To sell or not ?

[Kay286]

We own a property in the U.K. we rent it out. last year it would have sold for around £300k. Now probably between 260-270k.
we rent it out but way below market rates now at 900 (market rates around 1300)

we are on a variable mortgage and rates have inc to 7.5% which has increased mortgage by over 300 per month - income now doesn’t cover mortgage so far we have absorbed this but it’s not sustainable.

we live abroad and the market has slowed but not to extent on U.K. (average prices at the low end are £650k if we want to buy here which we do)

options are sell U.K. house now for lower and buy here and try not to miss a lowering market here ie we’re better to take a lower price for ours and try and hit the market and buy while lower here (bigger impact on buying when house are million in dollars ?) mortgage is 100k so would have around 170k equity towards deposit for property here. Need to factor in once tenants leave we’d be paying mortgage bills council tax until it sold- tenants are not in a position to buy.

or increase our rental to market rates and try to remortgage on a buy to let and hold out for a few years for market to improve … but potentially missing a market drop
in prices where we live ? We currently rent and are paying $4k dollars per month too.

I just can’t decide , wwyd?

I’d sell the UK property. While the market has slowed, it’s by no means stagnant. Being a BTL landlord is about to get a whole bunch more challenging with rental and tax laws changing - go for the clean break!

Increase the rent to market rent. I wouldn't sell until the market recovers, which it will.

I'd sell personally. Less stress, financially and emotionally.

I am in a similar position and have just SSTC, although I was not under pressure to sell due to rates hikes.

The plan was always to sell pretty much immediately once my immigration status became permanent. The timing of it happening, while not the best, is what it is although I’m hoping the pound will strengthen a tiny bit more so I can have a small gain on the exchange rate, which is A LOT better than what is was in October/November 2022. So swings and roundabouts.

Why do you think the prices have dropped so substantially for your property? It’s supposedly only 3% down from peak at the moment.

Well 3 beds in our area were selling for 280/290k last year - ours is 4 so I think would have been 300k - now I’m seeing similar to ours on market (slightly different area ) for 270 and they are not shifting ! Although I’ve just seen exact house today listed for 300k on our street but it’s immaculate, I’m guessing ours won’t be and will need fresh paint carpets etc - estate agent think 265-285k depending on condition.

we thought about selling last year but same
situation we didn’t have pr but now do so are staying ! I’m just dreading house being empty paying sky high mortgage and it sitting there for ages getting into a market crash !

Did you also have tenants in before selling ? If so did issue section 21 and sell whilst property empty ?

This is a consideration but we need to increase it substantially! Probably be seen as greedy landlords where in reality it’s not the case - we’ve taken the hit on mortgage increase for the last year so not affect our tenants espec during the cost of living crisis, income rent is less than mortgage now unfortunately - it’s not sustainable. We’ve also taken an increase in rent here of 1000 per month so hit both sides !

I think you’re right , there more rules regulations coming in , the tax return every year is a pain and I think really we just need to get rid of it ! Just wishing we did it last year.

Several thoughts which may contradict eachother:

1. If market rent genuinely is £1300 you should raise your rent - at least £100. Tbh that seems high if your house is worth up to £300k (I'd expect to pay about £1000 a month rent for a house worth £300k). If you remain a little under market rent, your tenants will still stay as they won't find anywhere better.
2. If you're on a variable mortgage doesn't that mean you can switch to a fixed rate without penalty?
3. Paying a mortgage without tenants is still gaining equity in your house like any person who lives and owns their house; if you can afford it it's actually fine in the long run.
4. If you want to buy a higher price property, it's better to do this while the market is dipped than wait for it to recover (say you sell at £260k and buy at £600k, that's an uplift of £340k, whereas wait for 20% growth, sell at £312k buy at £720k is uplift of £408k). So you're definitely better taking the hit on the lower sale price in order to benefit more from lower buy price.

Keep us posted on your progress :)

I had expected that I would have to do this, but my tenant had asked me not to and said he would rather continue to live in the property while the viewings took place.

I am under no illusion that this was done for my benefit. I was assured by the letting agent (also the sales agent) that two months notice from either end would be fine from when we had the sales deal agreed.

The tenant has since found a new rental and has given a months notice, rather than the agreed two. I’m not impressed as nobody seems to stick to their word, but it’s not unexpected. Better he moves out early and I have to cover the mortgage, than him refusing to move out and having to go the eviction route and lose the sale in the process.

