Do we keep ours to rent out for future pension

Bookworm105

buy new house (230k) with a 190k mortgage having used up all your 40k savings to do so... how do you propose to clear the outstanding 10K on the old house, or do you mean you'd need to borrow 200k, not 190k in that case?

if you need a mortgage on both properties, then wait until you speak to your mortgage broker so they can assess if you would need a Buy To let mortgage to keep the old one, as criteria for those is different to a normal residential mortgage 

FlyMeSomewhere79

Watch a few episodes of those nightmare tenants programs and see how you feel about it then because the problem is it can go really wrong and end up with a landlord being financially and emotionally broken. 

We were in a very similar position with the house we sold last year and the value of the one we wanted to buy. Because the market was slow and we really wanted to move, I pondered about renting it out so we could go but I'm glad we cut our ties with it. It's not only the worry of bad tenants, the issue might be things going around with the house or neighbours causing problems that the tennant makes your problem. 

MEM62

happygirl01 said:

My questions are;
1. Would keeping ours so we have something for the future to sell for our pension, and would renting it out be worth it after paying tax. 

Only if you want an investment that is high risk and not even remotely tax-efficient.  The risk comes from bad tenants, void periods and the risk of ever more onerous legislation.  You costs will exceed your estimates.  In addition to the income tax paid on the revenue you will have a capital gains tax bill when you sell it.  Also bear in mind that, as a landlord, you are the only party that cannot end a tenancy agreement - that can only be done by the tenant or a court.  The days of renting a property being the holy grail of retirement income are long gone.            

Albermarle

peterhjohnson said:

TBagpuss said:

If you invest into a pension then you will get extra money on top from the government -  .and when you retre, can take up to 25% tax free although you will of course pay income tax on the balance as you draw it (dependent on your total income) but don't pay CGT.

Also consider putting some of the money in a Stocks and Shares ISA. OK, there are no tax advantages going in but there is NO tax on taking money out. As a retiree with both a drawdown pension AND an ISA, I draw just enough to avoid tax from the pension and  as much from the ISA as I want :-)

However the absolute minimum tax advantage of a pension over an ISA is 6.25%. 
If you get 40% tax relief, and/or can withdraw some under the personal allowance it is a lot more.

thegreenone

Have a look at some online Calculators both on MSE and others.  I did a quick calculation on £160K (sale of house minus £10k mortgage).  Buy new house at £230K with £40k deposit and £190K mortgage, if affordable.  Put the £160K into savings (would have to be various including ISAs), compound the interest, and you could, just could, be looking at £350k in 20 years  solely from your 160k.  You would need to look at the nitty-gritty, but I wouldn't keep the original house.  Fill your pensions from earnings.  Fill your ISA's, where you can from earnings.  Without all the Landlord hassle.

miffyhugmuffin

I came across your post as I am looking at this from the other side.  We have a house we rent out, worth about £200k, mortgage free.  We've been landlords for 7 years.  In that time we have had good tenants until now, we have a nightmare one.

I am wondering if we should sell the house and thought you might be interested to hear about our experience with a similar-priced property.  The rent they pay is £950 per month.  An agency looks after the house and takes about £95 per month for this.  I consider this good value as the amount of red tape and hassle otherwise is unbelievable - I absolutely under-estimated this before becoming a landlord, it is not fun.

You need to think of the figures after tax, before tax is meaningless.  My husband and I split the profits (he is higher rate, I am lower rate), so basically 30% goes in tax. 

You WILL have void months - so factor that in.  Even with a good letting agent (or doing it yourself) the property won't always be rented out.  There are various checks on the house that have to be done, again this costs.

You are luckier in that the house is in good condition, we have had to pay for repairs.  The sad truth is our tenants live in a much better maintained house than we do as tenants expect a very high level of service these days.

We were looking at the figures recently and we made about £4k profit on the house last year.  This is a far cry from what appears to be the headline figure of £950 x 12 months, it is more in the region of £333 per month.      

We are feeling we might as well sell up, pay off the mortgage on our own home (which is costing £2k per year in interest) and put the money in ISAs.  This is so much easier than letting out a property, we would get a better return on our £200k and much less stress!

Bigphil1474

Don't forget that your house will have gone up in value in those 7 years though - a house worth £200k today might have only been £150 - £160k in 2017. Even at the upper end that's still £40k profit, equal to about £475 a month. You'll obviously have tax to pay on that though.