Selling/letting quandary

[Fedupwithflat]

Hi everyone, I bought my one bed flat in London for £300k in summer 2016, as a first time buyer, when I was 28. I stretched myself to buy the flat and thought it would be a good investment for my financial future. Around the time I bought, other flats in my development were selling for £290-310k, so £300k seemed a reasonable price. However, due to a combination of factors, the exact time I bought seems to have been the peak of the market - within a couple of years of buying, the prices for flats in my development had dropped considerably, and the most recent sold prices are now around £260-£277.5k. No flats in my development have sold at all since early last year, despite some being on the market for some time.

DP and I have been living in the flat together for the last 1.5 years (we’ve been together 3.5 years in total) and are now ready to buy somewhere bigger together with a view to starting a family, and also to relocate to be closer to our own families. I’ve had my flat on the market for £275k for around three months now with only seven viewings (the first viewing resulted in an offer of £265k which I rejected because it was so early on and I was hoping for more, but I’ve had no offers since).

I’ve now got to the point where I’m desperate to move and I don’t know what to do. Should I keep trying to sell the flat at the current price for longer (which is feeling increasingly futile) or reduce the price and make an even bigger loss (I would need to sell for around £280k to break even compared to having rented for seven years, when all the mortgage repayments, stamp duty, legal fees, renovations etc. are factored in)? I’m starting to worry I won’t be able to sell the flat in the current market even with a big reduction.

Alternatively, I could rent the flat out and we could rent elsewhere, but I would actually be making a loss of around £250 a month on the letting when tax, mortgage, agents fees etc. are factored in. I’m concerned about the risks of being a landlord and the flat potentially dropping even more in value, plus the lease is only 93 years so I’m concerned that extending the lease (which I think will cost around £10k) will become an even more pressing issue the longer I keep the flat.

I could go into more detail but think I’ve probably ranted long enough! Any advice would be greatly appreciated, as I feel I’m going round in circles with this, I’m wearing out the patience of my DP, family and friends and I can’t get any perspective any more. I’m so anxious about this all the time and am starting to feel like I’m living in a prison!

Where abouts in London ? Very surprising it hasn’t increased in 7 years ? Unless you paid over asking by a significant amount.
what do you owe on the mortgage ?
I would highly avoid becoming a landlord, it’s just not profitable anymore, and new stricter regulations are coming in …. You also would need a decent chunk of money for repairs , covering mortgage is tenants don’t pay , insurance etc. not a good time to get into it with rates rising.
drop the price it’s only worth what someone will pay

If your sure your numbers are right, then I wouldn't be considering renting it out. Small landlords are facing an ever increasing battle to make a profit if they have high leverage - this situation is likley to get worse as prices settle lower and further legislation is on the way.
You would be better taking the hit now and having an honest conversation with your agent about re pricing to a level that will definitely get a sale. If you don't do that quickly your going to end up chasing the market down as prices soften further.
Having said that it is possible that help to buy might be reintroduced and might include second hand homes towards the end of the year. If that does happen then there might be more chance of a sale at the price you hoped for.

I think you should ask your estate agent for advice about what you could do to make your flat more attractive - is it cluttered, for example, are there lots of DIY jobs that look like they need doing. Or is it too neutral (no character at all)?

Don't worry about the money you have lost on the flat, that is done and you can't change it - you should be able to negotiate a great price on the property you buy because the market is flat in most areas so it's swings & roundabouts.

I would reduce it by another 10k and ask the agent if they will push it hard if you do as a recently reduced property that is good value.

I would need to sell for around £280k to break even compared to having rented for seven years

what do you mean by this? Are you trying to recoup what you would have spent on rent?
how much mortgage do you have to pay off?

Where in London? I know where we live (z3, SE) one beds are stagnating, especially anything with no outside space, whereas other properties are in short supply and selling well. FTBs who tend to buy these types of properties are still very nervous- if the building is cladded, for example, it may well put them off.

Is it a new build? If so, you generally end up paying a premium as the first purchaser, and it takes a while to come back up.

There are generally a few reasons why people won't look- atm, these are price, been on the market too long, undesirable property/area, or spooked ftbs. What has your agent said (if you're not using one, you should be to help you navigate this)? Could it be time to switch agents to bring the property back up the rightmove listing?

Is the building service charge high?
What is the feedback from viewings?
When does your mortgage expire?

If you've had the property since 2016 you should have a built a bit of equity, drop the price, forget about 'recouping costs' and move on with your life.

The cladding scandal did spook a lot of buyers when it comes to new builts.

Does your flat has all the right paperwork in place (to show that there is no cladding/remedial work needed)?

If so I would highlight that from the start in the Rightmove advert.

If your flat is a convenient location and reasonably priced you should still be able to sell it.

As long as you can repay your mortgage with what you get for the flat, then you are better off selling that taking on the responsibility of being a landlord.

People always expect to make a profit on property but like any over investments that is never guaranteed. You should focus on the fact that selling the flat will allow to move on with your life.

You will also pay more in stamp duty if you already own one home.

The 93 year lease will be putting buyers off. I would consider paying 10k to extend the lease yourself, then put it up for sale again.

I would be reluctant to rent the flat out and rent somewhere else, as you need a financial buffer to be a landlord.

I wouldn't extend the least - 93 years is fine though is another reason to sell this year rather than rent for a few years.

I guess it’s just not not in an area where people want 1 bed flats. It should have increased in value. My DD has a flat bought in 2018 and in her area (zone 1 now) they were a lot more in 2018 than in 2016. Hers has just been valued showing an increase over 2018 prices. However it’s 2 bed, 2 bath. At £270,000 (say) you would not get anything much in towns in the home counties so this must be a very undesirable part of London for this type of property.

