Should I sell for a loss and use sale money as deposit for next property?

Theresonly1

housebuyer143 said:

If you keep it, you will incur additional 3%or 4% stamp duty on your next purchase. As it's likely to be a big property that will cost you into the tens of thousands. That's a real loss. 
For that reason j don't suggest you rent it. If you want to move I would reluctantly take the loss and move on.

That's true. Never thought of that actually. Thinking about it the additional SDLT on next purchase will likely equate if not more than the loss i would incur by selling.

Playing devil's advocate, If I do rent it out, then surely the rent will pay the remaining mortgage off wouldn't it & after x number of years later once that mortgage paid itself out, I would just be raking the rent in as profit in the long term? And on top of that I would have additional asset...

jj_43

Typically not. Buy to let relies on capital gains and as your flat has not seen this it wouldn’t be a great investment.
my rule of thumb is that it takes one or two property cycles to show growth for new builds, they are not good investments, but nice homes.

user1977

The loss in value of your flat has already happened. If property prices increase generally (which they will do in the long term anyway), you may as well have your equity in your next property rather than your old one.

Sistergold

If I bought a property for £245k and now need to sell it for £215k so £30k devaluation, stayed in it for 7yrs then I would not consider it a “loss” at all. If you had not bought you would have still payed to stay somewhere and still “lost” the rent. For me a home is a home whatever I buy it for is “never too much” and whatever I sell for it even if it’s less is “never a loss”. If I bought it to rent out then well it would have been a loss and a bad investment. 

So if I were you unless you just want to go into buy to let then I would not keep the flat even if it’s selling for less. That £30k is surely reduced by the rent you would have needed to pay elsewhere? You did enjoy living in the flat, had no fear of being asked to leave by landlord etc, all that is priceless in my books. 

Nothing wrong in renting out the flat though but that’s a different kettle of fish. 

Schwarzwald

Sistergold said:

If I bought a property for £245k and now need to sell it for £215k so £30k devaluation, stayed in it for 7yrs then I would not consider it a “loss” at all. If you had not bought you would have still payed to stay somewhere and still “lost” the rent. For me a home is a home whatever I buy it for is “never too much” and whatever I sell for it even if it’s less is “never a loss”. If I bought it to rent out then well it would have been a loss and a bad investment. 

That might how you “feel” about it, but even without running the numbers, purely economically speaking he might had been better off renting that flat for those 7 years. The loss alone plus stamp duty alone are quite a significant chunk, leave alone opportunity costs of the deposit over since 2015.
however, you might have emotionally a good time in the flat, so yes maybe was still “worth” it overall.

on your decision:
probably would wait to see if there is a stamp duty cut coming.

1) if you have sufficient deposit for your next property without needing to sell and stamp duty cuts coming, might wanna keep it.

2) if you need the equity for your new deposit and no stamp duty cuts coming, probably would sell.

generally speaking, try to learn from your mistakes why you lost money on the first property so you can make some up again in the next purchase.

silvercar

Depends on the numbers for the the new place. Do you need the equity in this flat for your deposit?

Calculate the likely yield on the 1 bed flat. As an income you want the gross yield to be 3%+ otherwise you may as well sell up and use the money elsewhere. If you used the money to reduce the mortgage on your new place then you calculate the mortgage interest on that amount and see if the flat produces that as a rental.

if you feel there is capital growth potential, from the new low base of the current value, and you are prepared to wait long term for that, then you only need it to “wash its own hands” ie the rental income cover all costs.”

Do be aware of SDLT on the new place as a consequence of already being an owner and the hmrc treatment of mortgage interest on rental income.

lookstraightahead

Sell and move on.

prices go down as well as up which is why you shouldn't always look at property as an investment.

I've been a landlord (years and years ago) with a one bed flat. It was easy then. Wouldn't do it now.

Zerforax

Just think of it as having spent 30k on rent for the last 7 years.

Your circumstances have changed and you need a bigger house so may as well sell and get what you need for now/the future.

Sarah1Mitty2

Mr.Generous said:

How on earth can you lose £30k on a 1 bed?? They are good landlord properties, plenty of demand round my neck of the woods. When did you buy and how long have you had it?

Because people can`t afford the monthly mortgage payments now, because people don`t want to be landlords now, because more and more young people are staying at home now, because Uni`s build their own accommodation now etc. etc. etc.

dimbo61

Another Vote for sell and move on.
I have No idea if the figures stack up and being a Landlord is no picnic in the park !
If you keep the flat then you will pay extra 3% stamp duty which would be the rent for 1/2 years.
You need to get the property ready for the rental market and comply with all the laws, rules and regs.
Paying a lettings agents 8/10% plus VAT
Doing a tax return and losing money every month when the mortgage and other costs exceed the rent.
Sell and put the biggest deposit down you can and get on with life