Sell or rent out? Heart over head we think

mebedforduk

Hi Bendy

Currently living in Cottage but  75% of belongings are now at sensible house. The idea was that it looks more appealing as a lived in house rather than an empty cold show home. Of course now its looking the best it ever has

Sensible ( but very ugly house) - Apart from now containing lots of our junk we have been very slowly doing it up. So new elecs, heating plumbing etc
The guy who built it never quite finished so although he died 20 years ago his tools and buckets of mixed up plaster were still as he left them. Some rooms left as bare plaster or plasterboard, skirting missing, cheap nasty government grant UPVC windows that we will be replacing.
We now have the annexe finished along with Office, couple of bedrooms, plant room and a temporary kitchen

So not ready for rental market as its stands but the idea has crossed our minds

Bendy_House

So in theory you could make either your main home, sell it, not pay CGT, and move in to the other?

Or, you have a rough idea how much you could rent your cottage out for, but what about the Ugly one?! Presumably a lot more?

Being a private landlord isn't always a horrible task, tho' of course it can become so. I know a couple of folk - one in London, and one in the South West - who manage their own rental property, carefully vet the tenants from the local area (references, and - with one -  a guarantor), and rent their places out for what must be at least 15% below the market rate. They can do this as their remaining mortgages on it are low, and the rent still provides a small but helpful profit each month.

The tenants in both cases are amazing - the SW one was given a free month's rent, and fully decorated the place to make it look better than ever - it is truly immaculate, even tho' decorated, er, quite boldly. The lady is stupidly house-proud, and her child goes to the nearby primary school; she knows she has a very good deal, and is genuinely grateful.

The London one has 4 bedrooms, so some tenants do come and go, but there's a grateful core of long-term tenants there who are protective of 'their' place, know they have a good deal, and won't let a miscreant tenant spoil it for them (the last one - an arrogant weed-head who started to go out with another tenant, persuaded her to move in to his room and then sub-let her room - was shopped by the other tenants, and provided the evidence which allowed my friend to evict him).

These are ideal scenarios, of course! But in both cases, tenants and LL are very content.

mebedforduk

Hi

Cottage would be around £900/month
Ugly, anything from 2-3K/ month  

Ugly is a very one off odd ball of a house. Dead end track with only a few houses on the track, set in .75 acre plot on top of a hill overlooking a nature reserve and valley. Woodland to the other side. 4 very big bedrooms with internal GF annexe + another GF bedroom. Oversized rooms thoughout ie Utlity room as a guide is 5m by 5m. 

There are very very few rentals advertised around here which makes me think they either have good long term tenants, or there is a waiting list.

If we could get the perfect tenant it would make the decision very easy. The money is in something that is semi protected from inflation and as you say either can be our main residence

Stamp duty reclaim of 16K does have an influence but would be offset in rent / value increase

Bendy_House

mebedforduk said:

Hi

Cottage would be around £900/month
Ugly, anything from 2-3K/ month  

Ugly is a very one off odd ball of a house. Dead end track with only a few houses on the track, set in .75 acre plot on top of a hill overlooking a nature reserve and valley. Woodland to the other side. 4 very big bedrooms with internal GF annexe + another GF bedroom. Oversized rooms thoughout ie Utlity room as a guide is 5m by 5m. 

There are very very few rentals advertised around here which makes me think they either have good long term tenants, or there is a waiting list.

If we could get the perfect tenant it would make the decision very easy. The money is in something that is semi protected from inflation and as you say either can be our main residence

Stamp duty reclaim of 16K does have an influence but would be offset in rent / value increase

Wow, ugly house sounds amazing! But ugly :-)

Is your choice 'simply' down to which one of these two to live in, and then what to do with the other? Ie, you are not considering selling both and moving away from that area?

The ugly house sounds like an amazing asset, and income generator. The cottage just sounds amazing...

Just trying to feel out what my initial considerations would be.

Ok, I wouldn't sell the cottage, because you have fallen back in love with it again. Live in it until this changes, or something else forces a move. Then examine your options again.

I wouldn't sell the !!!!!! house - unless, possibly, it was currently down as my main residence so I wouldn't pay CGT on it, and you'd be 'happy' to get shot of it with no regrets, and pocket and use the cash. If the !!!!!! isn't your 'main' residence', then I wouldn't sell. If the !!!!!! is your main residence, but you have no long-term loyalty or draw to it - ie, it is purely an 'asset' - then I think I would consider selling it now, as the 'chances' are that house prices will level off or fall, and interest rates will remain highish for the medium term. Ie, a cynical judgement that you'll be selling it at its highest value for the foreseeable future, coupled with gaining a useful 3+% return on the money from the sale.

BUT, of COURSE, "cynical judgement" could equally mean "completely wrong". (As it has been for the past few years.)

The decision to sell the !!!!!! - provided no CGT - will likely be significantly made easier if you really, really do not want to be a LL. Or, if you are happy to rent it out, but equally happy to hand over 10+% to a management company.

A Q - what do you want from !!!!!! medium or long term? What purpose will it serve you? Do you NEED it (eg for large family visits)? Do you WANT it for any valid reason other than as an asset?

In your position, I think - if really uncertain at the moment - what I would do is to rent out !!!!!!, probably manage it myself (I'm thinking that anyone who can afford £2-3k pm is going to be pretty 'professional', so surely less irresponsible?), and use the income to run the cottage without worries about heating costs and trivial stuff like that... :-)

Ie, enjoy the cottage for as long as you want, and delay any decision. Also enjoy the added income...

