Two properties what to do?

silvercar

You are my sort of age. It is time to think about your retirement planning. Is the rental income going to supplement your pension? Would you down size in the future to pay off your large mortgage?

My IFA tells me that restrictions on pensions means it makes sense to have some rental income.

westernpromise

If you sold the flat and used the proceeds to pay down your mortgage, you would have a smaller mortgage, but you would also lose that £7k a year net rental income that you’d no longer be getting. So I think we need to know what your mortgage rate and payments are. If your mortgage is costing you £400 a month then paying off ¾ of it will save you £300 a month but you’ll lose £600 in rental income achieving this, which feels like a bad deal.

Incidentally, if you’re taking £600 a month in income from the flat, you have a yield of about 4%, which is pretty good. If you sold the flat and put the £180k on deposit somewhere you’d struggle to achieve a return like that. There would also be CGT on whatever the flat's value has gone up since you inherited it, meaning you might have less than £180k to put on deposit.

Stbridig

Our mortgage is one that is offset. It tracks the interest base rate I think at 1% above , I'd have to check that to be certain. Repayments are around 1600 per month but we do overpay as much as possible.
We also have critical illness insurance which is costly but I always worry about one of getting ill with a disease that incapacitates without actually killing you! I am a nurse so have seen this happen to people.
Our jobs are fairly stable and we both have reasonable pension provision in place.
The house we live in is small but in an area which has gained in popularity so not much hope of downsizing if we wish to remain here.

Jonbvn

Stbridig wrote: »

Our mortgage is one that is offset. It tracks the interest base rate I think at 1% above , I'd have to check that to be certain. Repayments are around 1600 per month but we do overpay as much as possible.

Why overpay a mortgage at 1.5%? You can better returns than this (after tax) with several different saving & current accounts.

Helvetica_Van_Buren

Stbridig wrote: »

... So I am keen to sell the flat especially if a property crash is imminent...

What makes you think a crash is imminent? I don't think we could be any further away from a property market crash.

Prices will only ever go up as long as demand exceeds supply.
The population increases by around 400,000 per year and nowhere near that amount of houses were built last year.

polarization

As you mentioned, there are £600 you pocket from the flats after all the deduction (I assume it includes all the costs related to your landlord liabilities). If it is more than enough to cover the interest you are paying for the £250,000, selling the flat or not depends on everyone's circumstances, whether you want to have the hassle to be a landlord, have energy to look after the flat or are you struggle to pay the mortgage every month or not.

If the net income from the rent is higher than the interest, literally it is equivalent to an offset mortgage or even have better return.

Hoploz

I would hold on to it for a little longer ... You might find in a few years time that the flat increases, and your mortgage decreases, and then the flat would pay it off altogether.

Hoploz

What's the lease like? By which I mean how long left? Lots of people ask questions on here about problems with leases preventing them buy or sell at good aren't value, if the lease is 80 years or lower.

Stbridig

We are the freeholders for our flat and the one upstairs it's not a block just these two flats together.
At the moment we have a great tenant we rented it to him for less than the going rate because he is decorating it etc, could be a disaster I suppose, but so far much better than the previous tenants.
Thankyou all for your advice and time, I think what has come out of this for me is that we need to get ourselves a bit more clued up, we are just drifting along mostly because we both work long hours shifts etc and we need to make time to properly consider some of the points you have raised.