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You have just bought a new house, and thus you are moving from your old house by the sea. In the neighbourhood of the old house, there is an old shipyard that is supposed to be transformed to fancy apartments within the next five years. The investors that are financing the transformation plan to develop the area and refurbish playgrounds, beaches and the boat mooring spaces. All in all, the qualities of the neighbourhood will be significantly improved and it is expected that the prices for the existing houses in the area will rise by 30% when the project is finished. That includes your house, and this rise comes in addition to the general yearly rise of houses. The general yearly rise is expected to be 7% in the foreseeable future.
To cash in on the future development on your old neighbourhood you can choose to not sell the house immediately, but instead hire it out and sell it when the project is finished. If you sell it now, you will pay no taxes on the profit. By selling it later, you will have to pay 28% in taxes on the profit from the sale.
A real estate broker tells you that you can sell your house for 2.300.000 GBP now. Another broker from a letting agency (a firm that hire out peoples houses) say they can hire out the house for 9.500 GBP per month. However, they are charging you the first 1,5 months of rent to start the process, arrange showings of the house, select candidates and write the contract. In addition, they charge you 10% on the monthly rent to maintain the contract (get in the cash, follow up if the cash is not coming in, etc).
If you rent it out you have to pay insurance for the house (3600 GBP/year), you will have maintenance costs (6000 GBP/year), and municipal taxes (water, renovation, etc. 700 GBP/month). You will also have to pay 28% taxes on your net profit from hiring out the house.
If and when you sell it, you can deduct the price you bought it for (800.000 GBP), and some renovation costs you have had during the time you have lived in the house (150.000 GBP) before calculating the tax on the profit from the sale.
The current and foreseeable interest rate on bank deposits is 1%, and on bank loans it is 4%.
Should I sell the house now, or wait five years?
To cash in on the future development on your old neighbourhood you can choose to not sell the house immediately, but instead hire it out and sell it when the project is finished. If you sell it now, you will pay no taxes on the profit. By selling it later, you will have to pay 28% in taxes on the profit from the sale.
A real estate broker tells you that you can sell your house for 2.300.000 GBP now. Another broker from a letting agency (a firm that hire out peoples houses) say they can hire out the house for 9.500 GBP per month. However, they are charging you the first 1,5 months of rent to start the process, arrange showings of the house, select candidates and write the contract. In addition, they charge you 10% on the monthly rent to maintain the contract (get in the cash, follow up if the cash is not coming in, etc).
If you rent it out you have to pay insurance for the house (3600 GBP/year), you will have maintenance costs (6000 GBP/year), and municipal taxes (water, renovation, etc. 700 GBP/month). You will also have to pay 28% taxes on your net profit from hiring out the house.
If and when you sell it, you can deduct the price you bought it for (800.000 GBP), and some renovation costs you have had during the time you have lived in the house (150.000 GBP) before calculating the tax on the profit from the sale.
The current and foreseeable interest rate on bank deposits is 1%, and on bank loans it is 4%.
Should I sell the house now, or wait five years?
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