Would you sell flat now (that's currently let) if you don't *have* to?

[toomanyflatwhites]

I own a flat in NE London that I bought in 2004 for £165k. Got the mortgage with my parents but I have always paid it (interest only...) but in 2012 I moved in with DP and started renting it through an agent. I get a rental income of £1300 a month (which helped me a lot when I only got stat maternity leave 3 years ago!) and am currently on a "temporary" buy to let mortgage conversion with a rate of 3.75%.

I am pregnant and due in June (but will get paid mat leave this time around) and DP and I (living in his flat) need to either have a loft conversion or sell and buy something bigger (we are in a different area of London) so I have a few options:

1. Put my flat on the market - have just had it valued at £400-420k - and see what happens
2. Keep it, remortgage/release some equity to put into buying a house with DP
3. Try and sell mine, buy another rental property but outside London (in my home town) where I could either buy a 3-4 bed house mortgage free or very low mortgage, OR option 3b (!) get a mortgage of similar level to now and use equity to put into house with DP - bonus is that rental income is potentially higher than in London due to student population in that town.

Of course I have no idea if my flat would sell, risk is that my tenants might move out if I put it on the market (otherwise would give them notice when I find a buyer) and I would lose the rental income.
I want to get out of the joint mortgage with my parents and think selling/buying outside London could be the best option - plus the temporary buy to let mortgage is probably not the best rate and will get pulled at some point, I'm sure....
or I could do nothing!
Does anyone have any thoughts on what they might do?

You need to work out your sums.

What is best for you? Keeping the flat and paying an additional 3% stamp duty on your onward purchase? Selling the flat, paying CGT and using the equity to reduce the mortgage of your onward purchase. Selling the flat, paying CGT, keeping some equity back to buy a cheaper BTL in your home town?

I'm biased but I found having a rental property a PITA and was glad to sell it and move forward with a smaller resi mortgage on my next purchase.

Also your idea about renting to students - bad idea unless you are in the same location. Students can be very needy tenants and you will want to be on hand to pop over do things yourself - like switch the boiler back on after they have knocked the off switch.. fix the hoover (pull out a coat hanger after they hoovered up a coat hanger), check the 'damp' (drying clothes inside with the windows shut) etc etc

DP?
Keep your flat.

As per pp you need to do the sums on CGT / stamp duty / income tax.
However you have already made a sizeable capital gain and I would doubt there is much scope for more in the short to medium term. There is a risk of interest rates going up and rents could fail to keep up due to stretched affordability. Your income while on maternity leave is likely to be lower which may save some tax and there may be scope to split the bill with your parents to minimise it if they are on the deeds.

Depends whether you would rather have £200kish in hand for your present and future or "own" a £400k property with a £165k+ mortgage and an ongoing financial relationship with your parents rather than your DP.

My personal inclination would be to sell up and sink the equity in a joint property with DP, assuming his equity stake in his flat is similar to yours. Then I would be assuming joint finances for going forward as a HH raising DC.

@SushiMonster good point about them having to pay the extra stamp duty on the potential new house, that scared me! So I did some research, I could then reclaim it but does motivate me more to try and sell now in advance of when we try to buy...
But yes we need to do sums and I think we need some sort of official advice - but not sure if that would be tax advice, mortgage advice, financial planner...so tricky to know! Oh and my DP agrees on renting to students! I would aim to rent to non-students but their presence in the town has pushed rental incomes up. As it stands my rental has been easy (fingers crossed) as I pay an agent full management and have had minimal issues the past few years.

@7to25 do you mean because we're not married? That has been my POV all along (and why I still own the flat) that it's my insurance policy.
We are actually planning to get married now though and likely to do something within the next 12 months (complication is in needs to be in DP's country and dates are tricky deciding to do before or after DC2 arrives!)

@howabout thank you, this is all really helpful too! I have to be honest I like having the independence of owning my own property separate from DP but as we are planning to get married with DC2 on the way, maybe I need to get over that! His equity would be more than mine but we would likely draw up an agreement anyway, his income is way in excess of mine (think three times...) so we don't assume parity between us though actually as I've had my flat so long there's not such a huge difference between equity stakes.
From your comments though it starts to become clear that what I need is tax advice so I can figure out the CGT, stamp duty etc - extra complication with the joint ownership is that we had a legal agreement saying it's bought for me to live in (not 2nd home got them) which was to avoid them having to pay CGT so not sure if the liability is split, but I assume not.
Gahhhh my head is spinning over all of this!!

Your cgt will be negligible

The time to get over the independence thing is after you're married, not before.

If you want to be independent and not married I would still argue it is better to have an equity stake in the house you live in with your DP and DC and be seen to be making a contribution to the ownership of it than have him own the family home with you risking being left with only your starter flat if you split.