Sell or Keep BTL

Jaguar_Skills · 13 January 2019 at 8:53PM

Will try and keep this as brief as I can but hoping for some advice. I have been having a continual debate with my gf (note gf not wife yet) about the BTL we own jointly and whether to sell it or keep it.

The value is approximately £250k and we have about £118k left on mortgage.

£200k equity in our home value circa £450k

Me: Soon to be an Additional Rate Tax Payer which will mean the amount I can contribute to pension will start to taper as far as I understand it.

GF: back to working 3 days per week (our 18month old now in nursery). For 3 days per week her salary is approx £50k per annum.

I have lost interest in the BTL a little with the hassle of chasing tenants for late rent, the maintenance etc and would prefer to sell it and use the equity towards our forever home which will cost us approx £800-900k.

The other issue with not being married (at present) is that I’m still paying high tax on it and I can’t transfer it back to her without tax penalties.

She wants to keep it as an additional pension element for when we are older as the tenants are paying off the mortgage (we don’t make much profit on it other than value increase) and if we do use some of the equity for the next house, just take some out but retain the property.

I appreciate the above is quite long winded and I also appreciate the position we are in but any advice would be useful. If there are any other points that are needed for me to answer please just shout.

Thanks in advance anyone.

Thrugelmir · 13 January 2019 at 8:59PM

What impact is the tax change on mortgage interest having on the profitability of letting the property?

chucknorris · 13 January 2019 at 9:03PM

Jaguar_Skills wrote: »

Will try and keep this as brief as I can but hoping for some advice. I have been having a continual debate with my gf (note gf not wife yet) about the BTL we own jointly and whether to sell it or keep it.

The value is approximately £250k and we have about £118k left on mortgage.

£200k equity in our home value circa £450k

Me: Soon to be an Additional Rate Tax Payer which will mean the amount I can contribute to pension will start to taper as far as I understand it.

GF: back to working 3 days per week (our 18month old now in nursery). For 3 days per week her salary is approx £50k per annum.

I have lost interest in the BTL a little with the hassle of chasing tenants for late rent, the maintenance etc and would prefer to sell it and use the equity towards our forever home which will cost us approx £800-900k.

The other issue with not being married (at present) is that I’m still paying high tax on it and I can’t transfer it back to her without tax penalties.

She wants to keep it as an additional pension element for when we are older as the tenants are paying off the mortgage (we don’t make much profit on it other than value increase) and if we do use some of the equity for the next house, just take some out but retain the property.

I appreciate the above is quite long winded and I also appreciate the position we are in but any advice would be useful. If there are any other points that are needed for me to answer please just shout.

Thanks in advance anyone.

You didn't say how long that you have owned the property. I currently have 3.5 investment properties, I have had up to 5. I was very keen for the first 10 to 15 years, but now I am up to 28 years, to be honest, I really have had enough, and for both that and other reasons I have started to sell up.

I can almost guarantee you (especially if you have not owned the property for that long, and you are still fed up) that you will become even more disinterested, as time rolls by.

chucknorris · 13 January 2019 at 9:05PM

Thrugelmir wrote: »

What impact is the tax change on mortgage interest having on the profitability of letting the property?

If it was just about profitability, I would never sell up. Profit isn't everything.

Jaguar_Skills · 13 January 2019 at 9:05PM

Thrugelmir wrote: »

What impact is the tax change on mortgage interest having on the profitability of letting the property?

Thanks Thrugelmir. Sorry I’m really not very good at working out all the maths of this?

Tax is certainly not my forte. I just try and put as much as I can in my pension but I will even now be having an issue with Annual allowance.

Jaguar_Skills · 13 January 2019 at 9:06PM

chucknorris wrote: »

You didn't say how long that you have owned the property. I currently have 3.5 investment properties, I have had up to 5. I was very keen for the first 10 to 15 years, but now I am up to 28 years, to be honest, I really have had enough, and for both that and other reasons I have started to sell up.

I can almost guarantee you (especially if you have not owned the property for that long, and you are still fed up) that you will become even more disinterested, as time rolls by.

She has had it for 13 years, I’ve bought the 50% share in the last two/three.

Jaguar_Skills · 13 January 2019 at 9:08PM

chucknorris wrote: »

If it was just about profitability, I would never sell up. Profit isn't everything.

We will never end up living in it but it’s quite close to the tube/London/crossrail. I might have misunderstood though?

chucknorris · 13 January 2019 at 9:18PM

Jaguar_Skills wrote: »

We will never end up living in it but it’s quite close to the tube/London/crossrail. I might have misunderstood though?

I think that you have indeed misunderstood, what I meant was, my investment property if by far the most profitable investment within my portfolio, but also the most hassle (by far). Years ago that was fine, but nowadays for me, profit despite being important, it isn't necessarily the final word.

Jaguar_Skills · 13 January 2019 at 9:22PM

chucknorris wrote: »

I think that you have indeed misunderstood, what I meant was, my investment property if by far the most profitable investment within my portfolio, but also the most hassle (by far). Years ago that was fine, but nowadays for me, profit despite being important, it isn't necessarily the final word.

I don’t even think we make that much profit on it.

Rent @£950pcm - maintenance @£90 - mortgage @£750 ish which is just over £100 per month and that’s if there are no maintenance issues.

It just pays itself off and if we had tenants for the next 18 years would have a £250k flat as an additional pension element.

I’m still no nearer to deciding what to do!

justme111 · 14 January 2019 at 12:50AM

Think if you buy your forever home with or without that equity - is any of those scenarios more beneficial?
Would you sell or consider keeping your present accommodation?
Would there be any chance of you familiriasimg with tax more and finding way of reducing it by increasing pension contributions ? So that you would be in a position to stop working/ doing this type of job if you wanted to and dedicate your time to anything else ?
Are your pensions /savings looking enough for you or will you want income from btl?
If in doubt- do nothing and keep the flat.

kidmugsy · 14 January 2019 at 2:15AM

Jaguar_Skills wrote: »

Me: Soon to be an Additional Rate Tax Payer which will mean the amount I can contribute to pension will start to taper as far as I understand it.

GF: For 3 days per week her salary is approx £50k per annum.

You must therefore be through the 60% zone, through the subsequent 40% zone, and about to enter the 45% zone.

Your gf will be a 40% tax payer if she gets any pay rise or promotion.

So BTL is almost certainly a lousy income investment and going to get worse as the phasing in of the tax changes proceeds. Unless you are confident of large capital gains from here, even after paying CGT, I'd incline to get rid of it and use your capital for the owner-occupied house.

As for pensions, read this.
https://3652daysblog.wordpress.com/2018/03/05/pension-allowance-taper/

Have you got any unused annual allowance to carry forward?

P.S. If you are going to marry get on with it so that you can minimise the CGT on selling the BTL.

Sell or Keep BTL

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