Main breadwinner dilemma - should I sell second home?

[Sleeples]

Hi!
Forgive my incredibly first world problem.
I’m married with two DD. I own a flat in an increasingly trendy area of London - it has 140 years on the lease. It’s bought entirely with cash, no mortgage.
I used to live there with my family but we’ve moved out of town and I still own the flat. It’s currently empty.
On top of my mortgage for the house we now live in, I’m in 50k of loans. I can afford all the payments.
I’m working FT and am the main breadwinner. My husband’s work is reliable but while I earn £55k a year he’s on less and is self employed.
Now we’re sending DD1 to nursery which is about £70 a day and will be four days a week. A lot of this is because when his work does come, we have struggled with the juggling act. I can’t afford this alone but he has said his salary could help.
I never wanted to be a landlord but I wanted to keep the flat so my DD have somewhere to live in London one day if needed.
But should I just sell to get out of this slight money squeeze?
It’s a one bed flat - worth about £240k…

What are the conditions of the lease? You may find that your ‘amazing asset’ becomes unsellable in a few decades

By conditions I mean can it be extended easilhn

Get a BTL mortgage to cover your loans. Get a tenant in fully managed. Don't sell the flat.

In your circumstances I think I'd sell.

You sound like you don't want to be a LL, and your life is busy.
Wanting to keep it so the kids have somewhere to live in London is nice, but that comes with an expectation on them that after Mum kept the flat & dealt with the associated hassle, so that's what they should do IYKWIM? Would you be pissed off if they decided they were moving to France instead?
Your property has ongoing maintenance costs, so if it sits empty between lets, you're still paying out.
Your heart does drop when the phone goes with your agent/tenants number as it always means pressure, work & money. Do you need that right now? Would your DH deal with it?
Particularly in a flat, there's a good possibility of a quick turnover of tenants, meaning work & costs each time they leave.
You say you don't have time to get it ready, so could hang about for ages.
Faff of tax returns
Keeping abreast of the ever evolving requirements (this is a good thing but takes time & money) etc.

OR you might let it straight away, have a great managing agent, a long term tenant & it might tick over making a bit of extra income each month!
Your ace card really is the lack of mortgage on the flat, it should be self-funding when let.

If you sell and pay off the £50k debt, could you put the balance in a tracker fund which you then give to your girls as a house deposit when they are of age? Historically property has tended to be the best investment so I’d try and get some solid tax advice on the different scenarios (renting then selling, selling immediately etc.) Presumably you’ve already paid second home stamp duty on your new property? If you sell one within a certain period from memory you get the second home element refunded.

If I’m honest I’d keep it, rent it and keep it ticking over. I’d love to have a flat in London I own outright- realistically it’ll only cost you/your girls more to re-buy the same thing in 20 years! The number of times I’ve wished my parents invested in property in the 80s when it was cheap enough to afford an investment house…

As an example, the flat we had in London was worth about £175k in 2007. Now, you’d pay £500k for the same one. The differential is massive. If it’s in a trendy area I’d hold on to it. It’ll either be housing for your girls or sold at a profit later if they don’t want it.

[quote Sleeples]@PicsInRed I pay for pretty much everything[/quote]
There we are.

Keep the flat. Rent it out.

He needs to get a job or you should put yourself and kids first and reassess this relationship.

Think ahead to retirement, because if you continue to carry a hobby business, you won't retire.

@PicsInRed what’s a hobby business? He isn’t working FT because I am and he’s looked after the kids. Isn’t it normal I pay for things since he’s the caregiver? More or lesss sahd who works nights and weekends?

[quote Sleeples]@PicsInRed what’s a hobby business? He isn’t working FT because I am and he’s looked after the kids. Isn’t it normal I pay for things since he’s the caregiver? More or lesss sahd who works nights and weekends?[/quote]
If he's really a SAHD and you have the same responsibilities as the equivalent male breadwinner (including the mental load) AND the business doesn't cost anything, sure why not.

Ultimately though, if things are so financially difficult that you are personally in £50k of debt including credit cards, and you're paying for everything (which suggests his business brings no net income), he needs to get a PAYE job.

