To sell, or not to sell?

To sell, or not to sell?

9:39 AM, 12th September 2022, About 4 weeks ago 10

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Hi, I have a mortgage coming off its fixed rate at the end of October and it’s not possible to switch rates until six weeks before.

With mortgage interest rates currently raising by the minute, my profit margins are disappearing and I’m tempted to sell up – although the flat has been absolutely brilliant with long term tenants and very little maintenance to do (especially as a new roof was installed last year).

It’s currently bringing in £1,400 a month.

If selling, it would be a great option for a landlord with no need for a mortgage – but other ideas welcome.

I only have a couple of buy to let properties so the other option might just be for me to get a second day-job!

Thanks in advance for any advice.

Rebecca



Comments

david porter View Profile

19:49 PM, 12th September 2022, About 3 weeks ago

how many landlords are out there in a buying frame of mind with no debt?
Most buyers will have the same mortgage issues that you do.

Glyn Jenkins

21:25 PM, 12th September 2022, About 3 weeks ago

What's net after ex,s?
What's left in the bank after fees and CGT?

JB

11:36 AM, 13th September 2022, About 3 weeks ago

I have a mortgage coming off fixed rate in December 2022 and have already been offered a new fix by the mortgage company. It maybe worth asking again for a fix now?

Its also worth considering selling it if its not reached EPC C

MIkeK123 View Profile

5:45 AM, 17th September 2022, About 3 weeks ago

My mortgage has increased to 3.5% and I expect that with further BOE rises it could go up to 5 -5.25%.
My net rental is £740 ( after letting agents fees) month less £113 a month service charges.
In the last 18 months I have had to replace most of the electrical appliances and have paid out maintenance costs.
When I consider that I can now only claim 20% of the mortgage interest the BTL is losing money.
I have had the property for let for 15 years with only 1 month void period.
I did ask he existing tenants who have a joint income of 100 k for a rent increase ((£850 to £925) but they said they could not afford to do so !
If I sold the property next year ( tenancy agreement ends May 2023) I would anticipate that I would have to lower the price to accommodate a decline in house prices.
I would after capital gains tax etc expect to raise about £80k to 90 k. If I put the funds into a 1 year bond it would avail me about 5% interest less tax. I have bond now which gives me 3.3% so with the imminent interest rate hikes 5% is very feasible.
Even if I increased the rent to £1000 a month after paying the mortgage, letting agent, and tax, plus the hassle,putting the money into a high rate of interest account seems to be my best option.
I do not live in the the UK and do not rely on the income.
The only negative I can think of is if property prices go up…….although I realistically don’t think this will happen for 3-5 years.
What should I do ?

DSR

17:59 PM, 17th September 2022, About 3 weeks ago

Reply to the comment left by MIkeK123 at 17/09/2022 - 05:45
get a proper rent valuation to start with . Sounds like you maybe under the market rate which is why you have had no voids?

Then do your sums again - if the rent increase works then given the existing tenant notice of the increase. On 100k income, I think they are playing you - they can afford this and if they cant then they have a decision to make.....

david porter View Profile

18:59 PM, 17th September 2022, About 3 weeks ago

As Don Corleone said
Make them an offer they cannot refuse.

MIkeK123 View Profile

2:25 AM, 18th September 2022, About 3 weeks ago

Reply to the comment left by DSR at 17/09/2022 - 17:59
You are correct in stating the rent is under market valuation. I have generally accepted this and not raised the rent due to having tenants that occupied the property for very long periods……better to have settled tenants than pay the agents to get new tenants who could be problematic .With the current increases in mortgage costs, plus the meager tax relief on mortgage interest this presents a completely new set of circumstances.
The other issue is tax. I draw pensions which take me over the tax free allowance and have substantial savings which are now generated a large amount of interest. With the allowance of only 20% tax deductible on interest there will be quite a large tax bill on the BTL which is making a very small amount of money.
I use a UK accountant to file my self assessment and they obviously know all the ‘tricks of the trade’ to reduce the tax, however with the extra money from higher interest on savings there is not so much they can accomplish.
I considered paying off the mortgage, but this would only increase my tax liability……no 20% tax allowance…..plus I earn a good rate of interest on savings (3.3% and will increase when BOE sets new rates).
The hassle factor is also having a negative effect on my otherwise peaceful life.

david porter View Profile

10:20 AM, 18th September 2022, About 3 weeks ago

Why have a mortgage if you have other investments?
Either cash in you investments and pay off the mortgage?
or sell the property with vacant possession?
yes there are tax implications but nothing is better than a good nights sleep!

MIkeK123 View Profile

10:31 AM, 18th September 2022, About 3 weeks ago

Cash is king ! Today I did a spread sheet of current rental income, costs, and tax possible liabilities. I also indicated the effects of a mortgage rate of 5% and a rent increase of 17%.
The figures were still appalling compared to cash in the bank. I forwarded these to our accountant to get his opinion.
My instinct is definitely to sell.

DSR

13:08 PM, 19th September 2022, About 3 weeks ago

Reply to the comment left by MIkeK123 at 18/09/2022 - 10:31put the rent up and if they don't like it issue a S21. You could also explain you are selling so even if you sold with them in situ (just say you are accepting offers on flat being occupied or unoccupied), they may well have a new Landlord who will inevitably raise the rent anyway...
you might find they run for the hills or at least look to move out....especially if you state you are willing to give them a great reference, but of course if they dont move and you have to evict them you will have to make a new LL aware of this when they ask for a reference...

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