64 and not a lot of captial. Should I sell my house and put money in savings?

rosabug

I'm 64 still in employment on a salary of £62,000. I have 3 years until retirement, but could possibly go part time and work for longer though not sure I want to do this. I was in a relationship for 20 years with someone who blocked any opportunities to buy a property and consequently we missed the boat. We luckily had a cheap and safe rental in the capital which I have rented at low cost (£850 per month) for 27 years. When we separated I lent some money from my father against my inheritance and bought a house in 2018 in a coastal town for £250,000. I paid £110,000 up front, taking on a mortgage of £140,000. In retrospect it wasn't a good buy, being inexperienced I paid the full asking price and made a decision based on how much I liked the property (it's old built in 1823), thinking I would live there some day. But I have come to feel differently about it and don't think I want to live there, I like where I live now very much, even though it's rented. Needless to say I cannot afford to buy in the capital.

I rent out the coastal property which covers my rent in my current home. I overpay on my mortgage each month quite a lot and the mortgage now has £83,000 left. The mortgage term ends in 6 years. So if I can't pay it off I'll have to sell anyway.

The house appeared to increase in value well the first few years but has now stalled. I would say it's worth 300,000 at top valuation.  £50,000 in 8 years does not seem great to me in terms of value increase, but I'm pretty hopeless at these things. Friends who live nearby say the property value in the town has gone down recently and the current climate doesn't bode well.

I have another £30,000 across an isa and a savings account. I can't seem to save much more. I will have a state pension and a teachers pension. But that's all.

I hate being a landlord. It's endless repairs and worry. I also think there may be significant problems looming - new windows, roof etc - these could wipe out my paltry savings. Ideally I want to maxamise my finances and make the most out of my position in the years I have left working and otherwise. Would it be better to sell the house now and put this money into a savings account? or buy a smaller mortgage free (newer) property to rent out? Is it worth me hanging onto the house? 

FlorayG

If I were you I would sell and buy a newer one that can be an EPC of C because that's going to become law soon. I did the same as you, I bought a gorgeous end of terrace never thinking that as it was built in the 1600s there would be endless problems. My current tenant is moving out soon and I'm going to sell it. I love it and would happily live there but as a rental it's a nightmare
Do you have tenants currently? Getting them out may be a problem

RHemmings

FlorayG said:

If I were you I would sell and buy a newer one that can be an EPC of C because that's going to become law soon. I did the same as you, I bought a gorgeous end of terrace never thinking that as it was built in the 1600s there would be endless problems. My current tenant is moving out soon and I'm going to sell it. I love it and would happily live there but as a rental it's a nightmare
Do you have tenants currently? Getting them out may be a problem

Is that a typo, or are you actually living in a property built in the 1600s? 

saajan_12

rosabug said:

We luckily had a cheap and safe rental in the capital which I have rented at low cost (£850 per month) for 27 years. When we separated I lent some money from my father against my inheritance and bought a house in 2018 in a coastal town for £250,000. I paid £110,000 up front, taking on a mortgage of £140,000. In retrospect it wasn't a good buy, being inexperienced I paid the full asking price and made a decision based on how much I liked the property (it's old built in 1823), thinking I would live there some day. But I have come to feel differently about it and don't think I want to live there, I like where I live now very much, even though it's rented. Needless to say I cannot afford to buy in the capital.

I rent out the coastal property which covers my rent in my current home. 

could you explain this - how is rent similar but the house value so different that you can't afford to buy where you rent? 

Sounds like perhaps your rent has been fixed at a low point for some time, but to offset that, you'd be paying tax on the rental income from your tenants, at 40% given your other income. 

Wondering if the difference isn't so high and you could perhaps downsize where you live but in a purchased property? 

rosabug said:

Would it be better to sell the house now and put this money into a savings account? or buy a smaller mortgage free (newer) property to rent out? Is it worth me hanging onto the house? 

How much is your rental income? From there you can work out the % return after costs, before and after tax. 

While there's a good degree get out of something that's so burdensome, the above should give an idea of whether that's a good idea from a financial perspective. 

Stubod

Not a good idea to be a single property landlord these days. Not really worth the pain, particularly with all the new legislation. I would sell it (assuming you can get the tennant out?). Then either save or invest the proceeds, or use the money to get your own house as renting is a bit of a waste of money in most cases.....IMHO.....

