Sell or rent WWYD?
Discussion
In a bit of a pickle. Been renting out a house and tenant moved out (you may have seen the other threads!).
We put it on the market at £1000 PCM. Lots of viewings and have 2 people who both want it.
Its worth £200k, mortgage almost paid off, interest is <£50 PCM.
However through the course of viewings we have been offered £210k to sell it.
I am now a bit stuck as which is best to do. Sell now or rent it out again for I guess 2-3 years.
We put it on the market at £1000 PCM. Lots of viewings and have 2 people who both want it.
Its worth £200k, mortgage almost paid off, interest is <£50 PCM.
However through the course of viewings we have been offered £210k to sell it.
I am now a bit stuck as which is best to do. Sell now or rent it out again for I guess 2-3 years.
There are a lot of implications related to tax that can't be answered by the information in your thread, and if you're thinking about it purely from a business decision, you need to take all those into account.
If it's not purely a business decision, then I'd have said that there probably isn't enough to information in the post to give you advice.
But you do ask "what would you do." Well, that I can answer. With such a small interest payment, I would have thought that there is quite a bit of equity in the house. I have a couple of ideas that are riskier than letting the house out, but could yield more than 6%. If I'd was able to avoid (not evade) the capital gains tax, I'd sell it, pay off my current mortgage, buy a new push bike, and put the rest into my (stagnant but still viable) business plan.
But I suspect my circumstances are different to yours.
If it's not purely a business decision, then I'd have said that there probably isn't enough to information in the post to give you advice.
But you do ask "what would you do." Well, that I can answer. With such a small interest payment, I would have thought that there is quite a bit of equity in the house. I have a couple of ideas that are riskier than letting the house out, but could yield more than 6%. If I'd was able to avoid (not evade) the capital gains tax, I'd sell it, pay off my current mortgage, buy a new push bike, and put the rest into my (stagnant but still viable) business plan.
But I suspect my circumstances are different to yours.
What would you do with the £200k you would get from the house, and would it be making you £1000 a month?
I have no idea of the actual figures, how much of the £1000 a month you end up with and how much of the £210k you would have left after fees and paying off the mortgage.
But I am of the opinion you never sell property, if I was retired I would love to have a fully paid for house bringing in £1k a month.
I have no idea of the actual figures, how much of the £1000 a month you end up with and how much of the £210k you would have left after fees and paying off the mortgage.
But I am of the opinion you never sell property, if I was retired I would love to have a fully paid for house bringing in £1k a month.
red_slr said:
There would be no CGT on the sale if we did sell.
The rental income is taxed, of course, but we are 20% band so not really a big deal.
After tax, fees, repairs and insurance etc I would say we net about £8-9k PA.
Simple answer and question on the information you have provided....The rental income is taxed, of course, but we are 20% band so not really a big deal.
After tax, fees, repairs and insurance etc I would say we net about £8-9k PA.
Could you invest £200,000 (what's left after selling fees) and have a monthly income of 4% (£8k p.a.)?
If the answer to that is yes, then ask yourself if you can do that with the added income of the principle investment increasing in value as a house no doubt will. In other words, could you invest your £200k and in three years (for example) walk away with a monthly cash return of £666.66 and the capital at potentially £220k+
For me, the answer is obvious. Keep the house.
red_slr said:
There would be no CGT on the sale if we did sell.
The rental income is taxed, of course, but we are 20% band so not really a big deal.
After tax, fees, repairs and insurance etc I would say we net about £8-9k PA.
I'm no Tax expert but did you buy it (or move out of it) when the house was valued at or more than £210k? My accountant told me that any value the house has made whilst being let was taxable. I sold a rental last year in Cardiff and was fortunate that when I moved out of it in 2008 the hiouse was at it highest ever value. Sold last year for a few grnad under its 2008 value so no CGT. The rental income is taxed, of course, but we are 20% band so not really a big deal.
After tax, fees, repairs and insurance etc I would say we net about £8-9k PA.
As for what i'd do, depends what you'll do with the money. Like you I had a very small mortgage on the Cardiff house so paid off about 1/2 the total value of my home in Oxfordshire. This allowed lower outgoings and let me take a slightly lower paid job where I now work 2 weeks out of 6.
Tyre Smoke said:
Simple answer and question on the information you have provided....
Could you invest £200,000 (what's left after selling fees) and have a monthly income of 4% (£8k p.a.)?
If the answer to that is yes, then ask yourself if you can do that with the added income of the principle investment increasing in value as a house no doubt will. In other words, could you invest your £200k and in three years (for example) walk away with a monthly cash return of £666.66 and the capital at potentially £220k+
For me, the answer is obvious. Keep the house.
What he said. Keep the house, the monthly income over the years will provide a decent return, plus property will only go up (historically). There's the obvious question over a bad tenent, but it's the risk every landlord has to take.Could you invest £200,000 (what's left after selling fees) and have a monthly income of 4% (£8k p.a.)?
If the answer to that is yes, then ask yourself if you can do that with the added income of the principle investment increasing in value as a house no doubt will. In other words, could you invest your £200k and in three years (for example) walk away with a monthly cash return of £666.66 and the capital at potentially £220k+
For me, the answer is obvious. Keep the house.
Tyre Smoke said:
Simple answer and question on the information you have provided....
Could you invest £200,000 (what's left after selling fees) and have a monthly income of 4% (£8k p.a.)?
