Not sure next step with property ?

beefybeefy

Not sure this is the right place for this - its more financial planning for future but can't think where else to post it

Would appreciate to get thoughts or opinions of more experienced people in here.

I'm an early thirties yr old single who want to be independent and self sufficient by retirement.
I have a steady profession about gross £45k/annum. About 7 years ago I bought an investment 1 bdrm flat for about £130k. Using the equity (not a lot) of that I bought another place 2 yrs ago for about £ 350k. Now I have a combined mortgage debt of about £300k. I've rented out both properties but have a net loss about £6k each year.

Buying the 2nd property was mixed intentions of wanting to get a decent place of my own for the future and if that didn't pan out it was as an investment.
Now with that level of debt, interest rates expected to rise and probably being out of pocket for a few more years yet, I'm not so sure if I should keep my current position or sell one/both the properties.
Both would have risen in value by now but there won't be much gain in the 2nd property as it hasn't been very long. Also aware that if I sell the 2nd property it may be hard to buy one similar back. First property is cashflow positive but as a 1bdr and old, its growth potential won't be as high as the 2nd property and selling it may help me pay off the 2nd one earlier. At same time I dont' want to sell a good thing going.

I know being mortgage free sooner would be awesome but I don't mind short/medium term pain if it means better outcome in the future.

Any thoughts on what you'd do or consider in my situation ?
Thanks

edinburgher

I'd sell both (although check the rules on capital gains) If you have a net loss of 6%, you've given yourself a hefty paycut. I'm not a fan of BTL as an investment, but if you're going to do it, you need to be good at it. A loss, but hoping for future capital appreciation means that this is speculating, not investing.

beefybeefy

the 6% is not expected to be ongoing, I'll be reducing the principal, increasing rent over the years. This is without considering capital gains in future - they are both in good areas and while I can't say how much gain it will be, I'm fairly confident it won't go backwards

When buying the 1st property, I knew it would only take me a year or 2 to make it cashflow positive as I got with that purpose of investment income in mind. With the 2nd, its more to get a place of my own for the future admittedly it wasn't a bargain but I don't believe it was overpriced either. If I were to sell it now, I'll still eventually need/want to get a place I will own and live in. And prices have def gone up in past few yrs and forseeable future.

edinburgher

I hear you, but I know a few BTL investors and none of them have 'invested' on the premise of making money eventually, achieving a decent rental yield is always the goal. Capital gains are a nice bonus, not what you hang your hat on. Ultimately you will make up your own mind, but one to think about.

Durban

If you don't need the money now I would keep both.
The first one is doing ok and the second one probably should eventually. Also the second one may become your home and as you said you may not be in a position again.
I have 2 BTL's and I think that if you take a long term view ( 10 years plus) that will outweigh your loss now.