Herzlos

You don't like being a landlord so it seems reasonable to sell up. You may find the current tenants may even be interested and save yourself a lot of hassle.


What you do from there I don't know. I think you'd struggle to make in interest enough to pay your rent without the pot diminishing, so I'd normally suggest using the money to buy somewhere smaller to retire to, ideally without need a mortgage. But that'd mean you'd need to buy something for under £217k + any savings you can use. That your rent is 'cheap' at £850/month makes me think you're somewhere expensive.

Maybe retiring is a good opportunity to buy somewhere cheaper and move somewhere different?

rosabug

saajan_12 said:

rosabug said:

We luckily had a cheap and safe rental in the capital which I have rented at low cost (£850 per month) for 27 years. When we separated I lent some money from my father against my inheritance and bought a house in 2018 in a coastal town for £250,000. I paid £110,000 up front, taking on a mortgage of £140,000. In retrospect it wasn't a good buy, being inexperienced I paid the full asking price and made a decision based on how much I liked the property (it's old built in 1823), thinking I would live there some day. But I have come to feel differently about it and don't think I want to live there, I like where I live now very much, even though it's rented. Needless to say I cannot afford to buy in the capital.

I rent out the coastal property which covers my rent in my current home. 

could you explain this - how is rent similar but the house value so different that you can't afford to buy where you rent? 

Sounds like perhaps your rent has been fixed at a low point for some time, but to offset that, you'd be paying tax on the rental income from your tenants, at 40% given your other income. 

Wondering if the difference isn't so high and you could perhaps downsize where you live but in a purchased property? 

rosabug said:

Would it be better to sell the house now and put this money into a savings account? or buy a smaller mortgage free (newer) property to rent out? Is it worth me hanging onto the house? 

How much is your rental income? From there you can work out the % return after costs, before and after tax. 

While there's a good degree get out of something that's so burdensome, the above should give an idea of whether that's a good idea from a financial perspective. 

Thanks for the response. I live in London - I cannot even afford a one bed flat. I just happen to have a good safe deal on a long term rental in London. 

rosabug

Herzlos said:

You don't like being a landlord so it seems reasonable to sell up. You may find the current tenants may even be interested and save yourself a lot of hassle.


What you do from there I don't know. I think you'd struggle to make in interest enough to pay your rent without the pot diminishing, so I'd normally suggest using the money to buy somewhere smaller to retire to, ideally without need a mortgage. But that'd mean you'd need to buy something for under £217k + any savings you can use. That your rent is 'cheap' at £850/month makes me think you're somewhere expensive.

Maybe retiring is a good opportunity to buy somewhere cheaper and move somewhere different?

Thanks for your reply. Yes I live somewhere very expensive. it would probably cost me at least £2500 a month with a different landlord. I do not bother him with repairs and sometimes take on the expense myself of quite large things, like new kitchen cupboards. I look after the house extremely well. I really struggle with the idea of giving up this to live in a tiny property where I don't know anyone. I'm well aware I'm in a bit of a bind.

Sapindus

Do you want or need to continue living in London once you retire or would you consider moving out to a cheaper area?

rosabug

Sapindus said:

Do you want or need to continue living in London once you retire or would you consider moving out to a cheaper area?

I like my house and neighborhood a lot. I'm getting increasingly sick of wider london. I worry I would be bored anywhere else. I wouldn't know where to start with a cheaper area. I can't just live anywhere, I'm an artist and I can't live anywhere that is completely cut off from culture, but I do love nature also, so the country doesn't worry me. I grew up in essex so I can't live in a predominantly limited or working class area - I escaped that when I was 21! Any ideas?

Herzlos

Culture is everywhere and London isn't a huge trek from a lot of places if you're going occasionally.

You'll get a lot more house for your money somewhere like Birmingham or Manchester, or even Edinburgh or Dundee. There's a lot better access to nature too.

What's your plan for if/when your landlord sells up or passes it onto someone else? Would the landlord let you buy it at a reduced rate given you've at least paid off his mortgage and looked after it for 25 years?

If you do need to stay renting your current place, then I'd be sticking with renting out the one you own and setting the rent above yours. I don't think you'll get a better ROI on savings.