Do not sell the flat. If you do, you'll bitterly regret it later in life.

I can't say whether financially it is better to keep or sell but don't put the expectation onto your daughters that they will attend a London University. They may have different interests or want to go to a different university town. They might also want to live in halls for the first year. If you keep it then of course in due course one or both of them may want to use it, although you will need to consider what you will do if they both want to live there but they don't get on. For all these reasons I would be cautious about my expectations for what might happen in 15yrs and avoid making decisions based on any such expectations.

Totally agree with everyone about expectations. I wouldn’t be sad if they don’t live there. I would like them to have the option of it if they need it.

You should sell, get rid of debt and invest the proceeds to cover childcare, pension fund and help for your child’s education (university if not before). Being an “accidental” landlord is an expensive hobby and won’t get you the returns you would earn from careful investment. There’s no guarantee your child would even want to live there in 20 plus years time but in that same period you are losing out in using that asset to help your whole family financially future proof.

Look at it this way. If someone handed you £240k, would your first reaction be "let's buy a flat in London"?

Would you think:
let's buy an asset that is a hassle to manage
let's buy an asset that has onerous legal implications
let's put all our eggs in one basket
let's buy an illiquid asset
let's buy something that we can't shelter in a pension or ISA wrapper
let's not pay off debts
let's not sort out the doer-upper once and for all.

I don't understand your DH's situation. He's a SAHD but you pay nursery fees? Again, I think that you need to take a dispassionate view of what makes monetary sense.

Ex landlord here.
With the new tax implications and increasing expectations on rental properties, returns are nowhere near what they were a few years ago.

If you sell up the flat now or in future, you need to consider Capital Gains Tax. This is quite complex and can add up to a huge amount the longer you hold the property without it being your main residence and/or a second property.

Choice as I see it:

• rent it out, put up with the hassle (perhaps get your husband to be the landlord/do the hard work?), while not making much month to month. Long term though you have a flat you could give to your children.
• sell up now, invest carefully as much as you can in Stocks and Shares ISA's for you and husband, pay off all debt, already invest for your children so that at 18 they have a chunk of cash to buy a place themselves. Long term you have investment and less debt cost - but no place to give to the children.

I am relieved not to be a landlord anymore, it stressed me out (I like things to be 'right' and would not rent a place that I would not live in myself).
I am now making more money monthly on interest on two years of maximum Stocks and Share's ISA's ('only' £40k) than I did renting the place out, with no hassle what so ever. I add another £20k next year - and have my own mortgage down to nearly nothing. All by selling an illiquid, hassle filled asset.
You can see what I suggest....

@senua he’s been doing childcare until now - we’re sending dd2 to nursery so he can be more free to work

Hold on to it! Get someone in to paint or whatever it needs and then get an agent around. If you don't have time to manage it get an agent to do it, though remember they will charge about 10% of the rent. Plus you are still responsible for any service charge and ground rent. But the tenant will be responsible for council tax, and you can deduct the fees against the income. By the time your child is 18 years it will be worth a lot.

yes london property prices have gone up a lot in the past (mine has doubled/tripled since i bought in 2000)

But that growth is all reflected in the current value of £240k. Its unlikely to be increase at the same rate over next 20 years.

I'd do up to try and sell early next year. the cash can be invested in shares/bonds/pay off loan/top up pensions and say £100k in premium bonds for the 2 of you to cash in when you next sell up.

Christ don’t put in premium
Bonds instead of London property!

Premium bonds?!?!?! What?? Please explain how that’s a good idea.

@senua I love your summary - perfect!

So you're going to leave it empty for decades on the off chance the kids will want to live in it? Surely it'll cost you a fortune in upkeep.

Either rent it out or sell it.

Re his wages could help, does that mean that if you can't cover all the childcare he will help out that childcare will be paid by you both at least proportionate to wages?

Not going to be empty for years. Either rented or sold.

They might not want to live in London - you don't have that long left on the lease so I would sell.

If your daughters do t want to live there then at that time
You can sell and it’s their deposit - and the investment will have def moved with the property market