To sell or not to sell second home

angelaR_3

I currently own a half share of a property with my sister, on the North Norfolk coast. We let it out to family and friends only so it brings in a small income. I am retired and drawing my work pension although as yet not my state pension and I have a small part time job. The property is worth approx £300 000 and my sister has offered to buy me out. Financially I am just about secure, but the lump sum would enable me to give my grown up children some money now and keep some for myself to invest. However I am unsure whether it would be wiser to hold onto the property as prices are rising at present and then in years to come they might inherit substantially more, and with interest rates so low anything I kept back for myself will not increase in value to the same degree.

Any advice will be gratefully received

redmalc

The question you need to answer is do your children need the money now or would they prefer a stake in the house which like you say is increasing in value at a later time in life.
The other issue is your personal tax position which you will need to take advice on if you sold your share,good luck and I hope which way you decide will be the correct one

bigadaj

Property prices look extended currently, but then so do most other asset prices.

This will depend on your wider financial situation, if you have savings, investments and pension provision then it may be worth holding onto your holiday home. If not then I'd far prefer to invest in equities through isas and oension than have a single illiquid property investment, but decision can only be yours.

I'd make sure there is an independent valuation before you decide, and you may well be subject to capital gains tax on the increase in value over the years which may affect your decision as well.

mike88

Hold on to the property. Over time it is an increasing asset which also pays you an income. Equities are more risky and I speak as someone who has half his wealth invested in shares and regret selling my investment property. Many share investors on here have only been investing in equities in the good times (my suspicion) but when you have seen as many collapses as I've experienced in nearly 50 years of investing you will appreciate that the current good times will not last indefinitely. My outlook on shares is always bearish and that has stood me in good stead over the years. Investing in shares at their peak or near peak is madness in my view. The time to invest in shares is when prices are low and certainly not now given your age.

Shares are poised for a fall, interest on capital is minute and, while property is possibly at or near its peak, you are less liable for losses with your property than shares. Indeed any property collapse is likely to be temporary whereas shares can remain in the doldrums for many years.

Of course if money is needed now than that is a different matter.

Daniel54

I would sell it.

If you are "just about secure " at the moment you will be a lot more secure if you have several hundred thousand pounds of extra capital from which yo can take an income.You can also spend some of the capital on things that will give you pleasure in retirement.

As long as your sister has her half share,then you cannot sell your 50% on the open market.Additionally,if it is let to family and friends I assume the income is comparatively modest

i don't have a crystal ball on how property prices in north Norfolk will develop.I am however confident that we are at an all time low for cash deposit interest rates and the only way is up

If you gift money to your children now,it will give both them and you much more pleasure if you are around to see them benefit from it ,whilst additionally they are probably at a stage in their lives where the money can help to materially change their lives now.Assuming you survive for 7 years,the gifts will also fall outside IHT,whereas at present you are close to the limit from just this property alone

How and where you invest the money is I think a separate question.

So i would unlock the capital and use it to enhance your life and those of your children

bigadaj

mike88 wrote: »

Hold on to the property. Over time it is an increasing asset which also pays you an income. Equities are more risky and I speak as someone who has half his wealth invested in shares and regret selling my investment property. Many share investors on here have only been investing in equities in the good times (my suspicion) but when you have seen as many collapses as I've experienced in nearly 50 years of investing you will appreciate that the current good times will not last indefinitely. My outlook on shares is always bearish and that has stood me in good stead over the years. Investing in shares at their peak or near peak is madness in my view. The time to invest in shares is when prices are low and certainly not now given your age.

Shares are poised for a fall, interest on capital is minute and, while property is possibly at or near its peak, you are less liable for losses with your property than shares. Indeed any property collapse is likely to be temporary whereas shares can remain in the doldrums for many years.

Of course if money is needed now than that is a different matter.

Every asset class has been inflated by quantitative easing and loose monetary policy, but the ftse 100 for example is currently yielding 3.5%. I think property is far more over valued than shares currently, and neutral interest rates of 5% would make it very difficult for people with mortgages.

mike88

bigadaj wrote: »

Every asset class has been inflated by quantitative easing and loose monetary policy, but the ftse 100 for example is currently yielding 3.5%. I think property is far more over valued than shares currently, and neutral interest rates of 5% would make it very difficult for people with mortgages.

I can only speak from experience in that a rental property is likely to yield more than 3.5%. I also take the view that ftse 100 stocks are more volatile than property prices. My own portfolio has lost over 4% in the last 3 trading days alone.

bigadaj

mike88 wrote: »

I can only speak from experience in that a rental property is likely to yield more than 3.5%. I also take the view that ftse 100 stocks are more volatile than property prices. My own portfolio has lost over 4% in the last 3 trading days alone.

Ideally you want both as you've said previously and I'm in a similar boat.

Property is illiquid and lumpy though, difficult, expensive and takes time to sell, and you also can't sell a bedroom or kitchen, whereas for shares and funds you can sell as much or as little as you want.

I think my problem is the uk housing obsession which I don't think is healthy, property investment is fine in a balanced portfolio but so many people have no pension or equity isa provision and take a punt on buy to let.

OP hasn't been back to advise on their wider financial position which is the primary factor in determining what to do.

lozzy1965

mike88 wrote: »

I can only speak from experience in that a rental property is likely to yield more than 3.5%. I also take the view that ftse 100 stocks are more volatile than property prices. My own portfolio has lost over 4% in the last 3 trading days alone.

Mine's down 4% too, but up a hell of a lot more than that this year, and I get 5% + from dividend income. The OP did say that this property only provides a "small" rental income. Stocks are more volatile agreed, but the long term trend of both property and stocks is up up up, and both beat other investments over most recent historical time spans. I am of the view that property is cumbersome and illiquid, and costs more than people imagine to 'run', but the best answer here I think was "See what the kids would like"

mike88

lozzy1965 wrote: »

Mine's down 4% too, but up a hell of a lot more than that this year, and I get 5% + from dividend income. The OP did say that this property only provides a "small" rental income. Stocks are more volatile agreed, but the long term trend of both property and stocks is up up up, and both beat other investments over most recent historical time spans. I am of the view that property is cumbersome and illiquid, and costs more than people imagine to 'run', but the best answer here I think was "See what the kids would like"

The original poster also said she was retired with a work pension but not yet drawing her old pension but has a part time job. She is thinking in terms of giving money from the sale of her share of the property to her grown up children and keeping the rest back to invest.

My issue is that people should invest (note the word "invest" and not save) when they are young and not when they are retired. If there is a downturn - and one is likely - then a young person has the ability to ride out the falls but older people have less time for their invested wealth to recover. Dividends aside, even with this present bull run, the market is lower now than it was in 1999.

As I said earlier many people have only started investing in recent years and have gained from the considerable increases this present run has brought. But after a bull run lasting 5 years, history tells me that a bear run will inevitably follow at some point and that now is not the time for a person of retirement age to be investing large lump sums in equities. The alternative of putting money away in cash savings is equally unappealing for as long as interest rates remain low and for as long as they fail to keep abreast of inflation. Given these two alternatives - buying shares or savings in cash -my advice remains for the original poster to keep the property.

angelaR_3

Thanks for all the advice it is much appreciated. My children have said the decision is mine and that they don't want me to sell for their sakes.

Having read all the posts I am inclined to hold onto my share of the property. I have never been a risk taker and the thought of equities makes me feel nervous. I have contacted HMRC and I would be liable for capital gains, which for me is another reason to leave things as they are.

I know the housing bubble is likely to burst at some point but I now think property is a more appropriate investment for me, taking into account my age, which is something I had not considered before.