Give up buy to let to keep family home?

agentcooper

Any advice on the below greatly appreciated.

I have a family home which I bought with my ex. She has now moved out into rented accommodation and the plan was to sell the house and split the proceeds. However, it has now occurred to me that its a nice house in a good location and it might be worthwhile keeping it (buying her out). In order to do this, I'd need to sell a flat I own and currently rent out. I'm not sure if this is a good move or not. My question: should I sell the flat in order to keep the house...or just sell the house, downside to a new one and keep the flat?

The numbers:

HOUSE
*Was bought for £320K with mortgage of £220K, £40K from me and £60K from ex..
*Now worth approx £450K. Mortgage remaining = £180K.
*So I think my ex's share is worth about £145K. (£450K value minus £180K mortgage = £270K, she gets 145 I get 125)

FLAT
*Was bought for £225K with mortgage of £135K and deposit of £90K..
*Now worth approx £290K. Mortgage remaining = £110K.
*Rental income currently makes a small profit after mortgage and other costs but I have to pay tax on the rental income.

So, if I sell the flat, I'll get £180K minus capital gains which I think will leave me with about £165K. I could use this to buy my ex out.

PROS - I would then have no service charges, no dealing with tenants and letting agents and I wouldn't pay tax on the rental income.

CONS - I no longer have a rental property to bring in money when I'm older (but I could buy another one in a few years)

Any advice on my best course of action? I'm sure I'm missing something obvious! Thank you in advance, Coop.

agentcooper

anyone able to help please?

AnotherJoe

Why is having a rental property "to bring in income when retired" the best way to accomplish that, and if you are finding it a hassle managing tenants now why would you want that in retirement?

agentcooper

"Why is having a rental property "to bring in income when retired" the best way to accomplish that,"

I didn't say it was. Very happy to hear suggestions that are better! I'm asking for advice on whether it is more prudent to hold on to a buy to let property or sell it to buy out my partner on our family home. If you, or anyone else on the forum, can offer any advice on that, it would be much appreciated.

dimbo61

Where are you going to live if you sell the family home ?
Where will your EX live ?
Any kids ?
Not going to rent a property yourself while owning another property

MortgageMamma

Well you've obviously put some love and money into your family home, and are clearly wishing you could keep hold of it.


I would look at this another way. What is your heart telling you to do? can you continue to love your family home or will it just remind you of your ex? What about future partners? would you expect them to live there or go off and buy something else to keep them happy?


Which scenario are you going to lose the most? Most people put more investment into their homes than rental properties.


Are you familiar with the tax changes to buy to lets?


You could always sell the buy to let but retain just enough to have a deposit for another one. Or save to buy another one at some point in the future.

agentcooper

@dimbo61 thank you for the reply.

If I sell the family home I will buy another property, using my share of the proceeds. I'm definitely not renting. However, this property will be smaller and in poorer location than my current house.

So my choice is:
a) own two smaller, cheaper properties, one of which is a buy to let
b) own one bigger, more expensive property

My ex has already moved out and into rented accommodation.

agentcooper

@MortgageMamma thank you very much for the reply!

I have no worries about the house reminding me of my ex...at least not now it's tidied up! :-)

I'm vaguely familiar with the tax changes to buy to lets, basically there's more tax to pay from now and buy to lets are less attractive, does that cover it? Is a buy to let still a great option, or should I look to sell it in any case and invest the money elsewhere?

AnotherJoe

agentcooper wrote: »

"Why is having a rental property "to bring in income when retired" the best way to accomplish that,"

I didn't say it was. Very happy to hear suggestions that are better! I'm asking for advice on whether it is more prudent to hold on to a buy to let property or sell it to buy out my partner on our family home. If you, or anyone else on the forum, can offer any advice on that, it would be much appreciated.

Investments in the stock markets, either in a pension, or outside it. There's a huge range to choose from at varying levels of risk (unlike a house which is at that one level of risk) and your money is very "liquid" (eg you can get it within minutes to hours) plus its distributed, eg its not in one particular asset (the house) which is very difficult (and expensive) to release money from,egt generally all or nothing (eg sell it).

Put it this way, if you had that money as cash woudl you look to go into the letting business with all the legal and other implications (as government progressively makes it less o fa paying proposition and adds extra laws) , or would you do something else with the money?

agentcooper

Thanks @AnotherJoe

I've always been wary of stock market investments simply due to my own lack of knowledge and the worry that if I'm badly advised, I could lose out.

I guess my logic has previously been that a BTL, once mortgage is paid off, provides a good monthly pension income and I wasn't sure there was an alternative that would lead to a similar level of income. Where would I find out about the best alternatives to BTL?

AnotherJoe

Start with Monevator.

A stock market investment is in theory no different to a house, except its more spread out, theres far more choice. Yes prices can fall, just like house prices and rise (just like house prices) and if you decide the area you bought your house in is looking dodgy its much harder to get out of than selling a few poorly performing funds. Its a bit like instead of being a landlord owning one house, you own 0.1% of a thousand so if one tenants defaults its not the end of the world. You can also have a bit of rental houses in say Japan and Germany and Switzerland and USA , rather than plumping for just the UK and your one house and hoping that the UK and the area your one house is in and the economy of that area, and your specific tenant, all do well.

There isn't an analogy (without bending over backwards) in the stockmarket to a tenant who will default on your whole income stream (yes some parts can go bad but not all of it) , smash the place up, need legal help to evict and be impossible to recover the money from. Its like a stock market investment where all your money is in a single share.

Investments also dont need gutters cleaning out, roof mending, nor does your stock broker call you up at 3am and say there's a leak or the central heating doesn't work.

There also isnt a steadily increasing set of legal requirements (some with large penalties) nor a focus on lowering the amount of money a landlord can make.