Sell BTL? And if so, how to invest 500k?

[Wellwellwellwhatsallthisthen]

Hi,

If I decide to go down this road I will consult a financial advisor, but thought I'd pick the Mumsnet brains first....

I own a BTL flat (mortgage free). It's a 1 bedroom Grade 1 listed property, which comes with its own headaches. Purchased for 365k in 2011, now worth around 560k. Used to manage it myself, but it has been fully managed the last few years. The rent is £1425 pcm at present, but the tenants are moving out and the agents have advised it will now get around £1700pcm. After estate agent/service charge fees, I clear around 12k a year.

The flat is in good condition but will need a full refurb in the next couple of years as it's looking quite dated. I haven't done a refurb before, but can't imagine it costing less than 40k.

My question is, if I sell it, I think I'd have a combined CGT/estate agent bill of around 65k. So would have around 500k cash.

Other than a BTL, what would be the next safest option of investing that money? I have a small amount of shares that I manage myself, but am not knowledgeable on that front at all. The risk of losing money worries me and I wouldn't want to invest more than 100k that way.

The reason I'm considering selling it that I never wanted to be a landlord, it was sort of forced on me by my Dad (who has since passed away)...even though it's managed, I never fully relax, worrying that something might go wrong with the flat, and would just like to be free of it. I also hear of people having nightmares with their builders too, so the idea of refurbishing it doesn't appeal either. I'm just not cut out for it I guess 😬

Any advice would be appreciated.

On 560k and 1700pm your yield is 3.64%.

You could easily invest the 500k across cash accounts and get 4-6% interest. ISAs, premium bonds etc.

I would definitely sell. It's just too much hassle. There was a thread on here about NS and I bonds. I think the interest-rate people were talking about was around 6%.

I sold mine recently and have invested the money in numerous saving accounts. I am making more this way than I was on the rental property, with a lot less hassle - although the initial set up takes time!

Thank you @SaturdayGiraffe & @determinedtomakethiswork

I currently have a cash ISA, but I know you can only put 20k in a year for tax-free interest. I don't have any other ISAs/premium bonds at present but I can look into that...

@Wellwellwellwhatsallthisthen As far as I am aware you can only put £20k per year into any kind of ISA. You can though make sure you move £20k of the £500k in each year.

Premium bonds are also tax free but you can only put in up to £50k.

Just to put this into context that is

1700 net pm vs 2131 pm (5% interest rate)

Sorry, should say GROSS pm not net

Sorry, I'm confused...

So if I put the 500k into multiple savings accounts as suggested (why not just one account?), I could then make 4-6% (currently) yearly from each savings account. But I'd need to pay tax on that interest?

Just trying to work out if I would end up worse off than the rental income 🤔

Maybe spreading the risk or people think it's above the maximum?

You could invest it all in a NS&I guaranteed income bonds (up to £1m). 6.20% fixed for a year. Yes you would need to pay tax on the interest.

But bear in mind that the NS&I bond may not be reoffered at such a good rate next year. Interest rates are generally expected to fall over the winter.

Have a look at the money saving expert forums, maybe. Some people advise putting a chunk into a low-cost global index tracker, which is fairly low-risk because your assets are spread across the whole world's markets. The downsides are a) you may still lose capital, and b) you may end up unwittingly investing in businesses you don't want to support - arms dealers, fossil fuels, etc.

Talk to a financial advisor and at the very least set up a pension.

Yes to these. With that amount of money you need proper advice.

You should speak to an IFA because of the amount involved but we have a spread of investments from a pension SIPP, ISAs maxed to annual allowance, various other bank accounts with different terms of access, a few shares in companies we are interested in, shares in one of our employers and, for fun, premium bonds.

Forgetting the SIPP, we have less than you and expect to get 12k in interest in 23/24, and £2500 in dividends, mostly taxable but not all.

Agree with the proper advice too but I think I’d be sorely tempted to keep the property. You are earning monthly rental from it and always have the property to sell in the future. I know property is going down at the moment but it should come up again in the next few years?

You can get good interest rates at the moment. But they are still not as high as inflation which means the buying power of the money will be eroded. Whereas the property value will likely match or exceed inflation (whilst also providing some income)

You havent shared how old you are, what your plans for retirement are etc so I'm not sure how anyone can give you any useful steer on what to do with the proceeds from the property sale?

You need to be clear whether you mean investment (where the capital would be at risk) or various kinds of cash savings?

Depending on your situation at the very minimum it makes sense to take advantage of any tax incentives available to you whether that be ISAs and/or pensions.

With that amount of money seeking some independent financial advice would seem prudent to me.

I sold mine recently for similar reasons. There are also more and more regulations coming in for landlords and I didn't want to deal with things like the EPC changes coming in 2025 as I knew my flat (Victorian conversion) would have been difficult to improve. Worth looking into that as yours is an older property. Would you have the cash available for the refurbishment works otherwise (considering you're estimating it would swipe out your profits for over 3 years).

What is your financial situation otherwise and what do you do with the profit you're making on the rental now? Are you saving it or using it to cover any of your own living costs that would be affected? In terms of tax on savings/investments, it's the same as rental income so I wouldn't base my decision on that.

Mine was not as valuable as yours and I had a mortgage so got less for it but my plan is to split the money across ISA (£20k this year and £20k again in the new tax year), global tracker investments, and at least for the time being savings accounts while rates are around 5%. I'll review that if rates start going down. But at least for the coming year or two I should be able to make what I would have done from the BTL considering all the costs of that I'll now save (insurances, repairs, management fees, annual boiler services and electrical checks, etc.).

And splitting across a number of savings accounts is safest because you get the FSCS protection for up to £85k per financial institution.

Thank you all for such helpful advice & thoughts, you've given me a good idea of the potential options. I'll definitely speak with an IFA! 😊