Landlord - should I sell and reinvest in S+S or keep BTL

ap2048

I am a 38 year old NHS consultant who became an accidental landlord in 2017 and bought my current home which I bought in December 2019. I paid the extra 3% stamp duty when I bought my current home (extra £10000). The three years to claim this back if I sell my rental property expires at the end of this year. I am thinking of selling the rental property and investing the money in S+S (and claiming the £10,000 extra stamp duty I paid). My rental property is a 2 bed flat in a nice area of Bristol which rents out very easily to professional couples. Never had any issues with tenants.

My current salary earnings are £93,000 plus approx £7,000 from additional work I do. I pay into the NHS pension and I pay my full allowances every year into a S+S ISA/lifetime ISA (approx have £100,000). I also pay additional amounts in my NHS pension via early retirement buy out. However, I am reluctant to pay any more into my pension due to the annual allowance/lifetime allowance limits. I do not wish to breach these due to the punative taxes charges if you go above these amounts.

I realise that there are many benefits of S+S including favourable tax (including being able to use each years' capital gains tax allowance and dividend allowance), diversification, more liquid asset, potentially less time consuming and lower running costs. However, the flat provides a regular income which could be useful if I am unable to work or as an addition to my pension once I retire (I do not have life insurance or salary protection because my living costs are low and I do no thave any dependants). I currently invest the rent into S+S so having both property and S+S in the longer term might help to diversify my portfolio in the longer term (but not at the present as the rental property outweights the value of S+S I hold).

I would be grateful for forum members' thoughts about how they would proceed if they were in my shoes

TBG01

So you've benefited from that rental income for three years, but only just now realised you're an accidental landlord?

babyblade41

Looking forward to see the incoming "accidental Landlord"  replies 

lookstraightahead

For clarity you are a landlord - I know you're probably using the term as you happened upon the idea by circumstance, but there's nothing accidental about it. Might want to change your heading as it winds people up

grumiofoundation

Are you sure you are due the +3% refund - the property you dispose of has to be a former home? Did you live in the (now rental) property in the 3 years leading up to December 2019?

If not you will not be due a refund of the +3% SDLT.


As above he term 'accidental' is not really appropriate - I assume you have complied with all the rules and regulations required of you as a landlord?


What yield do you actually get on the property after taxes?

Thrugelmir

Is letting the flat tax efficient (after all other costs are factored in as well)?  

ProDave

You are like me a reluctant landlord (would have preferred to sell but could not so let it) NOT an accidental landlord.

As the market is better now, if you still don't want to be a landlord, sell it.  But that assumes you have vacant possession (that is the only reason I am not selling right now)

ap2048

Apologies everyone - titled changed. Yes I lived in the property previously so am due to the 3% stamp duty back. The yield is approximately 4% before taxes and costs, more like 2.2% after taxes and costs. In addition I am getting close to the £100,000 threshold which means that I will start losing my tax personal allowance next year.

ap2048

I have complied with all landlord regulations as well.

Mahsroh

ProDave said:

You are like me a reluctant landlord (would have preferred to sell but could not so let it) NOT an accidental landlord.

As the market is better now, if you still don't want to be a landlord, sell it.  But that assumes you have vacant possession (that is the only reason I am not selling right now)

Why do you need vacant possession? I sold mine to an investor with a tenant insitu. In the current market I wasn't sure of potential buyers and it suited all three parties. 

1. I sell the house and continue earning rent until Completion. No council tax bills / utllity bills etc. to cover during vacant period.
2. The buyer starts earning rent on day one with a sitting tenant with no tenant finding fees to pay out to Letting Agents etc. 
3. The tenant gets to remain at the property. 

It was win/win/win. I *maybe* ended up selling for slightly less than I would've done had I sold to a residential buyer but any difference in price was easily offset by continued rental income and lack of 6months+ of costs during vacant possession. I was also fortunate to have a very understanding / accommodating tenant who was happy to facilitate viewings. 

I too was a "reluctant" landlord (relocated for work whilst in negative equity so couldn't afford to sell). 

Mahsroh

Should add to the above that I was originally reluctant to sell with tenants insitu but decided for it after getting advice / guidance from the good people on this forum! I thought it would be fraught with difficulties, but other than a few extra enquiries from the buyers solicitor in relation to the existing tenancy and the need to provide so extra paperwork over and above what you would ordinarily provide (tenancy agreement, TDS certificate, EICR, Gas safety cert etc.) it really wasn't any more difficult that a standard transaction. On completion I put the two letting agents in touch with each other and they arranged the transfer of the tenants deposit between them.