Should I sell my Rental property

christinajane

Hello, 

I'm looking for some advice regarding my rental property; hopefully from people that have more experience with this type of issue or more financial know how than me.

Anyway, a bit of background: I have a house that I worked really hard to pay off the mortgage, I managed to achieve this and  a couple of years later I met my partner and we then moved into our own house with a mortgage whilst I rented out my original house. I have two mortgages now, one a buy to let (I took out some equity to pay for a the deposit on the house I live in with my partner) and one for the house I currently live in.

I have had a tenant in there since I moved out around 4 years ago now. For the most part it been fine, I do get my rent; although I never know when I am getting it and I am always on the phone to the estate agent via text around the time it is due. As of now I am up to date with the rent but the tenant owes the estate agent one months rent, with the next months rent now looming again.

Every month this creates anxiety for me because this rent supplements my part time income. I would have thought this situation would have sorted itself out in the 4 years the tenant has lived there but it really hasn't.

I am now thinking should I sell it because I can not be bothered with this constant guessing game of will I or won't I get my money on time this month or if at all. The last time I had the house valued was 2017 and it was worth between £170k - £200k, maybe now it would be worth a little more. But how easy or hard will this be with the tenant currently in there? How much stamp duty would I have to pay? I owe around £18000 on the buy to let mortgage.

Part of me thinks to sell it, removing all the anxiety and investing most if not all of it of the profit. I currently invest in the s&p500 for example. Maybe even pay off my half of the mortgage on the house I have with my partner. But this house was supposed to be my pension, I dont have a pension you see, and the other part of me is thinking I am only selling it because this tenant is a bit of an !!!!!!, he essentially pays his rent when he wants. I am not one of those greedy landlords and I have been or tried to take it in my stride but 4 years on is taking the !!!!!!. Maybe I am cutting my nose off to spite my face if I sell it. I was going to speak the estate agent tomorrow to see what they think but I do keep coming back to this idea of selling. 

I am not sure I am cut out to be a landlord now. There are too many unknowns. At least if that money is invested I can see it in my account! 

Anyway, this is quite long winded - sorry about that. But any advice on this matter would be much appreciated!

Hoenir

What's the net annual profit after tax on letting the property?

Yorkie1

Life is only going to get harder for landlords, with changes on the horizon around tenants' rights etc.  

If you choose to sell, you have two options: 1) sell as a going concern, with tenant in situ, to another landlord; 2) sell with vacant possession, i.e. tenant has left.

You will have a much bigger range of potential buyers in option 2). But further details would be needed to be able to give an opinion on whether / when you can start the process of giving notice to the tenant to leave, such as whether they are in a fixed period of a tenancy (if so, when does it end), did you protect their deposit, serve all the right documentation at the start of the tenancy, gas cert etc.

Others will be along with far more detail in due course.  What is the 'right' course of action for you will depend on a whole load of other factors, including how old you are, what sort of other provisions you both have in savings, whether you can make alternative pension provision, any plans you have for future expenditure (including children) etc.

Another option might be to consider whether it's really just this tenant which is the problem. With that history of irregular payments, you might want to consider whether you're OK keeping the property but changing the tenant.

You mention Stamp Duty. Assuming the property is in England / Wales, there will be no Stamp Duty Land Tax on sale;  that only applies on purchase. But you may have some Capital Gains Tax relating to any increase in the value of the property, with exemptions for the period you lived there as your principal residence.

christinajane

Ahh yes sorry - I meant capital gains tax not stamp duty. I got confused because I've paid stamp duty when I bought this house with partner. I think because it was classed as my second property. 

I am 44 and I have some savings and an investment but nothing to write home about. No pension, as I said, the house that im renting out is my pension so to speak. 

To be honest it is the tenant rather than the house that's the issue Obviously, if the tenant was paying when he should I wouldn't have these worries every month and I wouldn't be asking myself these questions but as it is I'm not sure how easy or difficult it is to get him out if he doesn't sort himself out. 

My worry is that one day, he's jsut gonna stop paying. He effectively has already to be fair becaue his mum paid for the last rent we received! 

He is on a month by month contract because he has been so bad at paying on time that when the initially fixed year contract was up the estate agent put him on a periodic one so I think its less notice that we have to give him? All the right documentation and certificates were served at the beginning of tenancy and his deposit is protected. Its all done properly and he's as looked after as he can be, according to.the estate agent, he barely answers his phone and ignores his txts. Hence having to get in touch with his family after multiple attempts of chasing up rent with him.

christinajane

Hoenir said:

What's the net annual profit after tax on letting the property?

Approximately, £7400ish annually after tax. 

ThisIsWeird

When did you buy this house? 
And you started to rent it out around 4 years ago?
£7.4k is pretty good after tax.
I don't know what you'd end up with after CGT if you sold - let's call it £150k. At 5% interest, that would theoretically earn you £7.5k before tax.
So, pros in keeping house - larger annual income, house increases in value. Cons - stress of being a LL. Potential maintenance costs (how old is the house)? Not having access to a nice sum if needed.

That's a layman's summation.

christinajane

Bought the house in 2012 - lived in it for about 8/9 years. I wanted to keep it instead of selling it at the time because I thought it would make up for me not having a pension and obvs I would have rental income etc until I decided to sell it when i am close to retirement. 

This tenant  though had made me think am I better off selling it now and sticking that profit into investments. 

FlorayG

Do you rent through an agent? Surely if so it's the agent's problem to get the tenant to pay on time, that's what you are paying them for.

p00hsticks

FlorayG said:

Do you rent through an agent? Surely if so it's the agent's problem to get the tenant to pay on time, that's what you are paying them for.

Very much doubt that the agent will pay the OP from their own pockets, they'll only forward what money they get from the tenant (less their cut), so at the end of the day it IS the OP's problem. 

silvercar

From what you’ve said, it is the tenant that is the problem. Serve notice and get a more reliable tenant. Also ask the agent what they think. 

FlorayG

p00hsticks said:

FlorayG said:

Do you rent through an agent? Surely if so it's the agent's problem to get the tenant to pay on time, that's what you are paying them for.

Very much doubt that the agent will pay the OP from their own pockets, they'll only forward what money they get from the tenant (less their cut), so at the end of the day it IS the OP's problem. 

At the end of the day, yes, if the agent doesn't do their job. What I'm saying is it should be the agent's job to chase the tenant for payment on time