To sell and invest or keep buy to let?

[Whattodotomorrow]

I am going to look into getting proper financial advice but wanted to ask the MN brains first so I have a better understanding when I do go to a financial advisor.

I’d like to know what to do with a buy-to-let property and if I sell it, is it possible to invest the money so I get an annual income and the capital can potentially still grow.

The house was purchased in 2006 for £120k with a mortgage of 100k. It was lived in by myself until 2013. I’ve had 9 years of steady tenants. During covid, it was empty and the mortgage payments were problematic so I used our savings to pay the mortgage off…approx 35k.

Since 2006 it has gone up in value by approx 30% and is now worth 180k. The rent is £700 a month and I manage the property myself so outgoings are insurance, maintenance and tax.

It has worked well for us as the rent does help boost our monthly income. However, I think the house probably won’t increase in any further value and we could do with releasing the money I used from our savings to pay off the mortgage.

I’ve felt safe with having our money tied up in the house but I’m now thinking that maybe there are other ideas to help make the pot of money grow. Does anyone have any advice as to what we could do the money instead but still gain a monthly income? Thanks

The other thing to consider is whether you have the time/inclination to be a landlord. We rented out our old house for a while when we lived abroad. Even though we used a full management service it was still a massive hassle, constant emails, phone calls and extra admin. I absolutely hated it and would never do it again.

How much will you clear if you sell and pay off any mortgage? You could invest in index funds, choosing an income fund (where dividends are paid out periodically) rather than accumulation (where dividends are reinvested) - there’s no guarantee of income level but the capital will be there moving with the market.

You will I think have to pay Capital Gains Tax as it is a second home and it is being predicted that CGT allowances/rates may change in this weeks budget. Whether this would be with immediate effect or from next tax year I'm not sure.

My personal opinion would be to keep it if you possibly can, as the rent you earn will be a passive income for you later in retirement (provided the buy to let mortgage is paid off), topping up your pension.
But obviously depends if you really need the proceeds of the sale for something more in the short term.

You might get say at best 4% return on money in the bank. At best. Could be as low as .2 percent. Invest 180k
So that's about £600 a month. Less fees, tax.

Moral of course you should sell

Would it make more with an airbnb, although that is more work for you

I’d suggest running through the CGT calculator here. www.gov.uk/tax-sell-property/work-out-your-gain

You will be able to deduct estate agent fees etc from your CGT bill and you also get an allowance for the time you lived in the house.

but likely you’d still have to pay some CGT

I would walk through the calculation and see what you’d end up with and use that to inform your decision.

The next question as to the hassle of being a landlord vs. investing and the risk is down to your personal circumstances.

Also the timing of selling a property - now is a tricky time to sell, but it might be tricky for a while. All depends on your local housing market.

Best of luck.