Should i Sell or Rent my flat?

Barry1960

Hello everyone,

I'm looking for some advice on what to do with a property I own (no mortgage). Basically should I let it out (via an agent), or sell it?

Firstly, a little background:
The property is used to be my main residence but I got married and moved away from Worcester, so let it out the flat to pay the mortgage (as it was a bad time to sell) - I never made a lot on it, but it paid for itself.

About two years ago it became vacant and needed a total refurb. So, I decided to sell it to someone who is in the business of letting properties.

He offered me a fair price for the flat in the state it was in. I agreed to reimburse him for any refurbishment costs, should I decide not to sell.
I also agreed to let him move a tenant in to avoid council tax and recoup some money early - he agreed to give me some of the income (which he has been doing for about 18 months.).

Now, if the sale had gone ahead, I would have invested the money and/or paid off my mortgage.
At the time, the sums seemed to make sense and I didn't want the possible complications of being a landlord (even via an agent).

However, the buyer encountered various problems (mostly unrelated to this sale) and so far, until recently nothing has happened.

Things are beginning to move now, but after so much time has gone by it doesn't seem such a good deal now so I'm having second thoughts. (No contracts have been exchanged).


Here are some more details.

The flat is a 1-bedroom upstairs flat/maisonette in a not particularly great area of Worcester (WR4).
It is worth approx £45k (for morgage purposes, after refurb, which has been done).
It is leasehold, with about 62 years remaining, so I dont expect its value to go up (not many lenders will consider it).
I consider its value irrelevant if I'm going to let it.

I have been offered £42.5k on it (he paid about £6k to refurb, so that's probably fair).
There are currently tenants in the flat paying approx £400pm I think.
(I don't know if I could let it for this, but presume I could get close, but of course I'd have to pay an agent. Anyway I'd suppose the rent would go up over time).

The mortgage on my current house is £21K at 4.7% SVR (interest only).
(House is worth at least £90k, I should perhaps remortgage for a lower rate but same term, even tho I only have 6.5 years to go).

Now, assuming that I have about £41K from the sale, I could invest £20k in my pension or an S+S ISA (I've used none of this year's allowance) and pay off the mortgage with the rest (or invest it instead).

Or, I could decide not to sell, and just enjoy the income. I reach State Pension Age in early 2026. I'm a basic rate taxpayer and don't expect to have a huge pension.
Of course I'd have make arrangements to reimburse the 'buyer' (allowing a bit for net income he's already received). I have about 4.5k handy.

So, should I sell or should I rent? I would value your opinions.

Sorry this ended up so long, I DID try to be brief .

00ec25

so, legally speaking, the "buyer" is the landlord of the current tenant. Is that tenant aware and willing to leave?

you think the rent is 400pcm on a 1 bed flat "worth" 42.5 so an 11% gross yield.

Your current mortgage is costing you £987 pa interest and is frankly a chicken feed sum at "only" 21k but you say it is interest only, so with 9 years to go until state retirement age and crucially with only 6.5 years left on the mortgage how did you originally intend to pay it off ?

Re-mortgaging, given your age, will not be easy and the sum required may actually be less than the minimum amount some lenders will loan anyway.

your repeated use of "by an agent" suggests very strongly that you have no interest in being a LL. The fact that someone else paid for the refurb suggests you have no money (or appetite?) for riding out the financial ups and downs of dealing with tenants. Big repair bill - who are you going to call to give you the money to pay for it? Not ghostbusters I hope

Barry1960

I would assume it's not a particularly long notice period. I would not necessarily expect the tenant to leave in any great hurry. Possibly I could even use the 'buyer' as an agent for a while, as he is in the letting business.
Of course, I haven't discussed this yet.

I have a separate endowment, which although it's performing poorly should pay off the balance (esp as I'm still overpaying the mortgage).

I DO have about £5K easily obtainable funds.

You are correct in that I have no interest in being a LL however. For a start, distance would be a problem.
However, I would not be totally reliant on the rental income and would expect to put a good bit of it away to cover repairs etc. The main question is, would investing my £40K get even close to the return on the flat? Although, of course, 'A bird in the hand...'

Cakeguts

What are you going to do about the only 62 years left on the lease? That will affect the price and whether anyone can get a mortgage.

Barry1960

The buyer has found a mortgage lender apparently (I think they came up with the £45K valuation). I understand that if I do not sell it now I would probably have to keep it for income.

Barry1960

Rather than leave this (admittedly now dead) thread hanging... I sold the flat and am fairly happy with my decision. Thank you for those of you who responded; the questions actually did help me make my mind up!

AnotherJoe

Sounds like the best idea, removes a lot if hassle and the income you'll now get is the mortgage you aren't paying (I presume you paid it if that's a terrible interest rate) plus additional contributions to your pension you can make.