What to do with a spare £250K house - rent or sell?
Discussion
We have a second property that our daughter and Uni mates were using while at Uni, but now she has graduated and moved on we need to decide whether to sell it or rent it "properly"
Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
gmaz said:
We have a second property that our daughter and Uni mates were using while at Uni, but now she has graduated and moved on we need to decide whether to sell it or rent it "properly"
Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
Given the net rental yield would be 2.88% (assuming no voids and no maintenance costs) then there are plenty of other investment options.Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
Another attraction of this route is that you can then shift the money pretty quickly into tax efficient wrappers to their is no tax to pay on your returns, making this even more efficient.
A pension/SIPP wrapper my also be of interest as this has the added advantage of you getting full tax relief as you put the money in, which will more than offset the CGT you paid on the sale.
Money in a pension/SIPP is also fully exempt from IHT, enabling you to ultimately leave all of the proceeds of this to your daughter with no IHT bill to pay.
So there are lots of option and there will be lots of opinions as to what are the best ones, but at the end of the day there is no right or wrong, just what suits you better.
If you do want to chat with someone about the options please feel free to get in touch with Nik on the IM sticky at the top of this section and I am sure there will be others here happy to help too.
We're in a similar position in that our tenant has moved out and we're now looking to sell up. We realised that we were yielding around 3% after tax and could do better elsewhere.
Having said that, if you do want to keep it you can make a declaration of trust in your wife's name and the pay tax on the income at her lower rate. We were renting it at £725 a month and yielding around £580.
Having said that, if you do want to keep it you can make a declaration of trust in your wife's name and the pay tax on the income at her lower rate. We were renting it at £725 a month and yielding around £580.
gmaz said:
We have a second property that our daughter and Uni mates were using while at Uni, but now she has graduated and moved on we need to decide whether to sell it or rent it "properly"
Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
It’s almost impossible to answer without knowing your other investments, general desires, ages and lots of other aspects and considering the subjective aspects but as Julian points out you could sell and migrate the money into a pension wrapper and claw back a very significant chunk of the income tax that you and your wife currently pay. Very, very crudely, just by using your tax allowances you could claw back something like £50k out of thin air. That would be an extremely beneficial buffer to any capital value changes of the stock market. The FTSE yields more than you are currently yielding and that yield would be tax free and much lower maintenance. Its worth about £250K and we could get ~£1000pm rent, which would be realistically £600pm after fees and tax. I'm a high-rate taxpayer and my wife is just within the low rate.
Or we could sell it but what to do with £220K (after CGT) lump sum. Is there any investment that would have a similar return to letting it?
I know we should really speak to an IFA but I'm just looking for ideas at the moment.
Both markets are pretty efficient so the yields can be compared quite well and the risks of second properties are relatively clear such as voids, damage, potential tax changes etc.
Maybe you already have plenty of non property investments and the diversification offered by retaining the property is a benefit and maybe you are happy with the risks and the extra work for that diversification.
PH will probably offer some good alternatives but as you say, you do then need to sit down with the wife and a professional to plan the finer details to make sure it’s best for you.
DonkeyApple said:
It’s almost impossible to answer without knowing your other investments....
^^^ ThisIf everything else is in equities a bit of "disposable" (as opposed to main residence) property can be a useful diversification. Even a modest net return will beat cash.
Is it a good investment in itself? As Julian has suggested, there are probably better opportunities elsewhere.
Additional property is always a bit of a pain in the arse compared with paper investments, even if fully managed by an agent. Somebody has to deal with the agent, tax return, etc, etc.
rockin said:
DonkeyApple said:
It’s almost impossible to answer without knowing your other investments....
^^^ ThisIf everything else is in equities a bit of "disposable" (as opposed to main residence) property can be a useful diversification. Even a modest net return will beat cash.
Is it a good investment in itself? As Julian has suggested, there are probably better opportunities elsewhere.
Additional property is always a bit of a pain in the arse compared with paper investments, even if fully managed by an agent. Somebody has to deal with the agent, tax return, etc, etc.