If the answer to that is yes, then ask yourself if you can do that with the added income of the principle investment increasing in value as a house no doubt will. In other words, could you invest your £200k and in three years (for example) walk away with a monthly cash return of £666.66 and the capital at potentially £220k+
For me, the answer is obvious. Keep the house.
There is no guarantee on the income or capital appreciation of the property, so ensure you compare like with like!Could you invest £200,000 (what's left after selling fees) and have a monthly income of 4% (£8k p.a.)?
If the answer to that is yes, then ask yourself if you can do that with the added income of the principle investment increasing in value as a house no doubt will. In other words, could you invest your £200k and in three years (for example) walk away with a monthly cash return of £666.66 and the capital at potentially £220k+
For me, the answer is obvious. Keep the house.
Tyre Smoke said:
For me, the answer is obvious. Keep the house.
Fascinating - for me, the answer is obvious. Sell the house.Slightly more usefully, I'd suggest considering your "hassle" threshold, and what likely value growth you anticipate on the place.
The less house price inflation you anticipate, and the more you dislike hassle, the more the pendulum swings towards sell.
The more you can live with the risk of hassle, or the more you anticipate the price rising, the more retaining the property appeals.
xeny said:
Fascinating - for me, the answer is obvious. Sell the house.
Slightly more usefully, I'd suggest considering your "hassle" threshold, and what likely value growth you anticipate on the place.
The less house price inflation you anticipate, and the more you dislike hassle, the more the pendulum swings towards sell.
The more you can live with the risk of hassle, or the more you anticipate the price rising, the more retaining the property appeals.
I'm with Xeny. I'd also add that there's quite a lot of risk in owning one rental property, eg, voids, repairs etc. Slightly more usefully, I'd suggest considering your "hassle" threshold, and what likely value growth you anticipate on the place.
The less house price inflation you anticipate, and the more you dislike hassle, the more the pendulum swings towards sell.
The more you can live with the risk of hassle, or the more you anticipate the price rising, the more retaining the property appeals.
xeny said:
Fascinating - for me, the answer is obvious. Sell the house.
Slightly more usefully, I'd suggest considering your "hassle" threshold, and what likely value growth you anticipate on the place.
The less house price inflation you anticipate, and the more you dislike hassle, the more the pendulum swings towards sell.
The more you can live with the risk of hassle, or the more you anticipate the price rising, the more retaining the property appeals.
To be fair, I was going on the information the OP provided. And I was assuming full occupancy for two or three years. Yes, there is likelihood of vacant periods, but I would suggest that they would be short if at all, going from the viewings recently and two tenants after it. Only the OP will know for sure what the chances are.Slightly more usefully, I'd suggest considering your "hassle" threshold, and what likely value growth you anticipate on the place.
The less house price inflation you anticipate, and the more you dislike hassle, the more the pendulum swings towards sell.
The more you can live with the risk of hassle, or the more you anticipate the price rising, the more retaining the property appeals.
Historically property has never lost (in the medium to long term) and is still I would think a good investment. Particularly at the moment with the uncertainty over Brexit. To the poster above stating that income and future property values are not guaranteed, well neither is investments at that level of return. I would suggest that the house is the safer of the two.
I have done a quick calculation and after 5 years (just that example) I think we will be at roughly £48k "profit" after tax and all deductions assuming some voids, R&M etc. The house will then be 20 years old so I allocated an extra £20k for 2 new bathrooms, new carpets, full re-decoration, kitchen refresh. That brings us down to about, give or take £28k.
House prices in the area are always very slow to move, the house has only made about £20k in 15 years. So over the next 5 I will be lucky to see at most £10k increase but probably would sell quickly due to new bathrooms, carpets etc. So that brings me back up to maybe £40k, maybe a bit more if you include gains from investing the rental income.
If I sell now and invest the money I would hope I could return at least £30k after tax over 5 years at very worst but I would like to think well over £50k is quite possible. So its swings and roundabouts. Hmmm..
The poster who said what is my cut off for dealing with tenants and problems etc may well have the winning point here. For £10k over 5 years (assuming worst case) then is it really worth all that time and risk?
House prices in the area are always very slow to move, the house has only made about £20k in 15 years. So over the next 5 I will be lucky to see at most £10k increase but probably would sell quickly due to new bathrooms, carpets etc. So that brings me back up to maybe £40k, maybe a bit more if you include gains from investing the rental income.
If I sell now and invest the money I would hope I could return at least £30k after tax over 5 years at very worst but I would like to think well over £50k is quite possible. So its swings and roundabouts. Hmmm..
The poster who said what is my cut off for dealing with tenants and problems etc may well have the winning point here. For £10k over 5 years (assuming worst case) then is it really worth all that time and risk?
Tyre Smoke said:
To be fair, I was going on the information the OP provided. And I was assuming full occupancy for two or three years. Yes, there is likelihood of vacant periods, but I would suggest that they would be short if at all, going from the viewings recently and two tenants after it. Only the OP will know for sure what the chances are.
Historically property has never lost (in the medium to long term) and is still I would think a good investment. Particularly at the moment with the uncertainty over Brexit. To the poster above stating that income and future property values are not guaranteed, well neither is investments at that level of return. I would suggest that the house is the safer of the two.
Quite possibly. My point is that you need to ‘risk adjust’ both sides!Historically property has never lost (in the medium to long term) and is still I would think a good investment. Particularly at the moment with the uncertainty over Brexit. To the poster above stating that income and future property values are not guaranteed, well neither is investments at that level of return. I would suggest that the house is the safer of the two.
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