House Sell or Rent
Discussion
OK so the story is, I have 1 house mortgage free approx value 210 K, realistic early sell in todays doubting market maybe 180K.
The house draws a rental of £ 850 per month and I am a higher rate tax payer.
I think its getting very close to the capital gains tax if I decide to hold it, We lived there for about 10 years and paid 79 K
My current house I live in is mortgaged to a value of approx 240 K and on a repayment costs me about £ 1500.00 per month.
My tennant phoned me last night and says she is off at the end of this month so I now need to decide whats best.
I really liked holding the property, good bit of rental although not so good after tax and seemed a good asset to me long term that I cant readily get my hands onto ( which rules out an impulse buy of a F430 or Lambo )
Im thinking if its sold the money can pay off most of the current mortgage and hence not be paying well over a thousand in interest each month on current house,
Is there more I should be considering, I know its my choice and I would like to keep the rental house but if its a dumb thing to do financially all things considered then I would be willing to sell.
Thanks
The house draws a rental of £ 850 per month and I am a higher rate tax payer.
I think its getting very close to the capital gains tax if I decide to hold it, We lived there for about 10 years and paid 79 K
My current house I live in is mortgaged to a value of approx 240 K and on a repayment costs me about £ 1500.00 per month.
My tennant phoned me last night and says she is off at the end of this month so I now need to decide whats best.
I really liked holding the property, good bit of rental although not so good after tax and seemed a good asset to me long term that I cant readily get my hands onto ( which rules out an impulse buy of a F430 or Lambo )
Im thinking if its sold the money can pay off most of the current mortgage and hence not be paying well over a thousand in interest each month on current house,
Is there more I should be considering, I know its my choice and I would like to keep the rental house but if its a dumb thing to do financially all things considered then I would be willing to sell.
Thanks
I'd hold, no point selling in this market and rents are on the up, sure it might dip a bit more but there will be a bounce and £850 on a todays sale price of £180k is pretty good yield I would say. Not quite sure what you mean by "I think its getting very close to the capital gains tax if I decide to hold it", do you mean the 3 year after moving our rule. Remember the CGT is only on the increase since you moved out if it does kick in, doesn't suddenly backdate to day you bought (i.e. the £79k you mention), increase over the last three years is likely minimal. What I would do (if I have read the set up correctly) is mortgage up your rental to take some equity to clear down your own mortgage, no point in having that one mortgage free and having a mortgage on yours as you can't offset the interest that way, might as well swap that over and get effectively get tax relief on as much of the rent as you can.
Edited by touching cloth on Wednesday 20th August 16:54
haworthlloyd1 said:
agree with what touching cloth! says - however £180k giving you £850 per month is not that great.
You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
"although I would personally say that is much higher risk than property."You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
In what way?
"but nor will it lose you a fortune"
So losing 50k of that 180k is not a fortune?
NoelWatson said:
haworthlloyd1 said:
agree with what touching cloth! says - however £180k giving you £850 per month is not that great.
You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
"although I would personally say that is much higher risk than property."You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
In what way?
"but nor will it lose you a fortune"
So losing 50k of that 180k is not a fortune?
A diiferent value now, 5 years from now different again..
Prices fluctauate peak and trough...
BJWoods said:
NoelWatson said:
haworthlloyd1 said:
agree with what touching cloth! says - however £180k giving you £850 per month is not that great.
You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
"although I would personally say that is much higher risk than property."You could do something else with the money as property isn't doing too much at the moment - some banking shares are giving over 10% dividend which is taxable at 32.5% - although I would personally say that is much higher risk than property.
if you mortgaged up the rental property and reduced your main property as has been said you could reduce income tax as you can offset the mortgage against rental income which would do you some good.
There are various options available - depends which route/risk you want to take.
Keeping the property won't make you lots of money overnight, but nor will it lose you a fortune.
In what way?
"but nor will it lose you a fortune"
So losing 50k of that 180k is not a fortune?
A diiferent value now, 5 years from now different again..
Prices fluctauate peak and trough...
If you keep the house you are going to continue to lose about 1.5% of its value per month for the next year. Thats over a £2K loss per month. Paper gain, paper loss...you cant just count the upside then ignore the downside and suddenly 'think long term' .... thats what gamblers who end up in the gutter do.
Hi All, Yes it is joint owned with myself and wife although with the business she is up to he earning limits also, if that matters,
I did not realise it was only on th egains from when we left the house to market value now, so how do they go about calculating the cost of the property on the date we left it ?
I did not realise it was only on th egains from when we left the house to market value now, so how do they go about calculating the cost of the property on the date we left it ?
Exigeowner said:
Hi All, Yes it is joint owned with myself and wife although with the business she is up to he earning limits also, if that matters,
I did not realise it was only on the gains from when we left the house to market value now, so how do they go about calculating the cost of the property on the date we left it ?
The basic gain is worked out by subtracting what you paid for the house against what the sale proceeds are on the disposal. You can also offset against the gain all the legal and ancilliary costs incurred by you on purchase and on sale.I did not realise it was only on the gains from when we left the house to market value now, so how do they go about calculating the cost of the property on the date we left it ?
Then, in your situation, the resultant gain is time apportioned between the total period of ownership versus the time in which it was your main residence. For added measure, they allow you to add on an extra "deemed" private residence period of three years.
So, if you owned a house for 15 years and lived in it for 10, 10 years plus 3 i.e. 13 years of the period are allowed to be taken as the period in which it was your main residence and only 2 would be taken into account for CGT purposes.
If the gain on disposal was £100,000, then the gain subject to Capital Gains Tax would be £100,000 x 2/15 = £13,333.
Each individual is entitled to a Capital Gain Annual allowance - currently £9,600. In your case, as the property is jointly owned, the total allowances offsetable against any gains in 2008/09 come to £19,200. In the above example, this would wipe out any taxable gains leaving you with no CGT liability.
Since 6 April 2008, an individual's personal Income Tax rates are no longer relevant. There is now a flat 18% CGT tax rate (for non-business asset disposals).
Edited by Eric Mc on Thursday 21st August 09:06
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