Completed on the sale of my BTL flat about six weeks ago. After paying off the remaining mortgage and CGT I’m sitting on roughly £145k. Currently renting a one bed short-term while I figure out what to do next.
The original plan was always to buy another rental property, probably a two bed terraced in one of the northern cities where yields still look decent on paper. But I keep running the numbers and struggling to make it work. BTL mortgage rates are still north of 5% from what I can see, and with 1,500 products pulled from the market this month alone the direction of travel doesn’t feel great. Even if I put down 40% the monthly costs eat into the rent to the point where cash flow is basically zero before you factor in maintenance, voids, insurance etc.
The alternative is just sticking it in a fixed rate savings account or maybe a stocks and shares ISA and forgetting about property for a while. The hassle factor of being a landlord again is part of it too, especially with the Renters Rights Act coming in.
So my questions are basically: is anyone else in a similar position and what are you doing with the proceeds? Is there a yield threshold below which it genuinely doesn’t make sense to buy? And for those who have exited BTL recently, do you regret it or feel relieved?
Presumably the answer depends on whether you think rates are coming down meaningfully in the next year or two, but given the BoE held again and nobody seems confident about the next cut, I’m not sure waiting helps either.
I have been asking myself the same question for about eighteen months. I still have two in the Midlands and honestly if I could sell them both tomorrow without the hassle I probably would. The yields look reasonable on Rightmove but once you account for mortgage interest at current rates, the new regulatory burden, the fact that you cannot budget for a boiler failure or a three month void, the net return is worse than a savings account. That said I bought mine years ago so at least my mortgage balances are low. Starting from scratch now with £145k and needing to borrow the rest at 5.5%, I would not do it. The capital growth argument only works if you believe prices are going up, and the latest ONS data does not exactly scream confidence. If you have no emotional attachment to being a landlord and no particular tax reason to hold property, I would park the money somewhere boring and revisit in a year.
Been in BTL since 2003 and asked myself this question roughly every two years since the Section 24 changes.. The answer keeps coming back to “hold, but only because I bought cheap enough that the numbers still work without leverage.”
With £145k cash and no mortgage you could buy a two bed terrace in parts of the northeast outright. Yield on that basis is genuinely decent, 7-8% gross, and you have no interest rate exposure at all. The trade off is you are a landlord in 2026 which means the Renters Rights Act, potential Awaab’s Law extension, registration schemes in Scotland (already live), and whatever else the government dreams up next.
If you need the mortgage to make the purchase, I would not bother at current rates. The spread between gross yield and borrowing cost is basically nil. You are taking on all the risk and hassle for the privilege of maybe getting some capital growth in five years.. maybe.
As @GrumpyLandlord47 says, boring money in a savings account looks surprisingly attractive right now. Never thought I would say that. Cheers!
@theartfulfreeholder, I take the point about buying cheap being the key, but that’s exactly the bit I’m struggling with. Where are you buying cheap right now? Anything with decent yield in the areas I know has either been snapped up by cash buyers already or needs 30k of work to bring it up to EPC and licensing standards. And the mortgage products for BTL are grim at the moment, even if I was only borrowing 50% LTV.
I’m increasingly thinking the answer is just to park it in a fixed rate savings account for 12 months and see where things land. Not exciting, but 4.5% risk free versus chasing 6% gross yield with all the regulatory headaches feels like an easy decision right now. Might revisit if rates come down properly later in the year, presuming they actually do.
4.5% in a savings account sounds fine until you remember inflation is running at 3% and the interest is taxed. So your real return is somewhere around 1% after tax, possibly less depending on your marginal rate. That is not parking money, that is watching it slowly shrink while you congratulate yourself on avoiding risk. The question is not really BTL versus savings, it is whether you want to be a landlord again at all. If the answer is no then fair enough, but dont pretend a cash account is a strategy. It is just indecision with a wrapper on it. From recollection, equities have returned about 7% nominal over the long run, though obviously with more volatility. If you are genuinely out of property for good then at least consider putting some of it to work properly.
@GrumpyLandlord47 you’re right on the maths but I think the hassle factor gets underpriced every time this debate comes up.. Had a boiler go in my Gateshead flat last month. £2,800 installed, call-out fee on top, lost a week’s rent because the tenant (understandably) withheld until it was sorted. That’s nearly two months of gross rent gone on one job.
