Time to sell rental property

advicerequired2024

Hi, 

I have a 1 bedroom flat which I rent out, doesn't make any money but keeps the mortgage covered. Last tenant was a nightmare and the property needed lots of work to get it back to a decent standard.

I live with my partner nearby in a lovely home but is getting to be too small with kids getting bigger each day so we would like to upgrade however this wont be happening for a year or two.

Should I keep renting out my 1 bed flat until we are ready to put the wheels in motion to move or should I sell now and keep the money in savings until we are ready.

Thanks 

horsewithnoname

Sounds like one of those “how long is a piece of string” questions to be honest. Hard to say which will prove the most beneficial without a crystal ball. 

Sorry to be no help at all, but good luck with it anyway!

Mark_d

I'm no fan of buy to let.  You can potentially make money over the long term in terms of capital gains - but you will be hit with extra taxes. On a day-to-day bases, since all rental income is taxable, you're lucky if it covers all the costs to keep the place running.

If you're wanting to invest for capital growth would I recommend buy to let?  No.  You'd be much better of investing in a diversified fund rather than a single property.

Selling the property would simplify your finances and mean you have a bigger deposit for your new house - so you should therefore get a better mortgage rate

Mutton_Geoff

advicerequired2024 said:

Hi, 

I have a 1 bedroom flat which I rent out, doesn't make any money but keeps the mortgage covered. Last tenant was a nightmare and the property needed lots of work to get it back to a decent standard.

I live with my partner nearby in a lovely home but is getting to be too small with kids getting bigger each day so we would like to upgrade however this wont be happening for a year or two.

Should I keep renting out my 1 bed flat until we are ready to put the wheels in motion to move or should I sell now and keep the money in savings until we are ready.

Thanks 

If it "covers the mortgage" and that mortgage is a repayment loan (rather than interest only) then surely you are making money?

Herzlos

If the flat is currently empty then it makes sense to sell it now, then when you are moving later you only need to deal with selling 1 property and if you put a new tenant in you'll find yourself restricted in how quickly you can sell it later. If they refuse to leave you could be held up for months.

Will the flat be worth enough more in 1 or 2 years when you want to move? Who knows, but you'll probably want to bias towards readiness should you stumble across the ideal house early (we moved 3 years ahead of plan because the perfect house came up in budget).

Grumpy_chap

If the BTL is currently vacant and you are considering selling within a year or so, then it would seem to make sense to sell now.

MEM62

advicerequired2024 said:

Should I keep renting out my 1 bed flat until we are ready to put the wheels in motion to move or should I sell now and keep the money in savings until we are ready.

The problem with BTL's is that they are not tax-efficient.  Add to that the other on-going costs/ fees and, as you have already discovered, the fact that a bad tenant can cost you and you can see why many landlords are selling up.  Sold my flat last years and the money is working much better for me elsewhere (sticking as much as I could into my pension and ISA kept it way from the tax man) and I don't have the hassle of being a landlord.  

Mutton_Geoff

MEM62 said:

sticking as much as I could into my pension and ISA kept it way from the tax man  

Pension contributions are tax free on the way in, but taxed on the way out. ISAs are contributed from your net (taxed) income, but tax free on withdrawal, so neither wrapper keeps it away from the tax man 

Stubod

I would sell it now while it is empty.....would be a no brainer for me....

Albermarle

Stubod said:

I would sell it now while it is empty.....would be a no brainer for me....

On the other hand if it is not empty ( it is not clear) then they will need to plan well ahead to sell it 'tenant free'. Unless they sell to another landlord maybe.

Hoenir

Mutton_Geoff said:

advicerequired2024 said:

Hi, 

I have a 1 bedroom flat which I rent out, doesn't make any money but keeps the mortgage covered. Last tenant was a nightmare and the property needed lots of work to get it back to a decent standard.

I live with my partner nearby in a lovely home but is getting to be too small with kids getting bigger each day so we would like to upgrade however this wont be happening for a year or two.

Should I keep renting out my 1 bed flat until we are ready to put the wheels in motion to move or should I sell now and keep the money in savings until we are ready.

Thanks 

If it "covers the mortgage" and that mortgage is a repayment loan (rather than interest only) then surely you are making money?

A key question. Majority of BTL's are interest only mortgages. Pre GFC the gain came from capital appreciation of the property rather than generating a decent net after tax profit once all costs were factored in.