Why I am not selling but investing the equity?
I bought my first BTL in a corner of SE London in September 2012 for £132,500. It was a repossession and in a terrible mess, but the mess was superficial and I soon had it done up with a new kitchen and a new bathroom.
The mortgage was £79,500 (60% LTV), and with various fees added, the total loan was £80,099. Interest rates were low, and it was soon making me a welcome passive income. With interest rates low, I worked hard to reduce my borrowing, and happily, before my latest fixed term had expired, the flat was unencumbered and I’d navigated to avoid any early repayment charges.
Now my passive income was even greater, and I invested excess income (£20,000 per year) into a stocks and shares ISA. So far, £80,000 has gone in, and the fund is worth £102,213; an annualised growth of 15.6%. I don’t expect this to last, but 8.5% over the long term is certainly achievable. This exceeds my rental income.
My unencumbered flat is now worth around £280,000. Capital Gains Tax if I sold would be around £35,400. But by remortgaging to 75% I can extract nearly as much money as I could by selling, and get a fixed rate mortgage certainty of around 4.5% if fees and other costs are factored in (around 4% without fees).
If the £210,000 raised by remortgaging is invested and gains 8.5%pa it will gain £90,768 over 5 years, less mortgage interest payments of £47,250 and less 24% CGT of £21,064, I will have a net profit of £22,454, nearly 50% more if £100,000 of the money is transferred to my ISA.
So that is why I won’t be selling.
My wife and I have five flats between us, either unencumbered or very low LTV. We remortgaged the first to 75% in April, and plan to mortgage one per year for the next four years on five-year fixes. Thereafter, we have a choice.
1. Redeem
2. Refix for five years
3. Remortgage to 75%
Tom
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Member Since September 2022 - Comments: 192
9:11 PM, 2nd October 2025, About 6 months ago
Wow well done Tom
You bought a flat in London for £132,500 in 2012 !
Here was I thinking flats and houses in London were expensive 😕
It was a mess so good job you could fit a new bathroom and kitchen and have great tenants who paid the Rent every month.
As a Landlord myself I would Never Ever use the words Passive Income !
£20,000 Income each year after paying Tax ( 40/45%) Service and Management charges, Ground Rent, Trades in London, EICR, Agents, Repairs and updates etc.
So you put down a 40% deposit and paid the Lenders fee upfront as well.
Buying costs and Stamp duty as well.
You have also paid off the mortgage debt over the last 13 years again Well done.
So what is your Questin ?
Member Since July 2023 - Comments: 24
10:42 PM, 2nd October 2025, About 6 months ago
‘With interest rates low, I worked hard to reduce my borrowing’
Contradicts everything else you’ve said, could have made far more by not overpaying…
Member Since June 2014 - Comments: 1562
9:58 AM, 3rd October 2025, About 6 months ago
Renting out property is (increasingly) not a passive investment.
And you’ve not mentioned 40% inheritance tax.
Member Since June 2019 - Comments: 761
7:01 PM, 4th October 2025, About 6 months ago
I hate to say it, but how is the EPC, flats can be very difficult to improve (particularly if external cladding has been removed).
Member Since January 2023 - Comments: 26
9:29 PM, 4th October 2025, About 6 months ago
Well done on your obvious success!
But why are you remortgaging so slowly? Why not remortgage all of the properties in one fell swoop and get investing?
Why did you repay the mortgages off so quickly? Would it have not been wiser to pay the strictly necessary and no more?1
Member Since January 2023 - Comments: 26
9:31 PM, 4th October 2025, About 6 months ago
Reply to the comment left by Monty Bodkin at 03/10/2025 – 09:58
Probably because he has not died yet!