A property WWYD

[Freetodowhatiwant]

I am in a bit of a dilemma and wondering what to do for the best. Sell my flat so I can buy a family home or rent it out, buy a cheaper investment property to rent and rent a house for the kids and I?

Basically I have a two bedroom flat in London on the market for £425k. I owe £210k on the mortgage and am paying interest only £350 a month. I am happy with interest only at the moment and every now and then try to pay some off the total loan.

DH and I have separated, we have moved towns and I am currently in a rented Airbnb with the kids which I can’t stay in long as it’s expensive. The flat has been on the market a while but at the moment there has been no offer.

I have around £90k in the bank from the sale of the family home and my mortgage co have said I can port my £210k mortgage. Theoretically this means I can buy a new house at around £480k (taking into account fees) in my new town.

I was planning to sell the London flat and buy a family home here in the new town. HOWEVER a few people have mentioned, and also it did cross my mind too, that it might be a prudent move to keep hold of my flat in London, instead of buying a family home here in the new town buy a rental property (using the 90k in the bank and a mortgage of about the same amount), rent out those two flats and rent a nice place for the children and I. This way I have rental income coming in.

£480k doesn’t get you a great house where I am so that is another consideration, if I sold london and bought the family home it might not be somewhere I loved.

So WWYD - rent out london and invest in a new property BTL and rent somewhere for us to live in or sell London and buy a house in the new town?

I can definitely see something valuable about holding onto a property in London if I can. I am not a high earner, am self employed and currently have no pension.

Depending on the ages of your children I'd want them living in a stable owned home that they can't get kicked out of at the whim of a landlord. Although I agree that keeping hold of London flat could be prudent, particularly in current market where flats are a hard sell.

Thanks Dino. They’re 5 and 8. The leases here are minimum a year so we would probably rent somewhere for a year at least whilst we decided what to do. I don’t think they would be overly bothered about moving a couple more times in their childhood. But then I moved a few times a as child and didn’t see it as traumatic.

I can’t afford to keep both the London flat and buy a big enough place for us. If keeping the London flat I would probably buy a one bed investment flat for about £180k.

I moved a lot as a child and truly hated it. I was determined to have as close to a permanent home as I could before I had DS, but that's just me, based on my experience. Your kids may handle and view things very differently. If I could keep them in one good school, with their friends, and a settled home life (especially as they've already been through divorce etc) I think that would be my priority at those ages.

For me it would depend on the financial side of things - I would do calculations to see which works out best financially. Remember you'll pay tax on the rent at your marginal rate and you would be liable for some capital gains tax when you sell after a period of renting it.

If you want to sell London flat if its not shifting would say you need to reduce the price. If its got no garden it could still be hard to shift atm though I wonder if the change of weather will shift attention away from gardens a bit.

Do you feel you’ve got enough of savings to cope with a non-payment of rent or unexpected costly repairs?

Your budget is enough for a 3-bed house in London so it sounds like you’ve chosen a very expensive town or expect a lot of house. Personally, I’d just be financially sensible and get a 3-bed terrace house that’s easy and affordable to maintain. If that leaves enough money for a btl, then that could be a consideration. Or the spare money could be invested elsewhere. However, if you haven’t got a pension, than that should be a priority.

I would sell and buy a long term home

Where can you get a three bed house in London for £480k? Not being goady just genuinely don’t know if that’s the case.

Unless you mean more south into Surrey / Kent?

I can think of parts of London you could still get a 3 bedroom house for 480k, I know this wasn’t referring to me but I’m pretty sure there are areas. I was in SE London and whilst that would only get you a flat in my area I think a little bit further out you would be able to get one.

Anyway yes I can get a 3 bed room house here in my new town for that amount but in the areas I want it would either mean a Victorian town house with only a patio garden (but in a quirky and fun area) or a 1960s house on great swathes of suburban avenues. I would prefer something in the middle. This is preference though so I realise I’m lucky I know and there definitely would be a house I can get, it’s just not my ideal house.

We will definitely be staying in the new town and staying at their school so those are not issues. We won’t be moving around so I was thinking more what is best from an investment POV.

Tax wise I have rented out the flat before and am used to declaring that. CTG is something I haven’t had to think about before so yes that’s something I would have to consider.

@1990s a lot of outer London is doable on that budget.

What’s best from an investment point of view is one thing but it also needs weighing up against having a long-term home. Family homes also go up in value and you don’t pay CGT when you sell so in some ways that could be bit of an investment too even if there’s no regular income from it. You could also find somewhere that could be extended, have the loft converted etc as those things can add value as well.

Yes good points too JoJo. Hmmm lots to think about.