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  • Property-a-holics

    Selling properties with good capital gains?

    Hi all

    Just wondering if anyone as part of of their business plan sells off properties that they may have owned for a while and made a good profit on to reinvest in other properties? 

    If so what would be the reason for this as I’ve been asked to sell one of my properties to a current tenant which if I did would make be around 40k but then I’d want to reinvest in other properties maybe flats rather than houses if they are more profitable. Of course I understand there’s tax implications but just wondered if any other landlords routinely get rid of older profitable stock in this way. 

    Cheers 

    Jamie
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    I am loathe to ever sell a property that performs well.  There are always significant costs associated with doing so.

    I guess the answer really depends on such issues as if it requires a facelift, and you don't have the funds to do one.  But in that instance you could consider the Advanced Rent Option where you can receive 12 months rent in advance.

    And I certainly wouldn't sell a house to invest in flats! 

    ​So, on balance, and without knowing the full details of your circumstances, the performance of the property, the condition of the property - my answer would be to hold on to it.

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    If you are selling and have re-mortgaged and are heavily leveraged you need to work out if you have enough equity in that property to cover any capital gains tax liability.

    On a side point many heavily leveraged landlords have substantial potential CGT liabilities which they are unaware of and this can be a real issue for any forced disposals during a recession for example where any earlier released capital has been reinvested in additional properties but been wiped out by a drop in house prices.

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    Rural Practice Chartered Surveyor. Experienced in estate management, residential investments, planning and development and rights for utility apparatus. All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    I've got a one at minute paid £50K spent £5K, did roof partial re wire bathroom bit plaster paint.

    9 years later tenant wants to buy it, they always said this was their intention and wasn't to worried as it in Gateshead and maybe not the best area. Plus its a bit further away from where I usually buy. Its now worth about £80/85K.

    However they've put a new kitchen in and tiled kitchen, dining room floor, replaced flooring etc so £80K is fair. Head says no, but they've been good tenants and always paid on time. So will sell it, would I buy in this street again probably not, so I should sell it. Plus if I don't they will find another on estate. But mortgage is only £49 a month rents £575, selling isn't going to help me become full time I know that.

    Then going to end up with tax bill. But made me over 50k from rent over years after costs so cant complain, speaking to mortgage advisor as want to see if I can port mortgage I know it'll be a no as its 1.1% ish above base rate.

    What would others do?

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    I am in the middle of restructuring my portfolio and selling quite a few properties I have held since around 2006.

    The reason being that these properties are student properties a long way from my home and were bought with 85% LTV ME mortgages.  The values have risen a lot in the last couple of years and as the managing agent has been creaming off increasingly eye watering fees I have decided enough is enough and I'm buying a higher number of cheaper, good cash flowing properties nearer home so that I have more control.

    The ME mortgages were very good value in the past but the cheap deals available now are just as good and my aim is to have a portfolio of 60% LTV properties under an hour drive from home.

    I will have some CGT to pay but not a huge amount as I have been staging the sales over the last few years to make use of the annual allowance which is £12,000 this year - the last two properties will go in the tax years 20/21 and 21/22.

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    All comments are made in good faith and are given to the best of my knowledge and experience but I would advise you to consult an expert before making important decisions and I accept no liability for comments made.


    I never really sold anything until about two years ago when I went a little mad and sold 11 houses as thought I could no longer get mortgages to buy a high value country property as was so sick of all the hassles of being a LL.

    I really regret this now as these were my best houses and all had cheap debt on them and rented well, one being a large and sucessful holiday let and have gone up massively since.

    Luckily I did retain the rest of a larger portfolio and am maybe looking to add to it again as see Brexit uncertainties as a time of opportunity to get some good deals.

    I sold off too many at this time but am coming round to a bit of house keeping again...ie sell the odd house to a good tenant if it does not quite fit the portfolio any more.

    It could be a good idea to sell to your tenant and replace with a unit that works better for you.

    Some of my early BTL's will need refurbing again soon so think I may switch into smaller units in better areas as the refurbs will not really add anything to the capital value in this climate / location. Sometimes it may even do better as a house in need of slight TLC than a spanking new refurb!

    Frankly I'm also a bit bored with going back over old stuff all the time so quite like the idea of freshening up the portfolio a bit!

    I am also quite exposed to S24 so can re invest in a co structure.

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    Apparently we can get clobbered and a sale can be unwound if we buy at below market value because we have ‘exploited ‘a vendor so what about selling at above market value to an existing tenant ? The way the political winds are blowing we could get clobbered for this to .
             I have a property that has been very profitable for several reasons such as location but mainly because it’s had long term tenants so no void periods . The present tenant wants to buy it but the only possible reason I would part with it is if the offer was significantly above market value. 
         Also If the latest Corbin idea of a tenants right to buy their rental property comes to fruition then maybe now is a good time to sell to a tenant while we are still in control of the process .
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    I think it makes sense to take stock sometimes and sell some if you know you can do better with the funds.

    Which is what Im doing now with a 1 bed flat that i bought 4 years ago for £185k, extended the lease, refurbished it but still only brings in £950 a month in rent. Since its value is now closer to £300k I aim to buy 2 with the equity and also max out on my and my partner's yearly capital gains allowance. 

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