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Home > What to do if we sell our rental property?

What to do if we sell our rental property?

January 24th, 2020 at 07:12 pm

Advice, thoughts, opinions and experiences welcomed on this one!

First, the situation:

We're finally going to try and sell the UK flat this year. Now that Brexit details are becoming more concrete, we're hoping people will be less spooked and homes will move faster.

We'll probably list it in the spring, when the current tenants' lease is nearly up. It might be listed for 215K pounds but could sell for about 200K. We think management and real estate agent will take 3% of the sale price. We'll still owe about 32K in mortgages that will need to be paid off. We will likely owe about 35K in capital gains tax (the property appreciated in value quite a bit from when NT bought it).

So that takes us to:
200K
-6K
-32K
-35K
A profit of 127K pounds maybe?

That's approximately $160,000 in U.S. dollars.

Assuming we sell and we have $160K at our disposal, I can think of many uses for the money, but here are the two I keep returning to:

1. Pay down our mortgage on our home. Key factors:
- We currently owe about $370K
- We bought for $465K in 2014 and haven't had it assessed since then
- Our payments to principal, interest and mortgage insurance come to about $2100 per month
- We're 5 years into a 30 year mortgage, so we're looking at 25 more years if we continued to pay the minimum.
- We're looking at financing $40K of our upcoming kitchen renovation. We may explore a mortgage refi (for a lower rate or possibly for a 15-year term) once the kitchen is done and the home is assessed

2. Use the money for a down payment on a rental property closer to home. Key factors:
- The UK rental brings in about $500 per month, and we save most of that money for longer-term things (EF, renovations, etc.)
- The idea of having income generated outside of our full-time employment is very attractive for a number of obvious reasons.
- If we bought in our immediate neighborhood, condos start around $200K, single-family homes around $250K, and duplexes/triplexes around $500K. There are of course cheaper neighborhoods in the city.

So that's where I am. If you had to vote, which do you think would contribute more to overall financial security/independence?
A. paying down our mortgage
B. purchasing a rental property
C. you need professional help--go talk to a financial adviser already!

Posted in Uncategorized | 8 Comments »

8 Responses to “What to do if we sell our rental property?”

  1. Michelle Says:
    January 24th, 2020 at 08:12 pm 1579896745
    1579896745

    Following Dave Ramsey plan- you would put it towards your mortgage on your personal home. We just paid our home off in July and it is a wonderful feeling.

  2. crazyliblady Says:
    January 24th, 2020 at 08:22 pm 1579897349
    1579897349

    I personally vote for an alternative, paying down the mortgage on your home, paying for the renovations, and putting money into savings or retirement. That's my humble opinion.

  3. Lucky Robin Says:
    January 24th, 2020 at 09:10 pm 1579900216
    1579900216

    If it were me I'd put it on the mortgage, but that's because I hate debt.

  4. mumof2 Says:
    January 24th, 2020 at 10:27 pm 1579904855
    1579904855

    I would pay for the kitchen reno so you have no extra debt...pay on your morg...once that is down you can then look at a rental property...paying a big chunk of your morg should lower interest payments which will save you some money...but really it is up to you

  5. LifeBalance Says:
    January 25th, 2020 at 12:01 am 1579910487
    1579910487

    Do you like being a landlord? Would you hire a property management company if you bought a rental property close to you? It really comes down to your preferences. I tend to be conservative. In your shoes, I would pay the loan off to my friends, then pay the kitchen remodel, then throw the remainder at the mortgage. Or if your mortgage interest rate is low, it may make more sense to put the remainder in a retirement account.

  6. ceejay74 Says:
    January 25th, 2020 at 01:56 am 1579917384
    1579917384

    I appreciate everyone's perspectives. I'm trying to put emotion aside (I hate debt but also love owning property, so there's emotion on both sides) and really look at it from a long-term financial security perspective: Would it be financially better to have passive income and an appreciating asset, or a paid-off mortgage and therefore lower housing costs sooner?

    LifeBalance I did want to note that what I consider a "loan from friends" they consider a down payment on eventually buying a share of the duplex we all live in. I no longer think that's a very good idea, and I don't even know if they think about it much anymore, but we haven't had that conversation, so it would be sensitive to give them back the money without it being a big thing. We have over $50K in cash savings so could pay them off at any time but have chosen not to for that reason.

  7. My English Castle Says:
    January 25th, 2020 at 04:11 am 1579925477
    1579925477

    When my DH sold the UK flat, we put that cash toward our mortgage--with a dinner out in the mix. I like not having a mortgage, but it is a lot of eggs in one basket. Would you consider divving it up into a couple of different uses?

  8. CB in the City Says:
    January 25th, 2020 at 04:49 pm 1579970990
    1579970990

    I like EC's idea of paying down the mortgage and a dinner out! Make it a good one!

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