Time to sell?

by Readers Question

14:41 PM, 6th October 2014
About 4 years ago

Time to sell?

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Time to sell?

I have 10 investment properties in London which I started purchasing in 2008. I cannot decide whether I should start selling some as the value has increased very much in the last 18 months. For example, I purchased a 3 bed terraced house in N17 for £230k and have rented it since for £18,460 per annum which is about an 8% yield. I had It valued last month for remortgage purpose at £350k. Time to sell?

I spoke to a local agent who told he can sell it for £380k in a week!

At this value the yield is not even 5% so I am thinking maybe its time to sell and invest in better yielding properties.

What do you think?

C Dam



Comments

Mark Alexander

14:45 PM, 6th October 2014
About 4 years ago

Only time will reveal whether or not now is the best time to sell. In the meantime, all we have is speculation.

For this reason I think you should be asking different questions.

Why did you buy the properties in the first place?

When you started investing, what was your exit strategy?

If you were to cash in now, how would this change your life? For example, would the net capital be able to fund your retirement?
.

Shakeel Ahmad

15:29 PM, 6th October 2014
About 4 years ago

Hi C Dam,
Besides what Mark has stated. Please note that your yield should be calculated on today's value of the property & not historic.

By selling & releasing your equity. Do you have a better return on your capital ? and can you get fresh funds at the same rate of interest. I fear not !!!

In addition you will have to pay capital gains tax, Keep in mind that once you have paid the mortgage & the capital gains tax. Will it worth selling.

Property is a long term game & should only be entered by people who have the financial staying power.

Best wishes

Mike W

16:01 PM, 6th October 2014
About 4 years ago

I look at investment in houses in the same way as shares. You need to do your research.

In one area of London I looked back over a 25 year period at a number of streets (typical BTL flats) and compared them with streets in my local (relatively prosperous) city (not in SE). In 1990 a small 4 bed terrace house in my city was roughly the same price as a 2 bed flat in this area of London. Today the same flat could buy 2 of the 4 bed houses. Can such price disparity continue? forever? The rental yield in my city was (and is today) twice that of this London area. So to some degree the higher income offset the lower growth.

So if you had some shares which had increased by 50% over the same period would you wish to sell and 'bank the gain'? What would you do with the money (after tax)?

The other interesting point was that those flats in London that I was looking at peaked out in 2007. People selling last year (2013) were getting the same prices as 2007.

Just like shares house prices can go down as well as up. Just some thoughts ....

Rob

16:33 PM, 6th October 2014
About 4 years ago

Do you have mortgages on the properties? I have 10 properties and my long term stagegy is to sell 6 of the properties and use the profits from those to pay off the remaining 4 properties and retire on the rental income from the remaining 4. I believe (could be wrong don't hold me to it) Also if I sell 6 and reinvest the profits into the remaining 4 properties ie use it to pay off the mortgages then there is no tax to pay on those profits at that point. Depends what you want out of life and when you want it.

Mark Alexander

16:45 PM, 6th October 2014
About 4 years ago

Reply to the comment left by "Rob " at "06/10/2014 - 16:33":

Hi Rob

Unless your properties are commercial there would be CGT to pay. There is no CGT roll-over relief on residential property investment.
.

Rob

17:34 PM, 6th October 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "06/10/2014 - 16:45":

Interesting, my accountant claims if I re invest the profits into another property no CGT is payable at that point, it's paid when the property you have re invested the money into is sold. I'll have to look into that!

Mark Alexander

17:55 PM, 6th October 2014
About 4 years ago

Reply to the comment left by "Rob " at "06/10/2014 - 17:34":

When you realise that I am right I will be happy to refer you to an accountant who knows what he's talking about. I would be very worried about other advice he's given too. Does he have PI insurance?
.

Rob

18:19 PM, 6th October 2014
About 4 years ago

They should have there quite reputable, I've emailed them to clarify my claim. Probably me getting muddled lol

Shakeel Ahmad

19:42 PM, 6th October 2014
About 4 years ago

I agree with Mark, Sadly there is no roll over relief, another injustice. depending where Rob's properties are perhaps he could convert them in bed & breakfast and at a future date he could get a partial roll over relief.

Joe Bloggs

10:31 AM, 7th October 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "06/10/2014 - 16:45":

hi mark
you are correct, but with the exception of CPO properties.

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