Sell or buy: Advice

[RLG]

Hi All,

I am new to the forum and looking for some advice please as to whether I should sell or look to buy out my siblings - I have tried to provide as much info as possible:

• Mortgage free leasehold, 3 bedroom/2 floor maisonette (15 mins walk from Canary Wharf, London).
• Mum lived in the flat for 40 years (passed away in Feb this year). There was a fire at the flat a few years ago and so it has been completely redecorated with all new electrics etc… to a high spec.
• There are 90 years left on the lease and is owned by a Housing Association.
• The property was valued by three estate agents in Feb to put on the market for between £425-£450. However, this has been going down steadily over the months until we are now at a point where we are getting offers around £370 (which . The rental value given at the same time by the rental arms of the same agents was approx. £1,900 pcm with a view to accept £1,800. pcm.
• Management fees running between 15-17% plus VAT.
• There is a charge of £10k on the property due to the installation of windows by the Housing Association many years ago which my parents could not afford to pay at the time so they agreed to put it on as a charge.
• I appreciate there are lots of uncertainties and issues at the moment with extra stamp duty, taper relief, Brexit etc…

I am one of 4, higher rate tax payer and currently have a family home.

Any info on whether this is a good idea or not, financials etc... would be most appreciated and please let me know if you need any other information.

Kind regards,

Rob

For complete openness I have also posted this on one other property forum to try and get as much information as I can.

 

[FWL]

I think there are a number of factors to take into consideration here:

• The London property market is under pressure and is likely to be so for some time (a recovery will depend upon Brexit)
• There is continuous demand for private rental properties creating long-term income streams
• Bear in mind your taxation situation and the reduction in buy to let mortgage interest relief (especially for high rate taxpayers)
• How would you fund any potential acquisition of the property?
• Is there any inheritance tax payable on your mother’s estate?

 

[RLG]

Hi FWL,

Many thanks for your response.

If I were to buy, it would be for a long term investment so would hope the market would settle post Brexit.

No inheritance tax to pay.

I would look at an interest only mortgage and either release some equity in current home or pool together some savings for the deposit.

How much tax I would have to pay on the rental income is another thing to be considered.

Rob

 

[Longterminvestor]

Hi Rob,

Rental income would simply be added to your existing income. Also, remember the government is winding down how much of your mortgage interest charges you can offset against rental income. It will eventually taper down to a tax credit of just 20% on mortgage interest charges which means higher rate tax payers will be hit quite hard:-

https://www.propertyforum.com/property-in-the-uk/the-real-cost-of-changing-buy-to-let-mortgage-interest-tax-relief.html