Which property should I sell?

N

nbc

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Hi guys.

Looking for some advice

I have 2 properties which are not performing so well as both stuck with low rent compared to market rate ( rental
Pressure zones)and I’m considering selling one. Which would you advise?

Property 1
Location- citywest
Value 375000
Mortgage 0
Rental income 1500
Market rate 2500
Selling will result in 75k CGT

Property 2
Location - midlands
Value 200000
Mortgage 150000 5% int only 625 pcm
Rental income 840
Market rate 1400
CGT 0 or close to


Personal circumstances

Currently live in UK where I’m tax resident - any interest I pay on a mortgage I get a 20% tax credit for so not as generous as here

I’ve a small house in dublin that I spend weekends in- mortgage free.
I’ve a flat in London worth £750000- mortgage £350000-
Mortgage rate 5.5%

I’ve 2 other investment properties - one in London and one in dublin- both performing ok. Mortgage free Irish one and LTV London one is 65% on a fixed rate 1.7% till 2025

I’m 53
Income £125000
Have a small Pension 150k


So property 1 will never have a market rate
After CGT I could get almost as much in a savings account here in Uk (6% available )
Or pension- 100k of pension will
Cost me 60k

Property 2 - after tax is costing me
a small amount monthly but no CGT on selling.

Im normally good at this but I’m having difficulty if there is an obvious choice . Maybe there isn’t…
Thanks I’m advance

NBC
 
You own 6 properties in total including 4 investment properties? Aren't you very, and maybe overly, concentrated in one asset class and could do with diversifying a bit more? Perhaps by selling more than one investment property (perhaps even the two that you're asking about here) and investing the returns in another asset class such as equities?

This may need more of a Money Makeover post than a simple "which of these two properties should I sell?" question...
 
ClubMan said:
You own 6 properties in total including 4 investment properties? Aren't you very, and maybe overly, concentrated in one asset class and could do with diversifying a bit more? Perhaps by selling more than one investment property (perhaps even the two that you're asking about here) and investing the returns in another asset class such as equities?

This may need more of a Money Makeover post than a simple "which of these two properties should I sell?" question...
Click to expand...
Thanks for that. You may be right. If I put a gun to you head and said I could only sell one which would you advise?
 
nbc said:
Thanks for that. You may be right. If I put a gun to you head and said I could only sell one which would you advise?
Click to expand...

If I put a gun to your head, would you find any ideas in your previous thread on this?

Should I sell a property due to low rent?

Hi guys I have 2 properties rented below market rate due to me having been a nice guy back in the day House 1- dublin 3 bed - €1475 pcm Market rate €2400+ Mortgage free House 2 - Country location- 3 bed- rent €830 Market rate €1400 Mortgage interest only- was €150 pcm now almost €500 I’m...
www.askaboutmoney.com
 
Have you considered investing & renovating to bring up to market rent?

Alternatively you could rent out your Dublin weekend home & use the citywest rental property as your holiday home for the next two years. Then when you go to rent again, you'll be able to bring up the rent to market level.
 
DannyBoyD said:
Have you considered investing & renovating to bring up to market rent?

Alternatively you could rent out your Dublin weekend home & use the citywest rental property as your holiday home for the next two years. Then when you go to rent again, you'll be able to bring up the rent to market level.
Click to expand...
Thanks Danny
I’m guessing this would be challenged as I have a home.
 
If you don't need the money
And you want to remain in property
Sell property 2 in the Midlands and clear the loan


With property 1 can you consider short term letting? With the help of an agent.
Then if it's let like that for two years, can you let long term again at the market rate?
 
moneymakeover said:
With property 1 can you consider short term letting? With the help of an agent.
Then if it's let like that for two years, can you let long term again at the market rate?
Click to expand...
This isn't possible. As I understand the OP, both properties are already tenanted.

On the reasonable assumption they have been there for more than 6 months; that means the only grounds on which the tenant can be asked to leave (all other things being equal) are:
  • if the property is to be sold,
  • the owner wants it for their own use or
  • if extensive refurbishment is to be done, making the property uninhabitable during the refurbishment. (there's more restrictions on this one, you can look up the detail yourself)
 
nbc said:
Thanks for that. You may be right. If I put a gun to you head and said I could only sell one which would you advise?
Click to expand...
I would sell several, probably more than one or two, and invest in equities. But I have no idea of your overall financial circumstances so that's probably useless input.
 
Unless you need the cash, I dont see why you'd sell either.

There's an easy work around available to you & properties could be back to market rent in 2 years.
 
DannyBoyD said:
This isn't possible. As I understand the OP, both properties are already tenanted.

On the reasonable assumption they have been there for more than 6 months; that means the only grounds on which the tenant can be asked to leave (all other things being equal) are:
  • if the property is to be sold,
  • the owner wants it for their own use or
  • if extensive refurbishment is to be done, making the property uninhabitable during the refurbishment. (there's more restrictions on this one, you can look up the detail yourself)
Click to expand...
I didn't say immediately
What i meant was, when current tenant moves out
 
DannyBoyD said:
Unless you need the cash, I dont see why you'd sell either.

There's an easy work around available to you & properties could be back to market rent in 2 years.
Click to expand...
If I use abs excuse to get them
Out I’m pretty sure they could come back to haunt me later if they realised I wasn’t telling the truth
 
Not sure what you mean by "abs".

Theres no fib here.

Give notice on the City West property that you require it for your own use; that's about 8 months notice I think from memory (double check).

Then rent out the property you currently use for weekend use (& get market rent) and use the City West property instead.

After 2 years you can reverse & get the City West property let out at market rent.
 
If property 1 low rent is annoying you then sell it
Pay off the 150k loan on other property
Then that one is cash flow positive
 
So is the following summary about right?

1690015347190.png
So, you have about 30% gearing.

This is how I would approach the problem , and maybe you have done the first few steps.


1) Have I too much of my wealth in one asset class, property?
2) Have I too much borrowing?

If the answer to either of these is yes, then you decide how many properties you want to sell.

Then you assess each one on its merits.

Maybe you have done these steps, but it's not obvious to me.

So why are you selling either property?
Why is it one or the other? Why not neither or both?

Brendan
 
Then look at each one in turn.
Here is the approach I would take. I don't understand the tax position, but adjust these figures accordingly and you will come to the right decision.

If you sell property 1, you will get €300k net and lose about €9k net income - I assume your rental income is taxed at about 50%?

nbc said:
I’ve a flat in London worth £750000- mortgage £350000-
Mortgage rate 5.5%
Click to expand...

If you pay down this mortgage, you will save €300k @5.5% or €16,500

So that seems like the right thing to do.
 
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nbc said:
Property 2
Location - midlands
Value 200000
Mortgage 150000 5% int only 625 pcm
Rental income 840
Market rate 1400
CGT 0 or close to
Click to expand...

Rental income: €10,080
Interest: €7,500
Profit before tax: €2,500
Profit after tax €1,000

Net investment: €50,000

If you sell it and pay the €50k off your UK mortgage, you will save €2,750 net.
But you will lose only €1,000 in net rental income.

So I would sell this as well.

Brendan
 
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