Anything better than rental income ?

Fyldaccy

I own outright a property worth around £90k which is tenanted from which I receive around £350 gross rental income per month.
Is it possible to improve this income, perhaps by selling and investing the proceeds ?

grumbler

Fyldaccy wrote:

Is it possible to improve this income, perhaps by selling and investing the proceeds ?

350*12/90000=0.047=4.7%. Plus expenses, idle time between tenants….
Even easy-access saving accounts offer now about 5%. A&L offers 5.35% for up to £25K. And you can also invest tax-free into ISA. From financial point of view it is worth keeping the house only if you expect that its price will rise. However, nobody now can tell for sure where prices will go...

Fatboy_NSS

You could put the rent up! A 4.7% rental income seems rather low.

As grumbler points out, you're getting slightly less than the best paying savings accounts at the moment, so it depends on your view of the housing market. If you think it's going to keep going up then hold on to it, but if you think it's reached a peak then sell.

m00nie

dont forget you may have to pay capital gains tax also if you sell. so in effect the money you have to play with will be less

Crown

If you own the property out right and you havent a problem with letting wouldnt you better to stay in for the long run?

Also with the property you could always remortgage and reinvest into more investments without given up the house.

dunstonh

Commercial property investment funds have been performing very well for many years.

The property sector (pensions in this example) has performed at 9.79%p.a. average for the last 20 years. In that time, there has been only 1 year of negative return and that was 1991 when it dropped by 5.6%.

No guarantees for future returns but as low risk investments go, its been a good sector to be in.

Fyldaccy

Thanks everyone for your replies.
As regards the rental income it is £440 per month but £350 after agents fees which include rent guarantee, that is about the maximum rent you can get for a terrace house in this area.
As regards the CGT, we lived in it for 10 years before renting it out so we have a while before cgt liability.
Your replies have certainly given me food for thought, so thanks once again.

Pal

You could consider raising a mortgage on it, covered by the rent, in order to get a lump sum instead of a monthly income, but the first thing would be to look at increasing the rent or reducing the agency fees.

dougk_2

I would consider negotiating a better deal with letting agent - I would be looking to pay 10-12% of monthly income to the letting agent and no more (so max around £50).

Perhaps you should consider managing the property yourself?

Basically over 20% of your income is "lost" to the agent and the insurance.

garysletters

I agree with doug.
20% seems steep for managing fees, even with a rent guarantee.

If you remortgage, pay off interest only, this is then tax deductible, giving you money to buy more proerties or fritter away, but less/no tax to pay each year on the income. however, getting a mortgage with no intention of reinvesting obviously means you will earn less after your interest payments. You would have to invest the released equity.

4.7% yield is very low!

MarkyMarkD

4.7% is DEFINITELY very low.

We get £75 a week on our rental property which cost £50k a few months ago. That's 7.8%.

You must be very confident of growth in capital value to continue holding something which is effectively costing you 1% of its value each year in lost interest income.