Decisions Decisions..Should we sell or should we keep our rental property as per the original plan?

MM2002

Hi All!

My wife and I have a rental property we lived in until 8 years ago, valued now at £425k, was £250k when we started letting it, purchased by us 21 years ago for £180k, Rental income is £1400pm(should maybe be ~£200 higher imho) but have fantastic tenants that I'm sure wish to stay long term. 
We have a £200k interest only mortgage that is due renewal in sept and is going from £430 to £808 if the deals don't change (although I suspect they will.)

A 132% increase!!

Our residential property is worth around £475k, and we have £100K repayment mortgage on if, still fixed for the next 7 years(Phew!).

Selling the rental should give ~£200k equity making us mortgage free with £100k ish to invest somewhere else. We are both 52 years of age, with 2 kids(Well, 18 & 21 living at home), Wife is self employed(in a partnership) with no real pension and I have about 200k pension and a secure fair paying job, but have little spare cash at the end of each month currently.

With the CGT changes etc we are having to consider options to keep or sell, and this morning our property management team have discussed setting up a LTD Co as a further option and I am expecting a call from a company called Gateground to go through costs etc.


I really don't like the accountancy company we use, but as my wife is in a partnership(and owns 95% of the rental property as a lower rate tax payer) we feel its hard to move accountants as to not upset her business partner who doesn't wish to leave them, but they are extremely hard to get hold of and rarely give any advice on the BTL side.

The original plan was to keep the BTL as a retirement income and all was going well but with the recent changes, maybe a change of idea is required!!

What would you guys suggest? My property management people are obviously going to recommend keeping the place, and I'm worried i'm going to lose 10's of 1000's if I delay for another year.

TIA peeps

MM

TBagpuss

While it is convenient to use the same accountant for your personal and partnership txs, you don't have to. There's nothing to stop you using different accountants. They'd need to see a copy of the partnership tax return  and final account to do her personal return but that shouldn't be a problem,.

Equally, there's nothing to stop you seeking separate accountancy or tax advice from a different company in any event.

The CGT is only payable when you sell the property so if your plan is to use it as an income source you still can, unless you mean that you planned to sell when you retire and then invest the funds elsewhere for income? Either way, you will still have a fairly significant chunk of capital 

or you could sell up, pay the tax now and then invest (probably maxing out your wife's pension contributions each year from the capital would make sense, to get the tax benefit. 

MM2002

TBagpuss said:

While it is convenient to use the same accountant for your personal and partnership txs, you don't have to. There's nothing to stop you using different accountants. They'd need to see a copy of the partnership tax return  and final account to do her personal return but that shouldn't be a problem,.

Equally, there's nothing to stop you seeking separate accountancy or tax advice from a different company in any event.

The CGT is only payable when you sell the property so if your plan is to use it as an income source you still can, unless you mean that you planned to sell when you retire and then invest the funds elsewhere for income? Either way, you will still have a fairly significant chunk of capital 

or you could sell up, pay the tax now and then invest (probably maxing out your wife's pension contributions each year from the capital would make sense, to get the tax benefit. 

paying for another accountant would be doubling the costs though? Also, as for advice our accountant charges £200 per hour for the chat!!(Another reason for my unhappiness with them!)

As for CGT, the way its going, in 15-20 years when we plan to retire anything extra made between now and then would be taken as tax, so maybe invest somewhere else? Its a nightmare. I've always been employed with large firms, so never dealt with tax, maxing out contributions etc  

Thanks for your reply Bagpuss, really appreciate it. 

[Deleted User]

I am in a similar situation and will sell the BTL next year. I will hopefully pay off my own mortgage. I will also then invest the further proceeds.  A benchmark could be what return you would get from savings  ISAs at 4.15% (best current rates) vs rental yield if you keep the BTL. You will obviously not need to clear your own residential mortgage as it will be at a good rate.

MM2002

[Deleted User] said:

I am in a similar situation and will sell the BTL next year. I will hopefully pay off my own mortgage. I will also then invest the further proceeds.  A benchmark could be what return you would get from savings  ISAs at 4.15% (best current rates) vs rental yield if you keep the BTL. You will obviously not need to clear your own residential mortgage as it will be at a good rate.

I'm sure theres a lot of people in similar situations mate. If you are planning to sell then make sure you know about CGT rates that are changing for the worse next year! you may want to get that ball in motion sooner rather than later!!

As for working out rent return/house value increase vs ISA's etc, its so hard, as correct me if i'm wrong but nothing would match the return that owning a rental property has done over the past 20/30 years? 

grumiofoundation

We have a £200k interest only mortgage that is due renewal in sept and is going from £430 to £808 if the deals don't change (although I suspect they will.)

A 132% increase!!

Sorry for being pedantic but this is an 87% increase!

DietIrnBru

Perhaps gift the property to the excellent tenants? I’m sure they would appreciate a home.