What would you do? Rental property inherited

[70s]

I’ve ended up in a very lucky but unusual situation and would welcome your thoughts.

i have ended up owning 2 mortgaged properties, one my own that I live in, but one sadly by an unexpected inheritance which houses lovely tenants.

money is so tight right now as it is for everyone and the rent just covers the mortgage in the inherited property.
Do you either carry on as now, paying two mortgages, then end up with 2 houses in retirement in about 12 years but things remain incredibly tight now (as I have a bit of debt too)
or
sell the inherited house (think tenants want to buy) pay cgt , pay off that mortgage, pay off my own mortgage and debts and be completely debt free, plus have more money to save for retirement and enjoy life right now?

Apologies, it’s a good position and choice to have but it needs some thought and I would appreciate your thoughts. Thank you

The second option. Being a landlord is no fun at all, just stress

Have you worked out how much tax you’ll pay on the rented house income to see if you can afford it now?

How have you inherited a mortgage? Were you already a co-owner? The second option sets you up longer term. You could reinvest any proceeds.

If money is tight and there's nothing left over from rent after paying mortgage then you have no choice bur to sell. You need a decent amount in instant access savings to maintain the property. If you don't have this then you can't be a landlord.
It's also extremely stressful and will only get worse.

Yes. I don't understand how you inherited a mortgage.

If the inherited house is on a repayment mortgage you could remortgage it as interest only. You'd be able to pay the mortgage interest off it, have some additional money now and the house will go up in value over time. It's a solid investment if you can put in the work to be a good LL.

You need to sit down and do the sums, including how much tax you'll pay on the income and what CGT may be due. And take into consideration any money that might be needed for repairs etc. We're currently trying to decide whether or not to sell our rental. I would like to keep it as a long term investment, but once you factor in tax on the income and CGT, it's not really looking worthwhile to keep it. I think we'd be better off selling and putting some of the money into a high interest account, and using some to pay off our own mortgage.

Also no idea what you mean op...inheriting a mortgage isn't a thing 🤔

You need to do the sums, but please don't become an 'accidental' landlord unless you can commit to being a real landlord. It's not easy money and the regulations are becoming ever more strict.

Tenants can be a lot of hassle and the current lovely tenants are likely to leave at some point, particularly if they are keen to buy.

You could probably make more profit by selling and investing the money in S&S based investments in tax efficient wrappers such as pensions and ISAs.

A mortgage is a debt on an estate and as such has to be paid back upon the death of the mortgage holder. Unless there is also enough cash in the estate, or you have enough cash, then the house has to be sold to pay off the debt. In reality, you have inherited part of a house.

I am also confused as to how anyone can leave something to someone in their will that is not theirs. (A house with a mortgage is not the deceased person's house to give.. it still belongs to the bank.)

As someone who is in the process of selling our rental house I'd definitely say sell. The financial landscape has changed so much for landlords over the last 10 years and it's so stressful for small scale private landlords to keep on top of the changing regulations and financial changes.
If the rent is only just covering costs (I also can't see how you have inherited a mortgage?) than you are in a precarious position. It will only take the roof or boiler needing replacing to put you in debt!

Sell to you tenants (if they want it) privately to avoid estate agent fees and before the increase in SDLT next year (for their benefit if they're first time buyers) and invest the money for your retirement/pay off mortgage whatever.

Also, I would rather stick boiling hot pins in my eyes than be a landlord.

Sell to the tenants at slightly lower than market price.

I am also confused how you inherit a property with a mortgage on it.
Anyway, I would sell it, being a LL isn't an easy way to make a living unless you are a professional and have multiple properties

If the tenants wanted to buy, I'd sell it to them ASAP.

If they didn't want to and couldn't afford to, I'd stick with being a landlord and sell as and when they moved on if possible. My parents have a rental property and very close to their tenants and I know that's what they want in this scenario.

Why would you do that?

No Estate Agent comission

You can't inherit a mortgage surely?

The tenants will likely benefit from cheaper stamp duty anyway if the sale completes before next April? That's to their benefit.

Personally I'd get 3 valuations and sell for a fair market price.

How have you inherited a mortgage?

Having been in the situation of inheriting a tenanted, mortgaged, property, you may not have the final say.
The mortgage will need to be repaid. I was told that a deceased person could not have a mortgage ( understandably).
You can apply for your own mortgage, but if you are correct that the rent only just covers the current interest it’s unlikely that it will be granted.
There is no CGT on inheritance.
If the tenants want to buy it makes sense to sell to them at a fair price as you will have no estate agent fees and no rent voids.

This. You can't inherit a mortgage - that money will be due to the bank. Unless you mean taking a BTL mortgage yourself.

Definitely sell it - to the tenants, if possible, as that's nice to do. Then you can pay off your own mortgage: it's a no brainer. Unless the yield on the house is high (which it's not in this case), you'll be better off per month with no mortgages or debt, plus no requirement to fix a BTL when the roof/boiler/whatever needs replacing.