.
Best to draw a line in the sand and move on from there.

I probably mentioned this before, but I know of a couple (not married) who bought a place together, then split up a few years later.
As they are in deep negative equity, selling is simply not possible.
Luckily it’s a 2 bed, so each took a seperate room.

Now imagine when they meet new partners and bring them home. XX

capital gains in property? That’s one tax that’s not inevitable.

They seem to be getting a very high rent considering the outlay, are you sure the figures are accurate?

Are you sure about that, is that a firm offer? They could quickly find themselves in negative equity and then have no choice in the matter. Greed can be a powerful emotion and usually leads to incredibly bad investment decisions. Sell the house now while they still can and walk away with a deposit for a new house should they meet a new partner and want to start again, which of course they will.

I was in a similiar(ish) position, had bought of plans in 2005, in 2006 apartment had gone up about 60K, we split up after 8 years, I suggested selling but she didn’t want to, to avoid the emotional distress I signed it over and walked away empy handed and I’ve never looked back, thankfully I put emotional well being over money, now happily married and planning a family, what a nightmare it would be it I still had ties to that place, it would always be there in the back of my mind, I cannot recommend selling and walking away strongly enough.

Well played on that

yes, I’m sure the figures are accurate. they bought the site ten years ago and did a self build. the house would have been **valued **at approx 1M euro back in the day. I have no idea what their initial outlay was but pretty sure it was close to 500k.

this is my valuation, based on valuations in the locality, the fact that I am a huge pessimist when it comes to property values going forward etc. some EA’s have vlaued it at 500k to 590k. I think they would be very lucky to get 475k, but I am pretty sure that it would sell at 450k easily.

finally, I have been pleasantly surprised with the feedback (as in no shitty comments…there’s always one)…thanks for taking the time. excellent advice.

The rent of €2,500 seems very high. Without knowing the house in question of course, but in principle, with the current and future state of the economy there will be precious few people who can afford to pay that amount in rent privately. I would reckon on a lower rental income in future - just my opinion, others will disagree

I’ve held on to a former family home (in happier private circumstances but similar financial circumstances) and I’m starting to feel the ownership of it like a weight around me. I’d also advise selling

It’s hard to be exact with the crystal ball in terms of how much prices will continue to drop. They did drop 15.1% countrywide and 17.5% in Dublin. The drops were accelerating month on month in October also.

475k -> 380k is a 95k drop which is only 20% over 2 years.

I think this is optimistic given the next 3 budgets (with circa 12 billion in taxation and cuts) and the situation within Europe. The risks are to the downside and hence losses could very realistically be circa 20% per annum. That would be a 36% compounded loss over 2 years and a 49% compounded loss over 3 years.

For the sake of sanity in a difficult situation I’d support the views of a clean break and selling immediately. People in this situation can get very difficult with each other as the stress of further losses etc. build up.