Should I buy a second property? Or sell and buy?

jackharrison342

Hello all
I currently own one flat with a long term tenant of 3 years and I am looking to either buy a second property which I will live in, or to sell the existing property and buy another to live in.

I am looking for advice on the advantages and disadvantages of each option?

I have been in touch with a mortgage broker who says I can re-mortgage the current flat up to 75% (or £165,000). This makes the interest only payments £350 I receive £800 rent so this is fine.
I would have about £65,000 equity by doing this and it would enable me to put down a deposit of £55,000 on a similar property to what I have and leaves £10,000 for stamp duty and fees, as I would have to pay the 3% premium.
So I would end up with two similar flats one carrying on as it is, and the other I would live in.

The other option is to sell up and have around £115,000 to put down on another purchase to live in and avoid paying stamp duty, but also give up a monthly income.

So I guess it is a decision on whether to have two properties with 25% equity or one property with 50% equity?

Thanks in advance, look forward to any views.

theoriginalvicar

Not any easy question to answer, a few questions come to mind:-

- What are your objectives, to own your home, invest in property ?
- If you do keep 1 property for investment how would you repay the mortgage as it is currently interest only ?
- Does the current property wash it's own face, ie after management fees, maintenance costs, voids and TAX do you make a profit

jackharrison342

My objectives are on one hand to own my own property and pay off the mortgage, but also to have an income from somewhere other than work (be that property or something else). I want to work less hours eventually. I currently have no pension or other savings.
I have little costs with the current property, yes it's leashold but it's a long lease with no ground rent or charges. I could switch it to repayment and the rent would still just about cover it.

jackharrison342

any more views on the best way forward? many thanks

JimmyTheWig

Are you happy being a landlord? If so, why not stick with it?

jackharrison342

Being a landlord hasn't been too much of a problem as tenant has been helpful when it comes to problems and pays just about on time each month. I am just worried about things like stamp duty, tax changes and having debt which would rise based on interest rate increases?

JennyP

I think you have to consider capital gains tax. If you carry on letting the first flat and buy a second, then one day decide to sell the first one, you will have to pay cgt on any gain. You would now but the longer you keep it, the more it could rise in value and the more you'll have to pay. Whereas if you put all your money into your residential property, you will ultimately pay less in interest and any gain you.make is yours to keep.

On the other hand, two properties rising in value - might outweigh the extra interest.

Not sure how you stand with stamp duty either - if you have a buy to let, then buy a new property, albeit to live in, won't you pay more stamp duty?

jackharrison342

Hi Jenny, yes this is one of the issues, buying the second property would cost about £8-9000 in stamp dury