Tenant of BTL property leaving. WWYD?

[AgnethaF]

Our tenant has handed notice in. Is it time to sell up now or put it back up for rental?

Background:
Bought property back in 2007 just before the crash. Paid £135k mortgaged. Didn’t make any decent money as we decided to rent it with an agent who guaranteed rent would be paid, but obviously at quite a low rate. With hindsight this was a mistake.

We kind of bobbed along, rent almost covered mortgage, but always a bit of a loss every year. Not a great investment, but we were hoping we would make things work out if/when the property market picked up.

We decided to get rid of that agent just before covid, but plannning to refurb and relet with normal agent. Well lockdown happened. Couldn’t get anything done for months. We were without tenants for almost a year! More losses, paying council tax and utilities on an empty property.

Weve been renting since then at normal market rates, but tenant leaving soon.

We’ve been good landlords. Installed new central heating, double glazing, doors etc recently. So have kept the property up to spec. The current tenant got the house in move in condition with new everything, including carpets, kitchen etc.

Nothing special, just as you would expect from a decent landlord. We haven’t made a huge profit either. We pay for the garden to be done, as they are not interested, and we don’t want to annoy the neighbours.

So, would you sell up now? I don’t think we’ve been very astute landlords. Probably too soft.

I think we could sell for £235k in the spring if we gave it a refresh.

Time to walk away? We could gift our three DC some of the profit to use against their own homes, so the cash would still be invested in the property market.

Still working, our pensions are going to be enough to retire on when the time comes. Our own house has been paid off.

Whats the advantage of keeping this property? Obviously it will continue to increase in value, and we should make a profit of approx £6k after tax per annum. But in reality it’s actually less.

Is it worth the hassle?

Difficult to say. I’m also a landlord, of 12 years with its ups and downs. My view is I’m holding on, so I have pension top up and one day I plan to hand management on to my two sons, who will take the rental income to help them along. That way I also keep the capital appreciation. It’s managed via agents but as you know, as a landlord you end up dealing with everything anyway. You need a degree of toughness coupled with good emotional intelligence to deal with tenants successfully . Good luck with whatever you decide.

I'm getting shot of mine. The tax position is nowhere near as favourable as it used to be, the law changes coming in 2030 will as more expense, coupled with the difficulty in creating space between tenancies for renovations make it mostly not worth it. And that doesn't include any changes the Chancellor makes in the budget.

My guess is that there will be a rush to sell in 2029 which will dampen the market, so selling while you have the chance is probably wise.

What is the EPC on the property? If it's a C I'd keep and relet but if D or lower I'd sell. Once ECP C is in force many millions of houses will drop out of rental market and rents will sky rocket as there will be about 20 percent fewer properties to rent, nationally. Hence if a C I'd keep but if not I'd sell. I'm going to sell 4 of my 12 as high ECP D but will cost £13.5 each house to add internal cladding and redecorate afterwards so tenants can save about £140 pa. I know many other LL's in same position. Government seem oblivious that in some cities between 20-25 percent of rental property will go from rental market.

It is difficult to say without knowing your personal circumstances.

We've had ours for 20 years. Like you we have been good landlords, we have done loads of work on it in the last 4 years ( spent £12k on new kitchen and bathroom which is not being treated very well sadly) and in the past we have rented to people who may not have passed credit checks.

The current tenants really couldn't afford anything else in the same area but I'd love it if they gave notice. I'm in my 50's and we could pay off a fair bit of our mortgage. The new EPC rules coming in worry me too. It looks like we'll have to spend £15k trying and failing to get a Victorian terrace up to a C.

It's meant to be my pension. It seemed like a good idea at the time but not now.

We use Open Rent thus saving paying an agent. It gives you more control-you meet prospective tenants rather than the agent just taking the first person who passes the credit check.

In your shoes OP I would sell and give your kids the money

If you sell for £235k next year how much will you actually make? - ie what is left on the mortgage and after fees etc? Sorry if you have said already - I wasn't clear.

I would opt for the quiet life, sell, then save or invest it, be done with the hassle and expenditure. Give something to your kids if you want to and don't need it for yourself.

Love your username Caprice. That was my treat as a kid when I visited my french grandparents! Grew up in North Africa and there wasn’t much cheese there! Sorry to digress.

There is also Capital Gains Tax to consider, and I suspect this will just get more punitive in the future.

@TheGanderI only discovered it recently, I love it! Apologies OP for cheese-related digressions too.

I've opted to keep mine until I get SRP at 67 in 5 years. Then I'll drawdown cash as and when. I have a legal background now retired, so litigation to get tenants out doesn't scare me but it's not something I'd want to do. I rely on the income currently so . . .

Good thinking regarding the EPC. I will check that!

We have recently paid the mortgage off. So £235k “profit” less CGT of course.

Your gains would be lower than £100k depending on how much of your refurbishment is allowable. If you jointly own it you also get to use both of your CGT allowances of £3k.

Assuming you will have just over £200k left to invest, even if you just stick it in a no-risk cash fund, you can expect to do better than what you make on the rental.