BTL rent/sell conundrum
Discussion
Morning All,
Appreciating even the current financial situations are a moving feast, i'm keen to hear thoughts on what i need to consider when making a decision whether to continue with our BTL or sell up.
Had a call from my tenants last night who've been there for 4yrs, and they have another baby on the way so are likely to move out in 3-4 months. The BTL is our old starter home that we lived in from 2007-2016 so CGT isn't too much of an issue if we sell i believe. It's located close to Reading and so may benefit from a little uplift due to crossrail.
My concerns rise mainly around the fact that we've got a decent chunk of equity in both the BTL and our main home, so if the property market does take a tumble then we're exposed quite a bit. The BTL is worth around £340k, and we have a £220k fixed rate mortgage until 2023, payments are around £480, and current rent is £1245pcm. The rent is very good considering the size of house so i'd expect we may only get £1050 if we were to let it out again.
Our main house is around £675k, with a mortgage of £300k, and coming out of a fixed period in March 2021.
What i'm struggling to find a clear decision on is whether to try to sell the BTL, or just crack on with renting it on the basis that the mortgage is low and likely to remain low for a fair while. After all costs and tax we're getting around 7% return, which is much better than if we took the money out and offset it into our main mortgage as the rates are so low at the moment.
Any thoughts on things i should consider? How would you play this out in the current markets?
Appreciating even the current financial situations are a moving feast, i'm keen to hear thoughts on what i need to consider when making a decision whether to continue with our BTL or sell up.
Had a call from my tenants last night who've been there for 4yrs, and they have another baby on the way so are likely to move out in 3-4 months. The BTL is our old starter home that we lived in from 2007-2016 so CGT isn't too much of an issue if we sell i believe. It's located close to Reading and so may benefit from a little uplift due to crossrail.
My concerns rise mainly around the fact that we've got a decent chunk of equity in both the BTL and our main home, so if the property market does take a tumble then we're exposed quite a bit. The BTL is worth around £340k, and we have a £220k fixed rate mortgage until 2023, payments are around £480, and current rent is £1245pcm. The rent is very good considering the size of house so i'd expect we may only get £1050 if we were to let it out again.
Our main house is around £675k, with a mortgage of £300k, and coming out of a fixed period in March 2021.
What i'm struggling to find a clear decision on is whether to try to sell the BTL, or just crack on with renting it on the basis that the mortgage is low and likely to remain low for a fair while. After all costs and tax we're getting around 7% return, which is much better than if we took the money out and offset it into our main mortgage as the rates are so low at the moment.
Any thoughts on things i should consider? How would you play this out in the current markets?
I’d be happy with any ROI on the rental if it can service your own mortgage.
Lots of uncertainty right now to guarantee much.
Not sure on CGT. Does the CGT allowance drop off to 0, or suddenly stop after so long.
Maybe 4 years?
I’ve got a feeling that needs clarifying before you waste any more time thinking too much if CGT changes things for you.
Finally, anyone out there buying now will be hawking for a bargain assuming distressed sales.
If things bounce back (likely in the short term of a year or so), then you’ll lose out.
I think it’ll be 2021/22 when reality of this bites... if it does... but it’ll only be against a rising underlying asset market any way.
I’d stick.
Lots of uncertainty right now to guarantee much.
Not sure on CGT. Does the CGT allowance drop off to 0, or suddenly stop after so long.
Maybe 4 years?
I’ve got a feeling that needs clarifying before you waste any more time thinking too much if CGT changes things for you.
Finally, anyone out there buying now will be hawking for a bargain assuming distressed sales.
If things bounce back (likely in the short term of a year or so), then you’ll lose out.
I think it’ll be 2021/22 when reality of this bites... if it does... but it’ll only be against a rising underlying asset market any way.
I’d stick.
Edited by Mr Whippy on Monday 30th March 11:32
Ari said:
Hard to say without knowing more. You've got over half a million worth of debt, some of it serviced by a tenant, hopefully...
Whether that's a good idea is impossible to speculate without knowing whether you're earning £50K/year or £500K/year.
Joint earnings outside of the btl income between me and wifey are around 90k and we're in our late 30s. Certainly when you put in context of the amount of debt on its own it sounds a lot, however if we sold up the btl then we'd be able drop our debt down to £200k, and if we sold the main house then we could live in the btl with almost no mortgage remaining so it depends on which direction you look at it from i guess? I guess some of that view is a moot point as it's unlikely we'd go down that route.Whether that's a good idea is impossible to speculate without knowing whether you're earning £50K/year or £500K/year.
MrChips said:
Ari said:
Hard to say without knowing more. You've got over half a million worth of debt, some of it serviced by a tenant, hopefully...
Whether that's a good idea is impossible to speculate without knowing whether you're earning £50K/year or £500K/year.
Joint earnings outside of the btl income between me and wifey are around 90k and we're in our late 30s. Certainly when you put in context of the amount of debt on its own it sounds a lot, however if we sold up the btl then we'd be able drop our debt down to £200k, and if we sold the main house then we could live in the btl with almost no mortgage remaining so it depends on which direction you look at it from i guess? I guess some of that view is a moot point as it's unlikely we'd go down that route.Whether that's a good idea is impossible to speculate without knowing whether you're earning £50K/year or £500K/year.
I'd keep it. There's not a lot around that will provide the return.
If the housing market dips a bit, it will come back. Even if it does dip, the demand for rental houses will still be strong, so I doubt we'll see a drop in rental values.
We have a lot of flats, plus an office building. Whilst it is a worry re the current situation, unless someone loses their job completely and can't pay the rent, they'll hopefully be transferred onto the Furlough Scheme. Then we can agree what will be paid in the short term.
Plus, now is the cheapest time in our history to borrow money. If you're going to have £500 of debt, now's the time to have it!
If the housing market dips a bit, it will come back. Even if it does dip, the demand for rental houses will still be strong, so I doubt we'll see a drop in rental values.
We have a lot of flats, plus an office building. Whilst it is a worry re the current situation, unless someone loses their job completely and can't pay the rent, they'll hopefully be transferred onto the Furlough Scheme. Then we can agree what will be paid in the short term.
Plus, now is the cheapest time in our history to borrow money. If you're going to have £500 of debt, now's the time to have it!
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