Should I sell, pay the CGT and take my tenant?

Should I sell, pay the CGT and take my tenant?

9:30 AM, 20th January 2022, About 4 months ago 4

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Hi All, I am looking for some advice. Firstly, I will explain my situation. I have a leasehold flat that I have let for about 4 years to a good tenant. I am now getting major issues with the Residential Management Company and their managing agent, so much so that I am mulling over selling the property and buying a small 2-bed house.

My plan is to attempt to take the tenant ‘with me’ into the new property if they are up for doing this (I have not approached them yet it’s just an idea, would like to keep him as he’s been a model tenant).

I have had a quick look on the .Gov website and read as much as I can and believe that I may have a small CGT liability of around £5000 which I need to take into account in all my calculations if the property sells for more than I used in that calculation it just means more tax but more money if that makes sense.

My questions are:

1.Can someone confirm that there are no reliefs when you sell one rental property to buy another?

2.Can we deduct any amounts spent on the property in terms of improving it, I thought this was possible in the past? I haven’t spent much thankfully but would take this off the calculation if it’s allowable

3.Has anyone moved a good tenant from one property to another in the way I am thinking about?

I have looked into the possibility of moving back into the flat, but this would mean little difference from what I have read (for example declaring it as your main residence). It would be a pointless exercise.

With regards to the problems I have there, it would take too long to explain I am at the point of mulling over selling the flat because I see nothing but long term problems. I have considered contacting all the other leaseholders, but I am now beginning to way up the hassle of this and I have for the time being decided to put things on hold, especially as I am sure that if I decided to sell this would come up in any legal paperwork and I have to declare the problems. Not only would this ‘alert’ potential buyers to the issues there but would almost certainly put buyers off or mean low offers.

It’s very annoying because I wanted to try and get the problems sorted out, but once you start this sort of thing there is no going back. They have already instructed a solicitor, but I have now put engaging with them on hold as I am thinking over just jumping ship so to speak. If I keet the property, I would also have to spend money at some point on it regarding the possible EPC C upgrades. The boiler is also ancient so by the time I have paid out for all this I am probably looking at £10-15 k anyway. The flat is in a nice area and should be very sellable, so I might be able to balance it all out with a bit of luck on the purchase.

Any help and advice would be much appreciated.

Thanks,

Tony



Comments

by Judith Wordsworth

13:20 PM, 20th January 2022, About 4 months ago

Sell.
You can claim Gainst CGT all buying and sellings costs eg legal, estate agents etc. Anything you have done to the property to increase its value eg kitchen/bathroom upgrade/Windows/rewriting etc. Not maintenance as you Luke gave out that against your tax.
I have worked out you get the same or more money buying/doing up/selling one a year as you would get renting it out and without the hassle of tenants

by David

16:47 PM, 20th January 2022, About 4 months ago

You would have a transitional issue between selling the old place and buying/preparing the new place for rental. Not sure what the tenant would do during this time.
I would also have thought that the transaction costs of doing this would negate the benefit - CGT, legal x2, estate agent, stamp duty, refurb, removals....

by Darren Peters

12:05 PM, 22nd January 2022, About 4 months ago

Yes you can put the improvement costs against uplift value but make sure you keep all the receipts to prove what was done.

Add up the likely costs of doing the transaction on a spreadsheet or piece of paper then see if it is worth the time and hassle fighting the management company.

I found in the past that there are too many battles like this that drag on and on and even a 'win' isn't that great a win for the time & effort it took. Sometimes it's just better to walk away and use my time on more productive endeavours.

by Ian Cognito

17:39 PM, 22nd January 2022, About 4 months ago

You're absolutely right, Darren. However, some of us wired in such a way that we are unable to let pragmatism and profit rule over principle.


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