To sell or not to sell...that is the question...

Hi Pinsters, looking for some advice…

Bought a house in Drogheda for 155,000 4 years ago (3 bed end of terrace) and has been rented since but the tenant has moved out. A year ago it was valued at 350,000 and now it’s valued at around 285,000 to 295,000. It’s a in a popular estate with very little for sale in the estate so once it is priced correctly I think there is a good chance of selling.

If I rent again I’ll get a rent of about 1,000 with mortgage payments currently running at just over 700 (including a top up which I know the interest is not tax deductable).

In the last year Drogheda has seen drops averaging 20%. That’s the reality. My gut is that the rate of decrease will drop this year but it will still be another 10% drop and then probably more next year.

If I sell I will have to pay 1.25% fees + solicitor + a bit of decor work + capital gains tax. If I subsequently buy again in a couple of years I’ll have to pay solicitor fees, stamp duty, furnishing fees etc.

What’s your opinion?

Well you have more than made to case to sell in that post yourself. On a best case scenario you are coming out with a net 300/month less costs or a maximum 3600 pa. Just a couple of months unlet blows a hole in that. You do not mention how much of the mortgage is left. But if you come out of a sale with 280k less say 140k outstanding and deposit the 140k balance at a 0 risk 4.5% which is widely available this is 6300 pa at a 20% dirt tax rate compared to 3600 pa (max) taxable at upto 41% + PRSI. That is a nobrainer in my book. All the factors at play scream at you to sell and sit out the property market and see how it pans out. But I gather from your post you have worked that out for yourself already.

What term is the mortgage? How confident are you that you’ll have a steady rental income from it over the next 4-5 years? In other words, are your tenants generally families etc, or migrant workers?

Seems a reasonably solid investment - I don’t think I’d cash out now to buy back in again, due to transaction costs. But then again, property isn’t the only game in town for your equity over the next 20 years either.

Original Mortgage was 135,000 and then I did an equity release of 80,000 which was used towards another house. Both are currently interest only mortgages.

Last family was an Irish family, not sure about this time as it’s a few years away!

My gut is to put it on the market and see how I get on!

Ah, IO makes it a different kettle of fish altogether.

I’d stick it on the market. kerrynorth is right, albeit you did mention buying back in so you’d have to consider future transaction costs not just a simple yield vs deposit a/c comparison. But like I said, there are other investments too…!!

Transaction costs do not come into play here. Such costs in any future property investment is a matter for that time as they are not a compulsory cost impacting on this sale. There is no compulsion to reinvest in property vis a vis any other asset class.

True, but dexter did say it was his intention to buy back in…