I don’t know if my flat is a good investment anymore- mortgage deal ending

Sebo027

Things that enter my mind when I read your post:

• You wrote you make cash each month currently. Do you need or rely on this money, is it going to be a problem if you aren't collecting it each month? If you don't need the income from the flat then I guess it's more of a "where's the best place to invest my money" type question.

• Property values and trends vary alot depending on where in the UK it is, and even by post code within a town. You can check your flat on Zoopla to see how it's changed over the time you have had it. But even then, who knows what will happen. 

• As was pointed out in another reply, over the longer term your tenants are chipping away at the mortgage and building equity in the property for you, assuming it's not on an interest only loan. 

• I'm not familiar with the reform bill in 2025, but, are there grants available to insulate homes? 

_Penny_Dreadful

Sebo027 said:

• I'm not familiar with the reform bill in 2025, but, are there grants available to insulate homes? 

It’s the Renters’ Reform Bill which Shelter have been campaigning for although it’s not a done deal. It seeks, amongst other things, to abolish Section 21 notices, allow tenants to have pets and require rental properties to meet at least an EPC C. Under current proposals landlords are expected to spend up to £10,000 trying to get the property to a C. If after spending £10,000 the property still doesn’t achieve a C the landlord can apply for an exemption. I haven’t heard of any grants being available for landlords. 

I suspect that as the majority of landlords are 55+ selling up to fund retirement is being accelerated due to the possibility of this bill becoming a reality. At least that’s what the tea leaves told me today. 

https://www.gov.uk/government/news/new-deal-for-private-renters-published-today

expertinmoney

Your situation is common to a lot of landlords. If you don’t like being underwater for quite a while, then yes it probably makes sense to sell - it may be a very long time before the investment becomes profitable again, and other simpler investments would do so more quickly.Investing in property isn’t really something to do as an individual these days.

Sarah1Mitty2

FredAgain said:

Schwarzwald said:

You need to consider more factors than just monthly running costs.
expected asset appreciaton?
equity yield?
transaction costs to sell / buy into new asset class?
tax advantages?
what’s your alternate use of the equity? Stocks? Bonds? Savings account?

I have looked at transaction costs, CGT, tax etc, so I guess the thing I am struggling to get my head round is the potential expected asset appreciation- I think the high rates have me panicking rather than feeling confident in the long game. I am fairly young so am experiencing these particular issues for the first time!

You can`t expect "asset appreciation" from these price levels with interest rates rising at the pace they are, rate rises are designed to reduce prices, including housing, people your age have never seen rapid rate rises or high rates, it will take some getting used to I think!

Schwarzwald

Sarah1Mitty2 said:

FredAgain said:

Schwarzwald said:

You need to consider more factors than just monthly running costs.
expected asset appreciaton?
equity yield?
transaction costs to sell / buy into new asset class?
tax advantages?
what’s your alternate use of the equity? Stocks? Bonds? Savings account?

I have looked at transaction costs, CGT, tax etc, so I guess the thing I am struggling to get my head round is the potential expected asset appreciation- I think the high rates have me panicking rather than feeling confident in the long game. I am fairly young so am experiencing these particular issues for the first time!

You can`t expect "asset appreciation" from these price levels with interest rates rising at the pace they are, rate rises are designed to reduce prices, including housing, people your age have never seen rapid rate rises or high rates, it will take some getting used to I think!

While there is obv correlation and causality between interest rates and property prices, it's also not as simple as Sarah1Mitty2 wants to make it look .... not sure what her agenda is with every fear mongering post ....

"asset appreciation" might not happen from here for some time, but obviously it can happen. the property market is far from perfect and v illiquid and influenced by many factors, including interest rates, but also government decisions which are far from rationale and much harder to predict than the (mostly rationale) decision of the central bank. So while it would be naive to believe prices always go only up and rely on it, it is fear mongering to say that you "cant expect asset appreciation" from here and it simply cant happen ...

[Deleted User]

FredAgain said:

[Deleted User] said:

Sell it to someone who wants to live there.

If you do not agree with the situation I am describing, I am not sure why you felt the need to reply to me 

You asked for advice. I gave you good advice. If you don't like it, no need to be rude.

Sarah1Mitty2

FredAgain said:

Sarah1Mitty2 said:

FredAgain said:

I have a flat as an investment but my mortgage deal ends in November and I’m not sure it is a good investment anymore. 

In November my fixed rate deal ends and based on current calculators, it will go up by between £250 - £300 a month. Potentially more if the interest rates increase more by November. There is also £170 per month service charge I pay for the building. The flat is share of freehold. 

Once the mortgage increase happens, I am likely to make a loss each month on the flat, because costs will be more than the rental income I get. I’m really already at the highest rent I can charge my tenants. 

Up until now it has been a good investment because I make money each month, and the flat itself has increased in value. But I’m worried that come November, I will start losing money monthly, esp if repairs are needed. Also, in 2025, the reform bill will mean I will need to spend money to increase my flats EPC rating to rent it out, which I imagine will cost me a couple grand in insulation. This would all be fine if I was confident the flat will continue to increase in value and offset the losses, but, with property prices dropping a little this month, and interest rates rising again, I’m worried I’m on a sinking ship. I’m worried that nearer to 2025 my flat will lose value due to the EPC rating/new rules and general price drop. 

