What's the best financial act for an outright owned home that may not be needed sell/rent..etc?

AdrianC

me1000uk said:

AdrianC said:

me1000uk said:

AdrianC said:

me1000uk said:
I guess having digested everything it certainly seems like a more invested investment if that makes sense where stable income is offset by many variables. 

It's not an "investment".
You are starting and running a business...

Nice perspective to look at it this way

It's not a "perspective". It's a simple fact.

although it still feels like an investment as it is an owned asset and will be sold based on market dependent factors.

Yes, it's an asset. An asset of your lettings business.

Nearly every complication seems to be capable of being outsourced to a manager/lawyer/contractor/accountant.

Yes, of course you can pay somebody else to run your business for you.

You might even have a little bit of profit left after you've done so...

Whether theres profit or loss is for sure the 'business' side but even at break even there's an asset that could go up in value. 

It could, yes.
But it might not. It might go down.
Property values have been going up steadily for a few years, for the most part, with a rapid rise recently due to short-term conditions that are changing...

I have a genuine issue I'm trying to solve and am using all feedback including yours as best I can and it is appreciated. Calling an investment property a business isn't actually related to my question. The costs and taxes and profits and losses are still the issue whatever you call it and a decision still needs to be made! Thanks anyway.

It's an integral part of your question, because that's how you need to understand it if you're going to go ahead.

md258

If you want to be a landlord, why not mortgage this flat and buy 2 more with the money? That will give you less exposure to a single bad tenant etc and will also triple the house price increase.

I'd also say to run the numbers you did above for a few different scenarios:
500pm rent = 6000pa
- 20% letting agent fees
- 2 months void
- 20% (or more) income tax
- repairs/maintenance
- your time
= 2% per year (at a guess) = inflation
So you'd be relying purely on house price inflation for your profit (and prices could go down)
If you do make a profit, what are you going to do with it? Save up until you can buy another BTL?

Compare this to a global fund in a S&S account/ISA (20k per year)
Historic returns approx 4% above inflation
Tax incentivised (using an ISA and you can make sure you only sell £xxx per year so you don't have to pay CGT rather than all or nothing)
No risk of losing more than your original investment, even in the worst case (imagine if your flat had cladding, a major service charge bill, you'd had a non-paying tenant who trashed the place, you'd gone through the courts to evict them and then Covid means that you can't for another 18 months)
You are able to get some (any %) money back out whenever you want and don't have to sell the whole lot or you can add to it

me1000uk

Thanks for the responses. It seems overwhelmingly in favour of selling.
It certainly seems the 'easier' option to sell. Is there any rough idea as to how much fees are paid when selling? I realise this may vary judging by online, but it would be handy to have an idea. Are there any pitfalls when choosing the correct agent?
I presume there's some kind of inspections required too? e.g. fire alarms are new and according to regulation (with the certificates), and I have certificates or what electricians have done elsewhere. 
This has certainly been educational to say the least.

Slithery

me1000uk said:

I presume there's some kind of inspections required too?

If the buyer wants to do any inspections then they can pay for them.

me1000uk

thanks. I guess it's just having a ballpark figure as many websites have checklists but it's good to have a rough idea. I had some inkling that buyer would pay a fair amount of fees, but when it comes to commissions or unforeseen things, it's just to factor in my budget.

Slithery

The biggest issue with trying to sell a flat at the moment is that lenders usually require an acceptable EWS1 form. It would be worth asking your freeholder if this is available before going any further, without one you'd be looking for cash buyers only at a reduced price.

lr1277

You need an Energy Performance Certificate (EPC) either before renting or selling a property. My flat too was on the top floor and because the EPC assessor couldn't get into the loft space, they marked it down for the EPC rating. According to the on-site manager, the loft area was insulated a few years before. But all the paperwork was in storage and difficult to retrieve. I had to swallow that situation and go with a potentially lower EPC rating.

You say your loft area was boarded up as part of the refurbishment. Make sure you have any documents detailing the insulation that was installed.

me1000uk

Cheers, I will look into ESW1 as I am in Scotland so may need to see how things are treated there. In terms of loft ours is dedicated to the flat and accessible via ladder. The boarding is partial for some storage and remaining insulation is visible all round so hopefully is can be assessed.

AdrianC

Scotland makes for big differences in a lot of ways.
For letting, you need to be licenced by the local authority.
For selling, there's a whole different process, with home reports etc...

Nebulous2

You need to get quotes from solicitors for selling. I would expect you to be paying around £2.5k on a £100k property.  Home report about £500, advertising £250, estate agency 0.75% (£750) Conveyancing £500.  Most of these would be subject to VAT.  There will be some smaller additional charges as well, such as redeeming the mortgage.