In agony over selling or sticking with sole BTL

mrsmumbles

I have paid the solicitor fees, land tax, stamp duty, replaced a ceiling, built a garden office and wired it in.
Anything else I can throw in the pot?!

mrsmumbles

We have block insurance and I have my insurance, also in NLA.

mrsmumbles

Yearly rent, on paper is £7500. If I keep it, this could rise over the next few years to 14400 or thereabouts. But if we have a juicy global meltdown, this would not be happening....

AdrianC

mrsmumbles wrote: »

My btl mortgage repayment is £375 per month. Rent is £1000 so the profit is £625 a month.

I think we might be forgetting other expenses there...

Husband and I could pay it all off if things got hairy with interest rate rises in two years, but surely that is not the principle of buy to let?

Ooof. Where to start?

Don't confuse leveraged investments with running a residential lettings business.

If you need to leverage, then ensure that your return outweighs the cost of borrowing.
Borrow where it's cheapest, taking proper account of all tax factors - and remember the changing tax rules for your mortgage interest.
And NEVER rely on a rising market in the underlying asset - work your numbers on the rental yield alone.

Then I think: in two hears, you’d own this great flat!

You own it now. You've owned it since the day you bought it. You just owe a lot of money secured against it...

Also if you own the property outright and escape fate rise stress, wouldn’t you pay more tax when they bring in the flat 20% rate because your debts aren't ‘there’ and your profits are bigger?

No. The tax changes make leveraged BtL less attractive, not more, by reducing the offset of mortgage interest for higher-rate taxpayers.

(I wish I had listened in Maths lessons instead of drawing noughts and crosses on my mate’s arms.)

It's never too late to learn basic arithmetic, and how to apply it. It's kinda essential for running any kind of business successfully...

mrsmumbles

So I just did the yield calculator at Charcol and it reckons 8.2%!!

mrsmumbles

No, it must be 4 as they are using total not net rent. I would love 1000 a month, but do not net this. With the actual profit of net rent, it is 4%. Hmmm.

GDB2222

mrsmumbles wrote: »

No, it must be 4 as they are using total not net rent. I would love 1000 a month, but do not net this. With the actual profit of net rent, it is 4%. Hmmm.

The gross yield is 4%, before allowing for any expenses. It's a simple calculation. 12/3 = 4.

I have no idea how Charcol do their figures, to end up with 8.2.

Bear in mind that the important capital value is what the property is worth now, not what you paid for it.

getmore4less

I thought your mortgage was repayment?

For the business you just count the interest.
The capital part is saving/equity creation.

7% yield is based on the cash you would get if you sold.

Mortgage interest and costs reduce that.

Can you find an investment that will do better?

chucknorris

mrsmumbles wrote: »

chuck, yep you are right...guess who spent most of it clearing the jungle instead!
Plus major guilt issues with good tenant.
Plus family illness.
Plus waiting for election and Brexeeeek outcomes.

Now it all looks good. I then realised this week how impossible it will be to move back there and offset eleven years of rental. Stuff it, time to sell. Can I get this all done in three months?

It is possible, but it would be a real challenge, getting your tenants out and selling in time would be difficult, the exchange date is the critical date (not completion). Obviously you could try and sell to an investor with your tenants in situ, but that would be to a smaller market.

mrsmumbles

Agreed...what a wally I have been for delaying. Ok will approach the tenant, would be great of they bought it. Will also talk to five agents first to gage the market and haggle best deal, then off we go.
Lord knows what I am going to do if I do not sell and he wants some sort of renumeration for the hassle etc and a whole new contract. As it would have to carry a hefty rent rise and us having the statutory periodic suits me better. But understandably he would want more certainty if it is late March and a no sale situation. A new AST would be affected by the section 21 change, wouldn’t it, because I read on some .gov website that if the tenancy began on or before 2015, a tenant could still be served an s21, but of we did a new contract next spring, there is far more security of tenure?