(Your cottage doesn't have enough land to build a log cabin in it, so house visitors and family?)

MrCarrot

I can only speak from my experience.  We have a lovely house, but we have outgrown it now.

My plan was to always save up enough to buy a bigger house without a mortgage, and keep my original house and let it out.

Needless to say, things don't always go to plan.  I am now selling the original house and we are taking out a small mortgage on a new one.

In the end I decided to let go of the letting idea because:

1) I would pay the second home tax on the bigger, more expensive property.

2) Whilst the numbers work when I have a tenant, they become pretty scary if I go through a period of not having a tenant.  I'm also self employed, so the whole thing feels like a gamble.

3) As someone else pointed out above, landlords were rendered powerless during the pandemic.

4) I'm sentimental and would like to keep my original house, but perhaps it's just as well that I don't, because there's a good chance a tenant would not look after it as well as we have.

I might consider saving up and buying a buy to let in the future, but for now I've played it safe and I'm taking the equity out of our old property.

hazyjo

Ugly houses can be made beautiful! Sounds really lovely, what's so ugly about it?

mebedforduk

Morning all

Back from quick walk with Dog, she was no help as usual apart from saying there is always fresh Deer poo at Ugly house to eat

Bendy-
Ugly is second home with Cottage still as main residence. So we could finish the tart up and put back on the market. So pay CGT and lose the second home 16K stamp duty we currently can still claim.
Or as you say finish tart and then Rent it out. Ride out the dip in the market and put it back up for sale

We have 5 grown up kids between us who turn up with partners so thats 10 + us two + MIL likes to stay uninvited for 4 weeks at Xmas. This was part of the draw to buy Ugly in the first place ie future proofing for parking for 8 cars and grandkids at some point

No spare land at cottage but nice courtyard garden that the office doors open out into where I am typing at the moment

Carrot
I think your point 4 rings very true with us. Cottage is a home with tears laughter and a security blanket for the kids even at their age
we would hat to see it wrecked by a  tenant ( Then again our ex Vicarage has had all its fancy timber barge boards ripped off and UPVC everywhere)

Hazy
Where do I start
Image a large & very tall two storey house looks a little barn like, now add single storey off shoots to three side each with 1200mm wide Australian style soffits/ canopies
Bottom half of house rendered but top half black painted blocks as he ran out of money to clad
Large grand entrance hall with stairs leading up ( Think Titanic stairs but only one half). But where the entrance door should be he fitted 3 tiny windows in a row. You have to enter a side door, walk through a room to appear in one of the corridors leading off the entrance hall
High painted and tiled block walls outside off the boot room to create a "Spanish" garden

Then odd balls like:
Dead end galleried landing that takes you a window thats too high to see out of
Airing cupboard thats 8foot by 6foot
" Cold room "  7.5m by 4.5m which serves no purpose whatsoever apart from fantastic views to 3 sides ( It will be our new Kitchen)
Piano room - A room build just for a single piano

His son says he wanted to build Southfork - instead he built a miss match of many styles

Very long wide landing , 40 foot +  just ready for a little girl on a trike to appear at 3 am!

On the plus side
Fantastic views for as far as you can see with just one house in the valley
Deers and wildlife in the garden (Think Centerparcs)
Building plot can be sliced off one end for granny annexe or cash generator




 

Bendy_House

Wow, ugly is sounding amazing!
Could someone with an 'eye' - is that you? - work out an exterior revamp that makes it all look a more coherent grand design?

Just HOW important is it to keep Ugly free for family and friends? Or, is the annexe large enough to do this on a smaller scale, allowing the main house to be rented out?

I have to say, my gut would probably direct me to:

Live in lovely cottage for as long as you love it, and it's practical. When that's no longer the case, then make the move.

Finish Ugly, but rent it out and don't sell - for the time being at least. Keep the annexe separate and free if this is possible, so fams and friends can still visit (in smaller doses).

Live happily. And with the income from Ugly keeping the cottage warm.

When circumstances change - when the cottage dream is spent, or you wish to move away - sell the cottage (main home, no CGT) and either move in to the Ugly, or perhaps just the annexe - either way, make it your main residence. Stay there as you make your plans, whilst buying elsewhere if that is what it entails. 

When you are ready to move, then sell or continue to rent out Ugly. Hopefully selling would also mean no CGT, but I don't know the required circumstances for this - time scales, etc.

What a terrible dilemma to be in...

mebedforduk

Hi Bendy

Yes a very first world problem!

Architect friend has come up with schemes that with 100K spent would turn into a £1M +. Selling the Cottage as was the intention would fund this without having to touch our pot

Annexe is within the house, it has its own front door and garden but strangely shares a Jack and Jill bathroom with the main house.  But you can easily split the bathroom into two ( its about 4.5 by 4.5m) so one for house one for Annexe. Ugly also has family bathroom upstairs and ensuite and a a downstairs cloakroom already.

Been up to Ugly today
Went through to lounge and opened up the french doors (three sets off this room). Stepped outside..............
View of at least 10 miles right to the horizon. Not a sound, nothing, zilch, no traffic, not even a distant rumble, not a single man made object to see (dismiss the house down in the valley) Buzzards circling overhead but thats it.

Cottage lovely
Ok lets rent out Ugly

Ugly lovely
Ok lets rent out Cottage

Sell Cottage
Ok Mr /Mrs Sensible but , but, but,its perfect for just the two of us

Sell Ugly
Its the house many people dream of