Buy to let

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Do we think this is worth it anymore?

We have a one bed in London zone 2. We will both soon enough be higher rate earners for income tax. It's worth £300-320k and we have equity of £130k.

This/next year we plan to get a house. We have a separate deposit for this and could scrape together the additional SDLT we would have to pay.

I may want to reduce my work in the future or not work at all (currently pregnant with our first)

I can't decide whether we should keep the London flat given its zone and have tenants or put all the equity in our new home and have a smaller mortgage.

I'm ignoring covid for now!

My sister's did the opposite and when the recession hit in 07-08 the one with the rental seemed to survive better...

Anyone got any practical experience? I've heard you can't deduct half of what you used to so the income tax bill might not be worth it but because of the location I'm wondering if it's worth riding that out for the long term.

even if the sums stack up with the insurances and maintenance, be aware of the risk. Evictions have been stalled for ages and the backlog is now 18 months. That means that no tenant actually needs to pay rent and wreckage/drug dealing goes totally unchecked.

Fortunately I have normal humans in my rental, as do most. But the risk of new (=unknown) tenants is massive and it will only get worse.

If your financially minded you need to do a IIR calculation. But that calculation does not take into account the Tennant risk!
www.investopedia.com/ask/answers/022615/what-formula-calculating-internal-rate-return-irr-excel.asp

Thank you