I would make every effort to make it look attractive and accept price seems to be the issue. So reduce it. I’ve just sold a 2 bed house for £270,000 and it was 530 sq ft. That’s 40 miles from London.

I wouldn’t extend the lease. Mortgages don’t care as long as it’s over 80 years and there’s no way of telling how long it’ll take. The buyer can always negotiate the extension into the buying process; my husband did when he bought his flat - his solicitor loaded with the other sides and they handled it all.

Thanks! What’s your thinking behind saying prices will settle lower? You could well be right, but it would be great to understand your reasoning as I’m hearing conflicting things. I’m currently torn between worrying that prices might drop more and wondering if things might get better in a year or two e.g. when people get more to new mortgage rates/cost of living conditions, or interest rates potentially come down a bit.

I would definitely make a loss on letting - I think at least around £6-7k over two years. However I wonder if it’s worth it if it would mean being able to sell it at a vaguely decent price further down the line.

I’m lucky enough to have savings I’ve built up since I bought the flat that would be a good buffer, so it’s not really a case of not being able to afford to be a landlord (with all the risks), I’m more worried about throwing more money away.

With your calculations, are you factoring in full repayment mortgage? It’s not unusual for landlords to pay interest only.
could you look at this, and/ or extending the term, to reduce payments and make renting it out work out?
im in south west, very far from London, so different market, but here prices have not fallen noticeably and the market is picking up.
personally, I’d play around with figures, see if I can release a deposit for somewhere new, and rent the flat out.

I only had a small deposit, so what I would have paid in rent vs. what I have paid in mortgage, service charge and ground rent over the years is similar. £280k is roughly what I would need to sell it for to get back my deposit, extra equity I put in when I remortgaged, stamp duty (there was no exemption for first time buyers when I bought), renovations, legal fees etc. I have built up some equity (mortgage currently a little under £230k) but that is factored in.

Also, personally I would extend the lease.
im currently flat hunting, there are some with a recently renewed 999 year lease! So I’m not considering anything under 150 years.

Thanks everyone for your advice, although there are definitely some mixed messages here re buying vs letting and the lease extension, so I’m still pretty uncertain!

To answer some of the questions:

• I do have an agent (in fact, I switched to a new one recently so it’s been relisted).
• The feedback I’ve had from viewings has been generally very positive, and the agents haven’t really been able to suggest anything I should do to improve it for viewings (other than potentially replace the coloured carpet in the bedroom with a neutral one).
• It’s not cladded and it wasn’t a new build when I bought it.
• Putting aside the overall price drop which I think is due to various factors, I suspect the issue with selling at all right now is spooked FTBs and no new BTL landlords/BTL landlords selling off similar properties.
• I didn’t pay significantly over the asking price, I paid a typical price at the time and have been unlucky with the market for this specific type of property in my specific area. (I’m trying to be a bit vague about exactly where haha!) I agree though that it seems mad that it’s gone down in value after seven years - it’s quite difficult not to feel hard done by when I see how well friends who started off in a much better position than I did have done in the housing market.
• Service charge is pretty typical/maybe even low.
• My five year mortgage fix expires in July.
• Unfortunately the rental calculations are based on an interest only mortgage!

I take the point re property not necessarily always being a good investment, and I think I might end up just reducing the price to be able to move on, but it seems counterintuitive to sell for such a big loss, especially as I’ve hung on to the flat for longer than I would like already, hoping the value would improve. (I initially, naively, only planned to be in it for a couple of years.) The development was built in the nineties and prices increased steadily over the years, until almost exactly when I bought.

Tbh the whole experience has made me feel like property is a con and has made me very nervous about buying again! Is anyone on here in a similar position/has anyone had a similar experience in the past? I’m the only person I know who has had anything like this happen to them!

I lost money on my first 2 properties bought in London then Norfolk in the late 80s/early 90s.

Then I made a lot of money on my next property and the one after that. I know it can be so dis-spiriting when you lose money on property. But I always remember my Dad saying it doesn't matter if you've lost money if you're moving up the property ladder as the next house will be cheaper as well than in a rising property market.

As long as you have a deposit of course.

Is 20K really that much of a price to pay to move on with your life ? If you want to have a house and children, is that a price worth paying ? If you were 28 in 2016 you are now 35 I'm sure you don't need reminding :)

After all, a lot of people lose that on a car over 10 years. Amortized over 7 years that is 3K per year. Sure I would rather not lose that money. But it isn't disastrous surely ?

A lot of people have become fixated on the idea that property prices only go up. They don't - not all the time.

I appreciate it is a difficult choice. And kudos for not claiming you are about to become an "accidental landlord", as becoming a landlord is never an accident.

Good luck, whatever you choose.

I’d cut your losses and try and sell now , losing £‘s is frustrating but if you had been renting for that time how much would you have lost when you factor the equity you have built during the time too ?

Just cut your losses and sell then, you’ll obviously have to reduce the price but being a landlord isn’t going to make you money and it seems unlikely if it hasn’t gained in 7 years it’s unlikely to anytime soon espec with the current market

• My five year mortgage fix expires in July.

And have you calculated what you’d be paying on a new mortgage? July is not far away.

Just stay there and make it work. I sold a 3 bedroomed town house at a loss to move into a 5 bed new build, we never really recovered from that rubbish financial decision and I really regret being greedy. What I wouldn't give for that 3 bed house now

How can OP stay there and make it work when it's a 1 bed flat and she wants to start a family?
Your situation is not her situation.