Landlords v's selling on

Looking for some advice on what I should keep in mind for making a decision to keep our apartment and become landlords or sell on and put proceeds towards reducing the borrowings on a new house.

Our situation is that we are in a position to buy a new house/trade up. Our current apartment is mortgage free. It is in a good location with good rental potential (€1,300 per month). We do not HAVE to sell the apartment – so we are lucky in that we have a choice.

My husband believes we should keep the apartment saying he will take on the ‘landlord’ duties (although I fear I will be the go to person) and that the apartment is in a v good location and can only increase in value. I am not so sure. Besides the normal headaches that come with becoming a landlord, when I look at the management fees (2k per year), the property tax, the upcoming water charges + a slew of other costs associated with maintaining a property, keeping up with legislation and tenants rights etc I wonder is there any advantage these days in keeping 2nd properties when you have a choice. The apartment will never look as good as it does now being owner/occupier so am I better off selling it/having no headaches /banking the money against the mortgage on the new property and concentrating on the new property about?

as it’s mortgage free, you’ll have a fair whack of a tax bill every year (assuming you both currently work and earn in the higher band)
As a reluctant landlord a couple of years ago, I was lucky in that I had good tenants and rarely had to go near them. But thats the luck of the draw - there are some harrowing stories out there that would put anyone off becoming a LL

You’d also need to look at the impact of CGT on a future sale now that is no longer your PPR.

I’m also a reluctant landlord but the tenants rights / legislation isn’t that difficult to get your head around and keep on top of. Being a landlord that doesn’t have an agent does have time implications particularly when getting it ready to rent and choosing a tenant (although you are lucky in the current market that most likely you will be choosing from a number of interested parties). Ongoing wise there will be maintenance issues and property checks.

Personally, knowing what I know now I would sell now and wash my hands of the place if I was in your situation. That is just from the hassle perspective rather than financial though. Just don’t underestimate the potential difficulties in being a landlord.

Think of it this way. If the apartment is worth X, you have X to invest right now in any asset class you would like in the world. Does Irish property most closely match your investment goals? (Risk, capital appreciation, income potential, hassle, etc). If so, great. If not, sell and diversify?

On the area of GCT.

Taking into account - the property is in my name, it has been a prime residence for circa 10 years, would be selling now at approx 20% less than what it was originally bought at – am I still liable for CGT?

In an ideal world I would like to sell once we go sale agreed/sold on a new property but to avoid paying unnecessary tax would we need to ‘sell now –rent short term – buy’ (which I would prefer not doing)

I’d just sell the apartment to reduce the borrowings on the new house.

The new mortgage will be financed at 4%+, therefore reducing the new borrowings will give a guaranteed safe yield of at least that amount.

There is no alternative investment that will return 4% safely, even before taxes on those gains.

It’s been your principal private residence (PPR) for the entirety of your ownership so it’s exempt from CGT.

IN any event, you have a loss (not usable) on the sale so no CGT would arise even if PPR exemption was not applicable.

It sounds like this will not have any significance on your choice to become a landlord or not. In the event that you sold for more than the initial purchase price, only the amount of the gain “referable” to the period after you move out would be taxable. This is generally done on a time apportioned value (ie if you sell in a year for a 20k profit, only 1/11th would likely be taxable).

There is no CGT on your principal private residence (and it seems like you wouldn’t be making a capital gain in any case at this point). The other poster’s point was that from here on, if you decided to rent it out, you might in due course have a capital gain liability on a future sale.

Yes. Note that if it says at current value you can have a CGT loss which you could offset pro rata -

As others have pointed out you’ll be paying almost all rental income at marginal rates as it is mortgage free - this could be a lot of hassle for the net money received.

Personally I’d sell and pay off the other mortgage you can sell at a good price relative to the rental profit.

If say, you live down the country and your kids might go to college in the city it might change the equation somewhat.

The “Tiger” solution is to remortgage the rental property to the hilt and use the money to reduce your PPR mortgage, thereby getting the MIR benefit. This is not really feasible these days.

You don’t get to offset interest on a remortgage

Hmmm it’s also very dark in here. Let me also get some light in here, now where did I put my matches again… Canary B, meet Canary A