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  • FIRST POST
    • Jaguar Skills
    • By Jaguar Skills 13th Jan 19, 7:53 PM
    • 448Posts
    • 62Thanks
    Jaguar Skills
    Sell or Keep BTL
    • #1
    • 13th Jan 19, 7:53 PM
    Sell or Keep BTL 13th Jan 19 at 7:53 PM
    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.
Page 1
    • Thrugelmir
    • By Thrugelmir 13th Jan 19, 7:59 PM
    • 61,598 Posts
    • 54,827 Thanks
    Thrugelmir
    • #2
    • 13th Jan 19, 7:59 PM
    • #2
    • 13th Jan 19, 7:59 PM
    What impact is the tax change on mortgage interest having on the profitability of letting the property?
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • chucknorris
    • By chucknorris 13th Jan 19, 8:03 PM
    • 9,813 Posts
    • 14,612 Thanks
    chucknorris
    • #3
    • 13th Jan 19, 8:03 PM
    • #3
    • 13th Jan 19, 8:03 PM
    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.
    Originally posted by Jaguar Skills
    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.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    I've started running again, after several injuries had forced me to stop
    • chucknorris
    • By chucknorris 13th Jan 19, 8:05 PM
    • 9,813 Posts
    • 14,612 Thanks
    chucknorris
    • #4
    • 13th Jan 19, 8:05 PM
    • #4
    • 13th Jan 19, 8:05 PM
    What impact is the tax change on mortgage interest having on the profitability of letting the property?
    Originally posted by Thrugelmir
    If it was just about profitability, I would never sell up. Profit isn't everything.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    I've started running again, after several injuries had forced me to stop
    • Jaguar Skills
    • By Jaguar Skills 13th Jan 19, 8:05 PM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    • #5
    • 13th Jan 19, 8:05 PM
    • #5
    • 13th Jan 19, 8:05 PM
    What impact is the tax change on mortgage interest having on the profitability of letting the property?
    Originally posted by Thrugelmir
    Thanks Thrugelmir. Sorry Iím 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
    • By Jaguar Skills 13th Jan 19, 8:06 PM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    • #6
    • 13th Jan 19, 8:06 PM
    • #6
    • 13th Jan 19, 8:06 PM
    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.
    Originally posted by chucknorris

    She has had it for 13 years, Iíve bought the 50% share in the last two/three.
    • Jaguar Skills
    • By Jaguar Skills 13th Jan 19, 8:08 PM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    • #7
    • 13th Jan 19, 8:08 PM
    • #7
    • 13th Jan 19, 8:08 PM
    If it was just about profitability, I would never sell up. Profit isn't everything.
    Originally posted by chucknorris
    We will never end up living in it but itís quite close to the tube/London/crossrail. I might have misunderstood though?
    • chucknorris
    • By chucknorris 13th Jan 19, 8:18 PM
    • 9,813 Posts
    • 14,612 Thanks
    chucknorris
    • #8
    • 13th Jan 19, 8:18 PM
    • #8
    • 13th Jan 19, 8:18 PM
    We will never end up living in it but it’s quite close to the tube/London/crossrail. I might have misunderstood though?
    Originally posted by Jaguar Skills
    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.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    I've started running again, after several injuries had forced me to stop
    • Jaguar Skills
    • By Jaguar Skills 13th Jan 19, 8:22 PM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    • #9
    • 13th Jan 19, 8:22 PM
    • #9
    • 13th Jan 19, 8:22 PM
    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.
    Originally posted by chucknorris
    I donít even think we make that much profit on it.

    Rent @£950pcm - maintenance @£90 - mortgage @£750 ish which is just over £100 per month and thatís 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.

    Iím still no nearer to deciding what to do!
    • justme111
    • By justme111 13th Jan 19, 11:50 PM
    • 3,127 Posts
    • 3,007 Thanks
    justme111
    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
    • By kidmugsy 14th Jan 19, 1:15 AM
    • 12,400 Posts
    • 8,791 Thanks
    kidmugsy
    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.
    Originally posted by Jaguar Skills
    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.
    Free the dunston one next time too.
    • kidmugsy
    • By kidmugsy 14th Jan 19, 1:22 AM
    • 12,400 Posts
    • 8,791 Thanks
    kidmugsy
    She wants to keep it as an additional pension element for when we are older
    Originally posted by Jaguar Skills
    When you are older, and perhaps paying income tax at more forgiving rates, and have more time for a property business, you could set up a company and run some BTL that way. Or just invest pension money in firms that own residential property e.g. Grainger, Hearthstone and (I assume) others. In particular, companies that own residential property abroad might be a useful diversification.
    Free the dunston one next time too.
    • Jaguar Skills
    • By Jaguar Skills 14th Jan 19, 8:09 AM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    I have tried to answer your questions beneath, thanks for the replies.

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

    Yes.


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

    She is only likely to work for a few months, then stop (if and when she is pregnant again).

    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.

    This was my argument.

    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?

    I may have a bit but I put a lot circa £30k into my pension.

    This year I have drip fed £600 PCM = £7200 and will make 2 x £10,000 sal sacrifice deposits which I get the NI savings on so £22,760.

    I really don't understand the taper allowance, find it so difficult to work out adjusted and threshold income maybe when I get my accountant to do my self assessment this year, he can explain what I have left and am likely to have for the next few years?


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

    Have also told her this.
    • atush
    • By atush 14th Jan 19, 10:14 AM
    • 17,417 Posts
    • 10,953 Thanks
    atush
    You own 2 homes together, and have an 18 month old. So being not married is costing you money.

    Just get married?
    • BarleyGB
    • By BarleyGB 14th Jan 19, 12:16 PM
    • 192 Posts
    • 166 Thanks
    BarleyGB
    Stamp Duty on a £900,000 house if its your only property is £35000

    If you have a 2nd property (BTL) the 3% stamp duty premium means you pay £62000 stamp duty when purchasing a £900,000 house.
    • pramsay13
    • By pramsay13 14th Jan 19, 12:55 PM
    • 610 Posts
    • 1,041 Thanks
    pramsay13
    We were in a similar position and changed the mortgage on our 2 BTL properties to interest-only so that we can overpay our own mortgage and clear it off.
    Before that we were only just breaking even because of the repayment on the mortgages so it seemed like a lot of hassle for not much gain, but now the gain is more obvious it is almost like an extra wage.
    • Jaguar Skills
    • By Jaguar Skills 14th Jan 19, 3:03 PM
    • 448 Posts
    • 62 Thanks
    Jaguar Skills
    You own 2 homes together, and have an 18 month old. So being not married is costing you money.

    Just get married?
    I do agree. For her though the money is not the be all and end all. I would like to do a quick marriage then still do our carribean wedding but I do not think I can convince her.

    Stamp Duty on a £900,000 house if its your only property is £35000

    If you have a 2nd property (BTL) the 3% stamp duty premium means you pay £62000 stamp duty when purchasing a £900,000 house.
    I did not realise this and could be a deal breaker.
    • atush
    • By atush 14th Jan 19, 4:17 PM
    • 17,417 Posts
    • 10,953 Thanks
    atush
    but might convince her?

    Do something romantic and ask her.
    • justme111
    • By justme111 14th Jan 19, 5:13 PM
    • 3,127 Posts
    • 3,007 Thanks
    justme111
    Looks like your gf may have to choose - either say buy to property or get married
    Win win
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