Updating post from Reddit.
I have a two bed flat in London (Zone 4). I’ve lived there for the last 10 years and during that time the flat has gone down in value, as is case generally with flats.
I now am planning to move to the coast (close to family) and have put an offer on a house. I was planning to let out the flat (was given estimated rental value of £2k per month from Foxtons) and swallow the additional SDLT. I’m now having real doubts about this and wondering if it would just be better to sell at a loss. I’ve seen a flat in the building advertising for a lot less in terms of rental (£1.6K), although this flat doesn’t have two double bedrooms (has one single and one double), and spoke to the letting agent for that flat who suggested that Foxtons might have inflated the potential rental value for my flat. If I was to let out my flat for around this amount each month I’d be looking at around £350 a month after taxes, mortgage and letting agent fees.
I just wondered if anyone has any advice or has been in a similar position and, if so, what you decided to do.
Thanks!
Sell up, honestly it's not worth the hassle. We will be selling our rental at the end of the current tenancy.
Thank you. Yes, this is what I am leaning towards.
While Foxtons estimated £2k/month, the £1.6k/month figure from the other letting agent might be more realistic. After taxes, mortgage, and fees, £350/month isn't a huge profit, but it could help cover costs and keep the property as an asset.
Flats in London have generally seen slower growth compared to houses, but holding onto the flat could allow you to benefit from any future market recovery.
Renting out a property comes with responsibilities, including dealing with tenants, maintenance, and potential vacancies. If you're moving far away, you might need to hire a property management company, which could further reduce your profit.
Selling at a loss can be disheartening, but it might free you from the ongoing costs and responsibilities of owning the flat.
Flats in London have struggled post-COVID, and the cladding scandal has affected buyer confidence. If the market continues to decline, selling now might minimize further losses.
Need ask urself
Do you see yourself wanting to return to London or needing the flat as an asset in the future?
Can you comfortably absorb the loss from selling, or would renting provide more stability?
Thank you. This is helpful. The £350 per month factors in a fully managed letting agent fee. However, it doesn’t factor in service charges for the flat (around 3k per year and growing) or ground rent (250 per year capped).
The flat is leasehold and in 15 years time will be approaching the 80 year mark when it will be harder to sell, although it is possible there may be some legal changes in this space in the next few years making this less of an issue.
I can absorb the loss and it would also be balanced by around 20k I could claim back in additional SDLT.
The additional SDLT refund is if I sell in three years. Potentially wanting to return to the flat in the future is definitely something I am contemplating, but tbh I would never want to live there permanently, it would only be so I could commute to work during the week. If I sell this flat then I would potentially look at getting a one bed further down the line.
It sounds like you have already made up your mind and just need convincing to go ahead and sell.
Have you applied to extend the lease? The price would plummet at an 80. Year lease
Not yet. There are currently around 98 years on the lease so it’s not at that point yet.
I expect after a further 18 years of rental, given the cost of lease extension, service charge increases, further works, stamp duty, you will still be at a loss.
Your flat isn’t an asset it’s a liability.
Hopefully it’s not an office to residential conversation.
Yes, that is how I am starting to view it. It’s a purpose built flat.
I think you need to sell. Numbers don't add up for keeping it.
Sell now.
This is a no brainer.
Sell, you will only just be breaking even and then there is no money in the pot for repairs, updates, maintenance and the potential biggest cost - non paying tenants. I wish I had already sold
Sell
I was in this boat 2 years ago.
Estate agent said £1k a month rental value vs £150k sale value. I thought that sounded good. Even if I just hung on for 5 years, I'd make 60k, and then sell it for a little bit more. Easy.
Did the maths. Apparently not.
From the £1k is seemed I'd lose about £200 in various fees and insurance, and as a higher rate tax payer, I'd lose a further £400 in tax. Taking me to £400 a month. I'd also have to cover the £150/month service charge, and cover the costs of any repairs. I figured I could be down to as little as about £2-2.5k a year. It was also going to mean an extra £6k or so in SDLT. So all being well, I'd start seeing it earn money... About now. And then excluded the possibility of a shit tenant causing a load of damage, flooding the kitchen, or just not paying rent and dragging out a 12-18 month process to evict them.
As it was I took a 5 year mortgage on my new place so once the old place sold (circa 1 year later) I stuck the money in a 3 year fixed rate ISA. It makes more interest than i was set to make in rent. And the income it brings is (almost) certain. It's so much easier, and means I'll be mortgage free here the day my fixed term runs out.
Sell and go.
Is the '£350 a month after taxes mortgage and letting agent fees' an interest only mortgage, or does it include a repayment component?
Interest only.
The additional SDLT is a lot of years of rental income to overcome. Sell. But you need to have the right expectation for the price, otherwise it won’t sell.
Agreed. And, yes, I would absolutely price to sell (i.e. at 30k less than I paid for it).
To be honest, as much as we all hope that our property prices will rise, £30,000 lost plus a ballpark estimate of £20,000 of mortgage interest works out at £50,000 for ten years of London rent. You've probably still not made a loss compared to not having bought.
Letting is so easy if it is managed. We do this as we are over an hour's drive away and managing it ourselves is a pain. We get about £10k a year as passive income. Been doing this for about a decade now and all we have done is buy a new boiler (£4k), refurbished the kitchen (£2k) and a new sofa (£1k). The rest is all profit.
But they inevitably take a decent percentage each month for not doing much other than finding you incredibly expensive contractors (when things go wrong) only to take a rebate to themselves from said contractor(s).
I don't disagree it's easy when managed, but in my opinion you can now make more money on your capital easier and with less risk elsewhere; especially if the property is unlikely to go up in value significantly due to its type and location.
Having said that Trump hasn't helped on that argument over the last few weeks....
The letting is our approach to diversifying.
Our yield on the flat is 8%. Yes I could probably get more with equities, but I could lose a lot more as proven over the last couple of weeks.
Yep, can't argue with that (diversification) 👍🏼
If u brought the flat on ur name, then the rental income is taxable depending on your income. You might get a lot less than u calculated.
Yep. I will pay 45% of the rental income in tax - another reason it’s just not a great idea!
Rip. I hope your service charge is not that high as well.
You said London zone 4 but can you share the postcode? This would give an idea of how properties in general around there have changed in value and what they might do in future.
SE26 5BG. Thanks!
It is Foxton, enough said. They definitely inflated the rental you can get so you sign up with them.
£2k per month in zone 4 ? Unless you are situated next to a train station and is a new build, you will struggle to get anyone to pay £2k. £1.6k is way more realistic.
No one would pay 25% more rent (£400) just for a single room to become a double room.
Sell it, then you don't incur the additional SDLT. Plus save you the headache of being a landlord.
There are some god areas in zone 4 where £2k wouldn't be enough
It is right next to a train station (4 min walk) that is 16 min to London Bridge and 20 min to Charing X. But Foxton absolutely has inflated the rental value.
Yes, I think that is what I am going to do (I.e. sell). The responses to this post have been very helpful.
When you add it up over the years has it actually made you a loss? Just out of interest. It sounds like you don't want it, so just sell up.
I rented out a room using the rent a room a scheme. This has netted me around 50K over the years when I tot it up if I exclude bills. So I suppose you could say I have broken even if I make a loss when I sell. I don’t really have any sentimental attachment to it.
That's what I was getting at. If the future income is going to take say 2 or 3 years to cover the addition stamp duty, is it worth it?
What part of London
sell up buy some alt coins and wait for that to recover
In the same boat, I plan to rent for 2 years and then sell, to get back my sdlt. I'm in zone 7