Time to sell rental property

MEM62

[Deleted User] said:

MEM62 said:

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.  

This should almost be a sticky post.

It's a theme that pops up on an almost daily basis and yet so few seem to grasp the concept.

BTL has risk, regulatory burden and taxation (potentially substantial bills).

Money can be put into ISA and pensions with risk to suit the investor, long established regulations that are unlikely to change much (imo) and taxation that is far less harsh (and possibly even beneficial).

I have no idea why people would choose to become (or stay) landlords in the current environment.
For the most part it doesn't make good financial sense....

Yep, people still see it as the holy grail of making money.  The costs are usually under-estimated and most forget that it is not a passive investment - you are running a business.  

I didn't do it for financial reasons.  When my now wife and I first bought a place together I was moving in with her and two teenage kids.  Now plans are always made with the best of intentions but I kept that flat, which I had owned since 1987, as a plan B in case things didn't work out.  As it happens things went really well so plan B was never needed. 

In the seven years that I rented the flat out I lost money overall.  When we bought the house the flat was valued at £320K.  The value of flats in the Heathrow at area was well supported by the airport.  By the time I sold it last year values had been hit by aviation having been on its knees through COVID, interest rates rising rapidly and many landlords offloading their portfolio.  It sold for £250K - £70k less that I would have got for it seven years earlier.  I had paid tax on the income at 40%, faced big renovation costs after a nightmare tenant trashed the place (it took a month just to get rid of the cockroaches), it took six months to get the tenant out as he refused to leave and, to top it all, I had a capital tax bill to boot.  Of course we could not foresee events to come and it is what it is.  However, based on my experience I would suggest that anyone thinking about becoming a landlord think long and hard about it.