I currently support my family financially, I am not on the breadline and do have ample savings for emergencies, but I want to maximise my income and I’m not sure the flat will do that in the coming years. 

I’m wondering if selling now before prices drop and putting the money I’d get (30k ish, low equity) from it into savings is better. But I know there will be sales fees to consider. 

Long term it is very unlikely I will be able to afford a house, which my family need, and we cannot live in the flat - so it is purely a security investment really. Though my friend has said they believe that the flat will gain value and in 5 years I will have made more still on its value than I will lose. 

Sorry long post. Any advice is appreciated!!! 

The time to sell was before rates started going up unfortunately, it will just be a headache now with low offers and down-valuations by lenders, if you give the tenant notice you might end up with an empty property and be in even more difficulty, the thing to concentrate on is getting your debt paid off as quickly as possible, could you raise extra money by taking on a second job for example?

Thank you, I had not actually thought about the potential reality of buyers not being available and the fact the flat could be left void. Which of course would make for the biggest loss of money. Unfortunately second job not an option as I do a 45 hour week in a tricky role and I think taking on anything else would kill me off! 

I perhaps need to consider whether another fixed rate deal, locked in ahead of November, or staying with tracker would give me the best outcome for payments 

FredAgain said:

Sarah1Mitty2 said:

FredAgain said:

I have a flat as an investment but my mortgage deal ends in November and I’m not sure it is a good investment anymore. 

In November my fixed rate deal ends and based on current calculators, it will go up by between £250 - £300 a month. Potentially more if the interest rates increase more by November. There is also £170 per month service charge I pay for the building. The flat is share of freehold. 

Once the mortgage increase happens, I am likely to make a loss each month on the flat, because costs will be more than the rental income I get. I’m really already at the highest rent I can charge my tenants. 

Up until now it has been a good investment because I make money each month, and the flat itself has increased in value. But I’m worried that come November, I will start losing money monthly, esp if repairs are needed. Also, in 2025, the reform bill will mean I will need to spend money to increase my flats EPC rating to rent it out, which I imagine will cost me a couple grand in insulation. This would all be fine if I was confident the flat will continue to increase in value and offset the losses, but, with property prices dropping a little this month, and interest rates rising again, I’m worried I’m on a sinking ship. I’m worried that nearer to 2025 my flat will lose value due to the EPC rating/new rules and general price drop. 

I currently support my family financially, I am not on the breadline and do have ample savings for emergencies, but I want to maximise my income and I’m not sure the flat will do that in the coming years. 

I’m wondering if selling now before prices drop and putting the money I’d get (30k ish, low equity) from it into savings is better. But I know there will be sales fees to consider. 

Long term it is very unlikely I will be able to afford a house, which my family need, and we cannot live in the flat - so it is purely a security investment really. Though my friend has said they believe that the flat will gain value and in 5 years I will have made more still on its value than I will lose. 

Sorry long post. Any advice is appreciated!!! 

The time to sell was before rates started going up unfortunately, it will just be a headache now with low offers and down-valuations by lenders, if you give the tenant notice you might end up with an empty property and be in even more difficulty, the thing to concentrate on is getting your debt paid off as quickly as possible, could you raise extra money by taking on a second job for example?

Thank you, I had not actually thought about the potential reality of buyers not being available and the fact the flat could be left void. Which of course would make for the biggest loss of money. Unfortunately second job not an option as I do a 45 hour week in a tricky role and I think taking on anything else would kill me off! 

I perhaps need to consider whether another fixed rate deal, locked in ahead of November, or staying with tracker would give me the best outcome for payments 

There are a lot less buyers around now because monthly mortgage debt costs have risen quite a lot, and if we enter a recession there may be less tenants to choose from as younger people sit it out back home at parents, don`t scare the tenant away with trying to hike the rent too much. No one can predict interest rates but if you go for the tracker and rates have to keep rising you could end up in a real mess, a better mindset might be to fix and just accept that present borrowing costs are still very low by historical standards.

newsgroupmonkey_

Schwarzwald said:

While there is obv correlation and causality between interest rates and property prices, it's also not as simple as Sarah1Mitty2 wants to make it look .... not sure what her agenda is with every fear mongering post ....

A bit of history for you. Was previously known as "crashy time" and banned I believe. Has been back since under a couple of other user names.

Sold their house in (IIRC) the mid 2000s predicting a house price crash (They may or may not be involved in the HPC site too).

Moved into rented accomodation awaiting said crash which never really happened (although clearly there was a dive in 2008 which quickly resolved itself). Never been able to get out since, so sit here all day trolling the forum telling people that their house isn't worth what they think it is, bringing doom and gloom.

Zerforax

You've pretty much hit the nail on the head why so many landlords sold their rental properties in recent times.

Sarah1Mitty2

Zerforax said:

You've pretty much hit the nail on the head why so many landlords sold their rental properties in recent times.

If they got out last year they were doing well.