Selling BTL flat - how to invest the money?

[flatowner]

I own a flat in SE London that I used to live in and has since been rented out for the past 6 years or so. I don't particularly like being a landlord and to be honest, struggle to afford the sudden costs when something needs to be repaired (I always pay immediately, I don't make my tenants wait!). I only managed to buy the flat in the first place because I had money left for me when a parent died (inheritance), I'm actually on a low income and in the middle of retraining so hopefully will have a slightly higher income in the future (but not in the near future).

With the mortgage interest no longer being tax deductible, I really just want to sell up and stop being a landlord. That corner of London is also unlikely to see prices will continue climbing significantly for flats (the valuation today is actually pretty much exactly what it was when I started renting it out 6 years ago!), so I'd rather sell now in case prices drop.

Originally my plan was to use the money along with the equity from my current home and buy somewhere else. Due to the capital gains tax change that means you no longer get an allowance for the years the property has been rented out though, the capital tax will now be significant and I'm going not going to have the budget I had hoped for a new purchase. I can't move very far out of London due to the retraining and work opportunities at the moment being based here. In the distant future I'd be happy to move anywhere though to get a bigger home for less money.

So my new plan is to sell it now (leaves me £300-ish p/m better off when the mortgage is paid off), use some of the money towards my retraining and invest the rest so that I can still put it towards the purchase of my next home but perhaps in about 5-10 years time instead of this year as I had hoped.

I would have about £220k to invest. Is there anywhere low risk that would bring in an annual "income" from an investment of this size at all? Obviously it won't be the same as getting rental income but even a smaller amount would make a difference to my living standards. I will be about £5k per year worse off not having the rental income coming in. I feel so strange having this large sum of money and yet feeling I'm living pay day to pay day. I live alone so the cost of living increase is really going to hit me hard too. I'm 41 so have many years of my working life still ahead.

You need to speak to a financial adviser who can give you your options.

Government bonds are low risk but currently paying 1.56% which is lower than inflation so your savings will be deflated and the income generated would only be £3k ish. Also with the erosion of your savings this could have a detrimental impact on your budget in 5-10 years time if house prices and inflation continue to go up.

If your BLT is your only property. It's risky to get off the housing ladder so maybe look into options of keeping the property til you are ready to sell and buy or moving into the property?

It's not an easy situation to advise on, someone else may come along with some better advice.

I've retired slightly early due to covid and I have a btl I'd really like to sell but I can't get the tenant to leave. I hate being a landlord too. I'll net around 200k and honestly I think I'll just drawdown on it. I'm going to speak to a financial advisor though. After paying the very small mortgage left, the flat maintenance, the constant repairs then tax on the lot honestly it's shocking how little you end up with so I'll be glad to be free of the stress. My beautiful little flat has been trashed 3 times on the decade or so I've had it. This last tenant has been truly awful but with the Covid rules we've been totally trapped. You sound much younger than me so I think you do need to be careful as you still need capital growth as well as income.

Will speak to a financial advisor but I'd like to have an idea of options beforehand - I'm quite distrustful of FAs as my dad made some terrible investments on the back of their advice in the past and lost money as a result.

I own my current home as well but it's worth less than the BTL flat (nicer property but worse area basically). So I wouldn't be coming off the property ladder. However I also can't max out my budget and use all the money if I sold both properties to buy somewhere else due to the low income/single income household situation - I need some money easily accessible in case of sudden large bills or redundancy or something.

I can't move into the flat because it wouldn't suit my current circumstances (for example, I have pets and it's an upstairs flat with no garden). Being a landlord just feels so stressful, and comes with sudden bills too. There is also talk of the prices of flats potentially even going down in value with everyone wanting a garden or relocating to WFH. It has increased in value a fair bit since I bought it 10 years ago but capital gains tax will eat up a large chunk of that.

I know it probably sounds like I'm fortunate when others struggle to buy at all. I've just made a lot of wrong choices career-wise over the years so have ended up on a low income so it's all extra stressful.

I got an allowance to offset against CGT for all the time that I'd lived in my old house, plus 9 months, and had an allowance against the mortgage interest when it was rented out - I only sold it a few months ago too. You do get a tax allowance that works out the same as the old allowance if you're not a higher rate taxpayer. Can't you move back into it for 2 years so you don't have to pay any CGT?
Anyway, if you can't, I'd max out a SS ISA for 2 years or more