What to do now we have moved away?

by Readers Question

11:15 AM, 11th July 2019
About 2 weeks ago

What to do now we have moved away?

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What to do now we have moved away?

I have been an avid reader of this site and you kindly helped me before, so perhaps I can ask again for some advice? I have a 3 bed semi in Pegswood, near Morpeth, Northumberland, which used to be my home.

In 2011 my mother had a stroke, which meant I had to drop everything and move back to Norwich where I still live with my husband (mother still alive, but now in a carehome after I got exhausted with caring for her for over 5 years). We rented our house out as had no time to even think about selling and needed to pay the mortgage.

Our tenants have been lovely, stayed for 8 years, had two children there and now are leaving to buy their own new build. We did offer them to buy our house, but they don’t want to sadly. They want a 6 month tenancy which will expire in December when their new house will be hopefully ready. They have asked if there is any flexibility in case their house is not finished by then.

We are unsure as to what to do next. The house seems not to have increased in value much, but this is hard to judge as very few properties like ours seem to come on the market. We rented at £545 a month and only increased the rent by £10 in 8 years. We think it will sell for roughly £125-£140,000 and as we have no plans to return up north, think best to sell as difficult tenants would be a nightmare as we live so far away.

We have a interest only mortgage on the property of £65,000 and the deal runs out in December. This has been on the back burner giving me a small income as being a carer is a no pay job. I still am my mother’s enabler and spend a lot of time looking after her as care homes are realistically only just about adequate in the care of the elderly.

My husband works and we have no mortgage on the house we live in. We also own a 1 bed flat in Norwich with a long term tenant, which we bought 3 years ago for £80,000 cash and is let for £425 a month. I have no idea what to do with my small pot of money that is currently in my Pesgwood house- re-let? Sell? Buy another property?

Invest in serviced apartments which seem to good to be true? Help Please!

Emily



Comments

Neil Patterson

11:22 AM, 11th July 2019
About 2 weeks ago

Dear Emily,

Norwich is a fine city, but then I do live there too 🙂

I understand what you are going through as I had my Mother-in-Law in Nursing care as well.

It is very difficult to give definitive advice as a lot depends on what you want to do for the future, how involved you want to be in building a portfolio, you retirement planning, tax status etc etc. Serviced apartment are really a specialist investment area that you would need to understand well and can have potentially future complications.

With regards to the property you are thinking of selling could you not keep your existing tenants on a Statutory Periodic tenancy as you both need flexibility and it would give you time to consider your options?

Emily Callaghan

16:59 PM, 11th July 2019
About 2 weeks ago

Reply to the comment left by Neil Patterson at 11/07/2019 - 11:22
Hi Neil,

Thanks for your reply. I am a Norfolk girl and very glad to be back here, shame about the circumstances. I did think of a periodic tenancy, this means that we both only have to give each other 1 month's notice (2 months?) I am 56, husband 48 soon , no kids. I am a non tax payer, he earns about £40,000 per year if he does overtime. I did go to see a financial adviser but he told me with my very modest pot of £100,000 pension, it would not be worth paying them to help due to costs. I plan to go out with nothing left as seeing my very financially comfortable off parents scrimp and save, only to both become very ill, never to enjoy the results of their prudence has taught me a hard lesson. I am thinking of buying another flat in Norwich as the returns are better and prices are still going up. I am wondering if this is a good idea though with all that is happening in politics at the moment though, never mind the constant attacks on landlords.

Jay James

20:43 PM, 11th July 2019
About 2 weeks ago

Reply to the comment left by Emily Callaghan at 11/07/2019 - 16:59" I am wondering if this is a good idea though with all that is happening in politics at the moment though, never mind the constant attacks on landlords." Your own comment quoted here may be the most pertinent on this forum. I am no expert, but would suggest you take your current circumstances as an opportunity to get out of the landlord profession.
--
Perhaps sell the Northumbria house asap and consider when and how to deal with the other property after that.

Mark Alexander

5:04 AM, 12th July 2019
About 2 weeks ago

Hi Emily

Have you got to repay your mortgage in December?

If so, have you discussed your predicament with your tenants and your mortgage lender?

If you cannot extend your mortgage you may need to sell the property before the mortgage needs to be repaid. Your tenants may need to consider living in AirBNB for a while. The only other alternative I can think of would be to take a new BTL. Mortgage on your former home and then to consider letting it long term when your tenants move out. I suggest you have a chat with LettingSupermarket about the prospects of re-letting if this is the way you decide to go. Have a look at our Lettings page for further details of the services they provide.