This is one of the reasons I’m selling. Tenants seem to do as they please, irrespective of what agreements are in place. It’s just one of those things.

I was always upfront it would be a short-term rental until my immigration status became permanent. It was never going to be someone’s “forever” rental home. Leases had 6 month break clauses from the outset. I’ve been ok renting to home movers breaking chains, needing somewhere short term to live while looking for a house etc but it’s been a PITA.

I’ve just seen your reply on pricing/market dropping. It’s so interesting. I know the agents in our area VERY well. It took me two years to buy so by the end I was on first name terms with everyone.

I was surprised with the valuations I got, one £50k over what I sold for (10% over) but I know their houses are always overpriced, then sit & get reduced 6-8weeks later. They were outraged when I suggested their valuation was unrealistic.

Two were similar - within 10k of each other - with the more conservative being what I’ve agreed. Both were marginally higher than my (low) expectations. I was in SE if that helps.

I think if priced correctly and fairly, you’ll get your sale as many people can’t move now so there aren’t as many houses coming on.

Any chance your property could appeal to downsizers? They seem to be flush with cash from selling their large family homes with only a few places suitable for them to go.

I feel your pain with the increased rental costs this side. It’s been insane!

I can’t see any upside to holding onto your uk property and renting it way under market value. I would be inclined to sell. Or raise the rent to £1200 to cover the increase in mortgage costs.

When does the AS tenancy end, or are they on a rolling periodic tenancy? You can market the property whilst the tenants are still there, you just need to ensure it is vacant before exchange. Do you have an agency handling the letting? If so it is probably easier to use their sales team if the fees are reasonable, as they can liaise with the lettings team to arrange access for viewings. They can handle things like issuing the S21 (or equivalent) and advise you through the process.

This is almost out exact situation.

Our tenant was told that we were going to sell and that we would give 2 months notice upon receiving an offer. They have then found a new rental and have given the month's notice as they are contractually obliged.

We'll be paying the mortgage from when he moves out until the sale goes through - one of the reasons we chose an offer from a FTB rather than somebody in a chain!

Looking on Rightmove this rental income of definitely what property is priced at. If anything it’s conservative at the houses I’m looking at are not as nice as ours - imo !!

paying the mortgage without at tenant at moment it almost like 700 interest and 200 ish off the capital ! I technically have 100k so could clear the mortgage , realistically 50k of this is only pounds the rest Canadian - but I’m nervous to use all my liquid funds !

I think the math at the makes sense ! Need to do it

Yes I’m definitely leaning towards selling , we have a letting agent handling everything but they are trying to put us off selling !

What an awful attitude. Your tennant has had to find a new home in a very competitive and cut throat rental market and you are moaning about them giving a month's notice instead of two. You are very fortunate that they have found somewhere else and will be vacating, allowing you to complete the sale.

Update : In case anyone is interested, we decided to sell due to increasing costs of being a landlord , not being able to remortgage to a decent rate and uncertainty of property prices falling. We gave tenants notice , marketed the property (very messy with tenants clutter ! Not sure if that intensional ) and accepted an offer from a ftb within 2 weeks in market (2.7%) under asking price ! I was surprised I thought it would take a while … fingers crossed it goes smoothly from here. I of course feel awful for our tenants but we’ve had to make the decision for us.

Well done for making a decision that is what you think is right for you. I hope the rest of the process goes well. When is your tenant due to vacate?

I hope OP doesn't mind me asking but what changes are coming in please? I might be about to be a....reluctant...landlord.

@Whatwouldyouoffer Mid June, we served notice before getting an offer, as we actually thought we’d need to go and paint and make it more presentable. Hopefully they will find somewhere and leave by the date. Buyers are ftb so I think they will hopefully make it easier we are both chain free

I’ll keep everything crossed for you @Kay286 Just make sure your agent is on top of things and doing everything by the book. I know it’s hard from a distance

There’s a good summary here: https://www.martinco.com/news/landlord-legislation

Same dilemma here. Our mortgage payments will go up from £583 to over £1000 a month.

We've done exactly the same thing OP. Hoping to complete in the next two weeks!

I feel awful for the tenant but they've been perfectly fine about it and moving out pushed them into making a life decision which made it easier.

Cannot wait to be rid of the house now! It just cost far too much and it was too much responsibility to do it properly. Being a landlord is definitely a rich man, large portfolio game now!