Multiply that across a few properties over a few years and your 6-7% gross yield starts looking a lot more like 3-4% net before you even touch the tax position. At least the savings account doesn’t ring you at 11pm about a leak!!
Not saying cash is the answer forever but there’s something to be said for sleeping well. Especially once you factor in the regulatory direction of travel..
Cheers!
The boiler example is exactly it. £2,800 plus however many days of chasing plumbers and fielding tenant calls and waiting for parts. And that is a routine expense, not even a disaster. I had a leak in my Coventry place last year that ended up costing nearly £5k once the ceiling was replastered and the electrics checked, and I lost a month of rent on top because the tenant understandably wouldnt pay full whack while living under a tarpaulin in the spare room. Meanwhile the £145k @Kettless is sitting on would generate about £5,400 a year in a savings account after tax at current rates, with zero phone calls at midnight about a dripping overflow. I am increasingly of the view that anyone buying BTL now who didnt buy cheap a decade ago is paying for the privilege of a second job they dont enjoy.
@GrumpyLandlord47 you’re not wrong about the hassle but I think people forget what actually happens when you sell.. CGT on a rental property at 24% (assuming higher rate) plus the agent fees plus the solicitor plus the voids while marketing.. On my Gateshead flat the gain would be somewhere around £85k which means I’d hand over roughly £20k to HMRC before I’ve even paid the estate agent.
So yes the boiler cost £2,800 and yes it was annoying. But I’ve had that flat since 2003 and it’s thrown off rent every month bar six weeks total in 23 years. £2,800 against 23 years of income is noise.
The real question is whether the regulatory direction makes holding untenable. The Renters Rights Act, the EPC changes, the Scottish equivalent.. if the rules keep shifting the compliance cost becomes the issue, not the boilers. But selling into a weak market with 1,500 fewer mortgage products than three weeks ago?? That’s not great timing either.
Cheers!
@GrumpyLandlord47 I hear you on the hassle but here’s the thing.. with 1,500 mortgage products pulled in three weeks and rates creeping up, the leveraged BTL crowd are stepping back. If you’re a cash buyer (or close to it) this is exactly the window you want to be buying in.
I’m watching a two bed in Sunderland right now. Listed at £78k, been on three weeks, no takers. Agent confirmed yesterday the vendor is a landlord exiting. The yield at current rents would be north of 8% gross before you factor in that rents have been flat this quarter so there’s probably some reversion risk.
Obviously not for everyone and I’m not saying the hassle disappears.. but the maths changes when you’re buying at a discount because nobody else can get finance. That’s how I bought my Gateshead place in 2003 and it’s been the best performer of the lot.
Cheers!
The leveraged BTL crowd stepping back doesn’t help cash buyers like us though, does it. It just means fewer transactions, longer voids, and tenants who know they have options because supply in the rental market is finally loosening in some areas. Zoopla had rent growth at 1.9% this month, down from 2.8% a year ago. That trend isn’t going to reverse while the government is talking about 1.5 million new homes even if the actual delivery numbers are a joke. The direction of travel matters more than the current snapshot. I keep coming back to the same calculation: if I sold both properties today, paid the CGT, and stuck the remainder in gilts or a fixed term account, I would sleep better, spend less time on the phone to plumbers, and probably end up in roughly the same financial position in five years. The only thing stopping me is inertia and the nagging feeling I’d regret it if rates drop sharply. Which they won’t, not with the Iran situation still unresolved.
Coming back to this after a week of mulling it over. I had a look at what’s actually available BTL-wise in the Midlands this week and it confirmed what I already suspected. Yields on anything half decent are 5% gross at best, and once you factor in the tighter mortgage products, I counted three BTL fixes still available from my usual lenders compared to about fifteen this time last month. The product withdrawal is not just a headline, it is genuinely affecting what you can do. Even as a cash buyer the maths only works if you believe capital growth is coming back, and I dont see it, not with London dropping 3.3% and the rest of the country barely managing 1.2%. I think Kettless had it right originally. The era of straightforward BTL for ordinary people is over, from recollection it probably ended about 2018 and we’re all just slow to admit it.