I’m wrestling with a classic keep and rent/sell dilemma which I hope the super-smart MMM hive mind can help with!
Existing home:
Market value: $500k
O/S Mortgage: $180k (so equity of approx. $320k)
O/S Term: 16 years
Rate: 0.5% (yes, you read that right. Thanks, European Central Bank!)
Repayment: $1,020/month
Rental income: $2,500/m (conservative, easily over $2,700/m more realistic)
Tax rate: 52% on full rental income, before mortgage payments (ouch)
Even with the crazy high tax rate, this would be cash-flow positive to the tune of about $350/m – although I am not accounting for any tax reliefs so would likely be somewhat higher once I avail of depreciation relief etc.
Other Information:
Post-tax income: $150k p/a (household)
New mortgage: $800k (repayments $3,200/m).
2.5% mortgage rate, 27 year term.
Approx. $160k of that is renovation borrowing, which we would not need if we liquidate first property. So if we sell first property, mortgage on this house would be $640k, or $2,750/m.
Property value: $1.1m (after renovation)
Pension: Me = fund currently $500k, $40k additional annual payroll/employer contrib. (max. allowable)
Spouse = Gov. Job, accrues 1/80 of final salary per year of service. 20 years service. Looking at annual pension of approx. $40k (in today's money), index linked, govt. g'teed.
Savings: $150k cash which will all go on renovations on new house. Saving approx. $3k cash/month, even with paying two mortgages currently. Whatever happens this will obviously increase by at least $1k/m as 1st mortgage will no longer be paid by us in either scenario.
Spouse adores her job, will never leave. I like mine, but have lots of other interests so would like to go at 60 at latest – which might dovetail nicely with a paid off investment property. My income is approx. 80% of household income.
Both me and my wife are 43, one kiddo who’s 7.
Question: What to do, oh great hive mind? Keeping and renting current house feels like a no-brainer and nice inflation hedge...