Howard Reuben CeMap CeRER

9:47 AM, 12th July 2019
About 2 weeks ago

Hello Emily

Life is complicated enough and I truly admire what you do, and as you say, for no pay. You also don't want to not enjoy your wealth should your own health suffer, and I concur that we should enjoy what we can now, whilst we can. Prudently of course, as we all need money to pay our bills too, but the surplus should be spent and enjoyed.

But then, on top of the 'no pay' scenario, I read that your tenants are leaving, your mortgage is ending, and you're in a conundrum what to do.

BTL still remains an excellent investment, whether for capital growth, rental income, or both, as long as proper advice is taken and lowest cost strategies are employed.

The mortgage ending in December, and the property, does not have to be an issue for you, as you could (as Mark says above) hand it over to a very good value letting agent, eg LettingSupermarket) and also, via my Firm (and we have been working with Mark, Neil and Property118 for very many years now), we could arrange the extended BTL mortgage product for you too. My Team can be contacted via my profile link above.

So, the ongoing ownership of your asset (which if you sold could possibly have estate agent, legal, tax and any other fees and costs deducted from the sale price - as well as loss of ongoing rental income from a new replacement tenant, and also loss of future possible capital growth as well) can help you supplement your income ... and we could also create a much healthier bank balance for you too by releasing property equity which is currently just stuck in bricks and mortar, and you can't spend and enjoy bricks and mortar.

An initial conversation costs nothing and we'll be pleased to help.

Mark Alexander

9:56 AM, 12th July 2019
About 2 weeks ago

Reply to the comment left by Howard Reuben CeMap CeRER at 12/07/2019 - 09:47
Superb response Howard

Rod

10:55 AM, 12th July 2019
About 2 weeks ago

As someone once said " I wish I knew when I was going to die and work to that"! I would keep some of your pension pot back as you never know what's round the corner inc' rent arrears/legals etc so piece of mind helps. I shouldn't say it but I have a cynical view once pension age is reached we become a burden - state pension - health care etc as the government are after saving money and not everything will be provided so a little rental income will be welcome. Be wary of 'section 21' coming in though!

Michael Barnes

10:55 AM, 12th July 2019
About 2 weeks ago

I would look at what can be done to extend the mortgage beyond the end of the year. Just reverting to SVR may be reasonable if you are thinking of selling (no fees to do that).

If you go for putting your property on the market soon, then you may find you are stuck with it into next year anyway: 2 months notice; tenants don't have to move out at that time; time to get court date, etc. And even if they do move out, you are moving into a slower time of year for property sales (reduced demand).

Putting it on the market at the start of next year would put you into the (historically) higher-demand period of spring, and may reduce the time between tenants leaving and sale completing

Michael Barnes

11:08 AM, 12th July 2019
About 2 weeks ago

Reply to the comment left by Rod at 12/07/2019 - 10:55"so a little rental income will be welcome"
One could probably achieve a similar income in retirement without the hassle by putting the money into an ISA and drawing down the income and part of the capital (no tax to pay; no property maintenance costs; no mortgage costs, ...), plus the money is (almost) instantly available in an emergency.
Of course, it also depends on what non-property investments are already held, but if the plan is to spend it all before moving on, then such an approach will have to be taken at some point (property is illiquid).

Kate Mellor

20:54 PM, 12th July 2019
About 2 weeks ago

Hi Emily,
When you say your “deal runs out in December” are you referring to your entire mortgage term? As in it needs to be redeemed, or that your fixed term rate is ending and it will revert to the standard variable rate?

In either case you may be eligible to roll over into another product with your existing lender at very little expense, which is definitely something to look into.

If it is the latter, I personally would renew the tenancy at an increased rent and agree to allow them to carry on month to month. Heading into spring is a better time to market if you decide you do want to sell and you’ve gained some more rent and breathing space in the meantime.

I use one of Howard Rueben’s mortgage advisors, Jenny Reeves. She is excellent and works to help us achieve our personal goals and needs. She also has come up with some clever work around for us. I can’t speak highly enough of her and would definitely recommend you to take some advice from Howard’s team. I’m a very satisfied customer.

All the best with your decision and your future. It’s so hard when you’re not sure what to do for the best.

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