Jump to content
labatron4

Keep or sell current residential

Recommended Posts

Hi everyone,

Would appreciate some advice on this subject.

My current residential is worth around 225,000 and the mortgage left on it is about 140,000. I am thinking about renting a larger house as we need bigger but i'm in a predicament whether to sell or let mine out.

I am a higher rate tax payer (40%) and would receive around £900pcm for my house and was wondering if i switched my repayment mortgage to interest only would it be worthwhile as i have calculated the following;

 

interest only mortgage @ 2.5% on a £140k mortgage = £292 per month

40% tax on £900 rental income = £360 per month

management fee = £100

insurance = £20

This would leave me with a monthly profit of £128 profit per month from 2020 when the new tax laws come into play.

 

I would like to keep the property but not sure if this is worthwhile and alternatively I would sell up ands the equity to buy a several BTL's in my investment area which is Durham where i currently have 2, and put them in my limited company which i already have.

 

Any help or advice on this subject would be greatly appreciated.

 

Thanks

Joss

 

Share this post


Link to post
Share on other sites

Couple of random considerations I thought of when reading this 

> What is your goal? Being a high rate tax payer, all incremental income will be taxed accordingly, be it rental from your property or dividend from your company

> Does the property have potential for long term capital appreciation? If so, and that aligns with your goals, keep it and focus on the long term and any months profit is just a bonus. 

 

 

Share this post


Link to post
Share on other sites

Sell. Invest the equity either in a doer upper family home to 'force the appreciation' or alternatively in better performing rental properties through your company.

Best

Richard


Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Share this post


Link to post
Share on other sites

I don't believe renting a larger house for yourself makes sense - it will cost you more and remove any stability and control you have over your own housing. 

Your £128 per month profit may soon get eaten up with maintenance issues & / or void periods and what you actually receive may be significantly less.

I would sell your existing home & buy a larger house for yourselves. If this releases enough equity to buy another BTL - well and good. If not then save up until you have a deposit.

Share this post


Link to post
Share on other sites

sell current property, use the equity to purchase a larger property .... because even though you will have income from your rental, you need to factor in all the issues of being a landlord & the headaches that come with it without figuring out 'just the net income'.

and paying someone else rent (money flies out the window) when you have cash resources to buy .....

 

 

Share this post


Link to post
Share on other sites

Hi

Despite the rental being very profitable, to pass the stress testing rules I think you would need to be achieving rent of at least £930. You might get a lower stress test if you have a 5 year product but this may be counterbalanced that as a higher rate tax payer this may also take you into more extreme stress testing.

You are not far off it with a £900 rent of course so a bit of tweaking with the product might get you there.

I think you would be better off reinvesting in a more profitable rental.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×