Doing the right thing

gazfocus

Sort of related to my other thread, but just wondering, how do you know you’re doing the right thing when selling a house?

To give some background, my wife and I  have a 4 bed detached house that we rent out. It was our family home at one point and we are now selling the house. Accepted an offer within a week of it being listed (one of 3 offers) and all seems to be going through fine. 

We decided that we would buy a 3 bed semi in a seaside town with the equity from the sale so don’t need a mortgage, and have it as a holiday let. The 3 bed semi is the nicest house we’ve seen in this particular area within our budget. 

I’m now having second thoughts about selling and wondering whether the better investment would be keeping the 4 bed detached house instead. This would require a change of mortgage most likely but of course, my wife wants the holiday let and wants rid of the detached house. 

Ultimately, the long term goal is to sell whatever house(s) we have at the time to give us the deposit for our forever home so there’s not going to be any emotional attachment to either house, but I’m really stumped on what to do. 

I don’t want to mess the buyers (or our vendor) about but at the same time, I’ve tried shaking the feeling that we are making a mistake and it’s just not going anywhere. 

GDB2222

For the last three years, there’s been a boom in staycationing, but I think that is going to unboom again. The season is short and the weather is unpredictable. Are you sure about the business you plan to start running?

Why is that preferable to the present investment?

Flugelhorn

If I was going for a holiday let I would go for the fanciest I could get rather than the largest,  and do it up to high spec. Propety near me in Somerset town is let a very large % of the year, very well appointed even though not in a holiday place

p00hsticks

Personally I wouldn't be buying a holiday let now unless I was both prepared to service it myself and really wanted to use it myself at least some of the year. 

I live in a popular holiday location and I think the staycation bubble round here has burst - there are loads of holiday lets coming on to the market and not selling. And the locals I know who have them are continually moaning about how difficult and costly it is to get someone reliable to come in and service the place at every changeover.  

gazfocus

GDB2222 said:

For the last three years, there’s been a boom in staycationing, but I think that is going to unboom again. The season is short and the weather is unpredictable. Are you sure about the business you plan to start running?

Why is that preferable to the present investment?

Apologies, I should have said, the current house (that we are selling), is not in a seaside town so it would be rented out on an AST instead of a holiday let. 

There’s no specific preference as such but the reason we are thinking of holiday let vs long term rental is more down to the ease of selling the house when we are ready to buy our forever house in the future. 

gazfocus

p00hsticks said:

Personally I wouldn't be buying a holiday let now unless I was both prepared to service it myself and really wanted to use it myself at least some of the year. 

I live in a popular holiday location and I think the staycation bubble round here has burst - there are loads of holiday lets coming on to the market and not selling. And the locals I know who have them are continually moaning about how difficult and costly it is to get someone reliable to come in and service the place at every changeover.  

We would be servicing it ourselves and the attraction is being able to use the house ourselves for holidays. However, on the other hand, if we were to rent our current house for £1400 a month, that’d pay for a pretty decent holiday when we want one, hence why I’m struggling with the decision haha. 

GDB2222

gazfocus said:

GDB2222 said:

For the last three years, there’s been a boom in staycationing, but I think that is going to unboom again. The season is short and the weather is unpredictable. Are you sure about the business you plan to start running?

Why is that preferable to the present investment?

Apologies, I should have said, the current house (that we are selling), is not in a seaside town so it would be rented out on an AST instead of a holiday let. 

There’s no specific preference as such. 

My point is that the current house is let 12 months of the year, whereas the holiday let is likely to be empty a lot of the time. There has to be a carefully researched business plan for the holiday let, not just some emotional preference. Unless, of course, you just want a holiday home and are prepared to let it out a few times a year.

gazfocus

GDB2222 said:

gazfocus said:

GDB2222 said:

For the last three years, there’s been a boom in staycationing, but I think that is going to unboom again. The season is short and the weather is unpredictable. Are you sure about the business you plan to start running?

Why is that preferable to the present investment?

Apologies, I should have said, the current house (that we are selling), is not in a seaside town so it would be rented out on an AST instead of a holiday let. 

There’s no specific preference as such. 

My point is that the current house is let 12 months of the year, whereas the holiday let is likely to be empty a lot of the time. There has to be a carefully researched business plan for the holiday let, not just some emotional preference. Unless, of course, you just want a holiday home and are prepared to let it out a few times a year.

You’re 100% correct.

I wouldn’t say there’s any emotion preference either way to be honest. For me at least, it’s more down to what is the best investment. In my mind, the current house could rent for £17k a year. The mortgage is £7.5k a year (currently) so £9k pre tax profit. If we bought the seaside house, I doubt we would make £9k a year in bookings but should we do planB and rent it long term, that would fetch around £9k a year in rent with no mortgage to pay, so in terms of the actual income, we would be no worse off. 

My fear (if that’s the right word) is whether the future value of the current house would go up more (in percentage terms) than the future value of the seaside house and that’s why I’m having second thoughts. 

GDB2222

The way you are doing your sums, you are allowing for the mortgage interest on the larger property, although the interest rate could change of course. So, your question is essentially whether house prices will increase in future. As long as we have inflation and a rising population, the answer is yes in the long run.

dimbo61

Your trying up a lot of equity/money in your home !
If you sell it in the normal way then 100% of any profit you make selling price - mortgage owed  -  is available to spend on the next house.
Why do you want to be a Landlord ?
Is the property a good BTL investment just because you own it already ?
Higher rate tax payer ?
You talk about 9K profit after paying the mortgage ( dream on )
This government and maybe Labour as well HATE Landlords and are doing everything possible to drive them out of business.
Signed a Landlord 

gazfocus

GDB2222 said:

The way you are doing your sums, you are allowing for the mortgage interest on the larger property, although the interest rate could change of course. So, your question is essentially whether house prices will increase in future. As long as we have inflation and a rising population, the answer is yes in the long run.

Yeh, sorry, in the mortgage costs, I’m including the interest and the capital payment. The current mortgage payment is £610 per month. £160 of that is interest and the rest is capital repayment. 

So in terms of future value, say in 5 years time, even if house prices stay the same, the bigger house will have more equity in it than the seaside house as it will have had 5 years of capital repayment on the mortgage, so where there’s currently £160k equity, in 5 years time it’ll be a minimum of £187k equity. 

Now, if house prices go down, that’s a different story.