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5 years ago, my wife and I bought a apartment for 220.000€, taking out a 15 years loan, at 1%

Since then, kids happened, and we feel a bit crowded in this apartment.

After discussing with a few realtors in the area, it appears that we could rent out the apartment for roughly our monthly loan payment, leaving us with about 1.500€/y to pay for taxes, maintenance...

We could also sell the apartment, and get, all taxes deduced, 220.000€ in our pocket, leaving us with 60.000€ after the loan is paid for.

This money would be used as a down-payment for our new house.

Does it make any sense to keep our old apartment, or am I just being sentimental?

  • How will you fund the new place if you don't sell the first one? – JTP - Apologise to Monica Aug 31 '18 at 12:43
  • About 50 k€ cash, the rest (About 300k€) with a loan. The monthly payment would be ~30% of our net income. – Maxime Aug 31 '18 at 12:47
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    It would appear you are just being sentimental, since you haven't mentioned any reason for keeping the apartment. – chepner Aug 31 '18 at 12:48
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    @chepner Well there is an obvious one of having a good source of income 10 years from now. – Maxime Aug 31 '18 at 12:49
  • Does your bank require you to be resident in the apartment? I'm not sure about France, but in the US banks generally charge higher interest rates on mortgages for properties that you don't live in. You may have to refinance should you decide to keep the apartment. – Peter K. Aug 31 '18 at 14:09
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This is a decision that only you can make, but you need to be wary of the factors that go into this. It boils down to are you ready to go into the land lording business? Make no mistake, that managing a rental property is neither easy or automatic. There can be vacancies, non-paying tenants, and of course repairs.

You may have tenants that demand light bulbs be replace the moment they go out, which may happen at very inconvenient times. Along these lines are you prepared to learn about all the laws that surround this business, or hire a lawyer to assist you?

What makes this risky is that you are borrowing almost all the money to launch this business. Consider a person that purchase the latest weird flavored cookie, from their local grocer, and attempts to resell them online. Those cookies may not sell, and this person may be stuck with all these treats. If that guy used cash from his bank account, then no big deal. Sure he lost money, but none is owed to anyone. If, he financed it all on a credit card, and there is no money to pay the bill, then what happens?

You are very much in the latter situation with what you propose. If you have a tenant that pays the rent on time, well all is good. If you don't then what do you do? What do you do if you have to purchase a new furnace or water heater? What happens if you get sued for discrimination in your application process? Will you hire a management company and if so how does that get paid for?

If there is a plan to mitigate all these risks, and you have an interest being a landlord, then yes this could be a very profitable business. If not, and this level of risk, then this could be a disaster for your family.

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    Thank you for a well thought answer. In France there is a neat mechanism for this, where you can give a mandate to a realtor, and for ~10% of the rent, are discharged from all this (from finding a tenant, to making sure rent is paid, etc.), and just get your check at the end of the month. – Maxime Aug 31 '18 at 13:11
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    You may be misunderstanding what the management fee does for you. Do they pay your mortgage when there are vacancies? What about non-paying tenants? Do they pay for the repairs, such as a new furnace? We have the same thing in the US, but really all they do is collect money and find tenants. The risk is still there. – Pete B. Aug 31 '18 at 13:45
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    If that is the case, I may be looking at buying properties in France! That is a great deal! – Pete B. Aug 31 '18 at 13:51
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    I know nothing about the rental business in France, but this sounds like an impossibly good deal. You buy a property, sign an agreement with them, and then they GUARANTEE you an agreed amount of profit indefinitely? Like Pete B says, I might want to sign up myself. I'd definitely check into that further before signing up. I had a property manager in the US, but they guaranteed nothing. They collected the rent, found tenants, and arranged maintenance, but the risk of not having a tenant or the cost of maintenance issues was all still on me. – Jay Aug 31 '18 at 17:53
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    Maybe the rental market is different in France, but the more I think about it, what you describe sounds impossible. How could 10% of the rent possibly cover all the times an apartment might be unoccupied, plus all maintenance costs, plus all the times a tenant doesn't pay the rent, etc? Unless rents in France are astronomically high compared to the cost of buying and maintaining a property. – Jay Aug 31 '18 at 17:56

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