Should I sell up or buy more?

by Readers Question

4 years ago

Should I sell up or buy more?

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Should I sell up or buy more?

I have a number of BTL flats – all fully occupied. Should I sell up or buy more?

I bought them some time ago at around £20k then remortgaged at a later date with mortgages around £70k to fund a family home.

We can hardly complain – capital growth paid for the family home – with the mortgage on the flats being more than covered by the rent.

So what’s the problem….???

The mortgages are interest only so the day of reckoning for repayment will arrive in 10 years when I need to repay the mortgages.

Next……… I manage the flats in addition to a full time job and would like to “slow down” and have more free time.

So what to do?

Should I sell the flats, pay the astronomical CGT (but in fairness I have made an astronomical profit) and clear all mortgages or appoint an agent to look after the flats and forget about them for a year while they manage any issues. This also leaves the little issue of having to eventually repay the mortgages.

Any impartial advice?

Thanks

Alison



Comments

Mark Alexander

4 years ago

Hi Alison

It sounds to me like you are contemplating the sale of the goose that lays the golden eggs!

10 years is a long time to go on your mortgages, there may well be a lot more golden eggs to come.

Why not make a decision in ten years time? You don't NEED to consider refinancing until then, but it may pay to consider your funding options now with a view to buying several more golden egg laying geese.

You may not even need to refinance to raise extra cash, have you considered equity finance?

With regards to lettings, I totally understanding that part. I've contracted out the management of all of mine. It simply wasn't worth me investing my own time into doing it myself any more, although I can't help myself getting involved still on occasion!

Now the next bit isn't entirely unbiased. Along with my partners in Property118, we were so impressed with the letting agency I'm using that we acquired shares in them. Take a look at what they can offer you >> http://www.property118.com/letting-supermarket-amend-pricing/68829/

Why would you bother to get involved in letting and management yourself with this level of protection and at rates as low as 4% and no hidden extras?

Also note that I provide a Consultancy service but will not be taking on any new clients now until February 2015 - see >>> http://www.property118.com/consultancy-mark-alexander/61522/
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Mark Alexander

4 years ago

PS - if you do decide that selling up will give you all the money that you will need for the rest of your life, please remember that you will pay 28% CGT on the difference between the initial purchase price and the sale price, less any capitalised costs. Mortgages do NOT factor into the calculation!
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Jonathan Clarke

4 years ago

Hi Alison

You are just tired. Take a break and a few deep breaths and clear your mind. Then just carry on as normal. You are suffering from a condition known as I.F. ( investor fatigue ) . I.F will come and go during your investment career . I`ve had it a few times . Its nothing to worry about. Its a passing phase and will blow over. The key thing is not to do anything drastic during this infectious period which can last between 2 and 3 weeks every year. You will soon snap out of it and wonder what you were even thinking! .

Do not sell . With prices rising at a predicted 5% pa for the next few years if you sell it is counter to everything you have achieved to date. As Mark says why not wait 10 years and make your decision then.

If the day to day management gets too much then offload it and take a cut in your profits in return for piece of mind. Its a simple trade off. I personally go for a pay as you go system. It allows me to retain day to day control but if I`m busy or want a day off I simply ring my guys up and pay them to do the jobs I dont want to do.

It works well, it is a very flexible model and is much cheaper than handing it all over but mind you Marks 4% is hard to beat. I pay about 10% pa of what it would cost me to hand it all over and have it managed at 10% .

As for CGT. Its a lovely tax . If I have to pay it that means I am making capital gains which is good right. The government has got to survive. The way i look at CGT is

If I make £100,000 capital gains I have to pay £28,000 CGT

That`s a whopping £72,000 I get to keep which I otherwise would never had got if I hadn`t invested in property. How cool is that . Thats much better than making £0 capital gain and paying £0 CGT. £28,000 CGT is much better . It means I`m successful.

I love CGT

Keep the faith Alison
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Alison Winter

4 years ago

Thanks guys - very helpful. In particular Jonathan I think you are spot on in that I am tired. It is getting more complex these days with a set of lawyers trying to drum up business with benefits folk in particular to get a few extra £'s from landlords, electrical tests, etc etc. I think an agent is a good way of getting over this. I am still a little bothered about paying off the mortgage - I will be 65 when they are due to be repaid. Still thinking.

Colin Dartnell

4 years ago

Listen to Mark, why sell, let someone manage for you and relax a bit, then in ten years just remortgage and carry on.

My own business (unrelated to property) has always taken all of my time, but I have managed to build up a reasonable portfolio separately by using a managing agent, you may pay fees but you don't have to do any work, except paperwork!

Thank God for Jonathan, I though I was the only one who would rather pay Capital Gains Tax and make something, rather than pay nothing and have nothing. Hallelujah!

Mark Alexander

4 years ago

Reply to the comment left by "Alison Winter" at "20/12/2014 - 20:30":

Hi Alison

Please read this http://www.property118.com/financing-beyond-retirement-age/

Then read the rest of the series
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Colin Dartnell

4 years ago

It just occurred to me, the way you say you have ten years to go it sounds like you may have taken the mortgages out a long time ago. Twenty years ago the base rate was a lot higher, if so it might be worth looking at re-mortgaging and save some money, or freeing up money to buy another one 🙂

If you are with good (still active) providers you may be able to do a Product Transfer rather than change providers, it is much quicker and a lot easier, but you probably won't be able to increase the amount borrowed.

Mark Alexander

4 years ago

Reply to the comment left by "Colin Dartnell" at "20/12/2014 - 22:02":

Hi Colin

I suspect it's the other way around and the mortgages will be on very attractive tracker rates. Remortgaging is more likely to attract higher rates, big fees and hence worse cashflow. It is for these reasons I suggested an equity finance top up (see our finance section). The existing mortgages and cashflow remain in place but new money is still released towards new purchases.

OK you end up giving away 40% of any new capital appreciation but you keep the other 60% as well as 100% of any cashflow. You can also buy more cashflowing properties which should also increase in value.

By working smart it is possible to increase cashflow and prospects for capital growth and only use a fraction of that to wind down by contracting out the letting and management.
.

IF Alison is REALLY thinking about selling how about she sells the first property that is due to be paid BEFORE the April 2015 tax date, thus using her CG allowance after her other capitol allowable allowances?

Adrian Jones

4 years ago

Reply to the comment left by "Jonathan Clarke" at "20/12/2014 - 13:29":

Jonathan, I think you have got it absolutely spot on with your attitude to CGT.

Same of course applies to tax due on lettings profit.

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