This is why I pointed to Nik on the IM sticky or other here. It is impossible to come up with a conclusion or suggestions without knowing the bigger picture and only dealing with one element in isolation.
, unless you need the money the easy option would be to rent it out again.dai1983 said:
Help the daughter and your other kids out with her own places? I imagine you’ve already done that
Yep that is sorted.Thanks for all the advice.
I should say that the £250K is not just kicking around. We have a £200K capital on our offset mortgage (our own property) that will need to be paid off in about 10 years so the idea is to gradually pay that off and then finish with a lump sum of whatever is left. I guess I need to consider that when calculating the net income from renting the other house.
gmaz said:
dai1983 said:
Help the daughter and your other kids out with her own places? I imagine you’ve already done that
Yep that is sorted.Thanks for all the advice.
I should say that the £250K is not just kicking around. We have a £200K capital on our offset mortgage (our own property) that will need to be paid off in about 10 years so the idea is to gradually pay that off and then finish with a lump sum of whatever is left. I guess I need to consider that when calculating the net income from renting the other house.
I think is was fair to assume that if you owned this property outright then you also owned you own home outright. Obviously this is not the case.
Your home may be worth many multiples of the outstanding capital though and you may have maxed out your pension and ISA allowances, we don't know and you don't have to tell us in public.
But without this information no one can give you any assistance that is worthwhile.
If this is (understandably) not information you want to share publicly then send a PM to one (or more) of us and then strip any personal details out and post the results here to help others in the same/similar situation.
Macron said:
JulianPH said:
to help others in the same/similar situation.
s
tloads of people just happen to have a spare quarter of a million quid house lying around...Yes I appreciate the sentiment.
I appreciate the point you were making too.
You've said your daughter and her uni mates were using the property, this implies it has more than two bedrooms, and is close to a university.
A property with more than two rooms usable as bedrooms in a university town would be worth a lot more as a student let, my daughter pays £110 per week in a four bedroom house, so that's 4 x £110 x 50 = £22000 a year for what is an average semi worth £250k - £305k and purchased for £74k in 2000 according to Zoopla. Obviously there's a lot of costs to come out of that as utilities bills (along with all the normal fee's) are included in the rent, but I bet the revenue is more than a normal let, and there's also rises in property prices to bear in mind . Mind you if it was a two bedroom property it would be about the figure you stated.
Just something else to think about.
A property with more than two rooms usable as bedrooms in a university town would be worth a lot more as a student let, my daughter pays £110 per week in a four bedroom house, so that's 4 x £110 x 50 = £22000 a year for what is an average semi worth £250k - £305k and purchased for £74k in 2000 according to Zoopla. Obviously there's a lot of costs to come out of that as utilities bills (along with all the normal fee's) are included in the rent, but I bet the revenue is more than a normal let, and there's also rises in property prices to bear in mind . Mind you if it was a two bedroom property it would be about the figure you stated.
Just something else to think about.
Sell it, visit up north to the rough bit in my area, buy 5 flats with change charge a cheap £450 per month. Yes only tennents you get will be on the dole and your less likely to have the place looked after... but you'll have a higher yield until 1 has a party and wrecks the entire building, or Janice's 7 kids put a hole iv everywall imaginable.
DonkeyApple said:
Well I’m sure I’m not the only one to have worked out the net there is a £50k spend available for coke and hookers. Which is always the sagest financial advice from PH and the advice that no one can counter in reality. 
He mentioned wife so it's a no go unless he goes on business trips... DonkeyApple said:
Well I’m sure I’m not the only one to have worked out the net there is a £50k spend available for coke and hookers. Which is always the sagest financial advice from PH and the advice that no one can counter in reality.
Have you ever actually done either of those things?Douglas Quaid said:
DonkeyApple said:
Well I’m sure I’m not the only one to have worked out the net there is a £50k spend available for coke and hookers. Which is always the sagest financial advice from PH and the advice that no one can counter in reality.
Have you ever actually done either of those things?Gassing Station | Finance | Top of Page | What's New | My Stuff