Should I Sell My Rental Property? A Decision Framework for Bath Landlords

You might expect a lettingagent to discourage landlords from selling. After all, every property sold is aproperty we no longer manage.

But here's the thing: somelandlords genuinely should sell. The regulatory environment has changed, taxadvantages have eroded, and for some owners, the numbers simply don't workanymore.

The Current Context:Why Landlords Are Asking This Question

You're not alone in consideringthis question. Industry data shows: • 31% of landlords plan to decreaseportfolios or exit entirely (English Private Landlord Survey 2024) • 26% soldat least one property in 2024—a record • Only 8% purchased property last year •290,000 rental properties have left the sector since April 2021

The ratio of landlords sellingto buying has shifted from 1:1 in 2021 to 5.4:1 in 2024.

What's Driving Exits: • Taxchanges (Section 24): 78-81% cite as major factor • Regulatory burden:Increasing compliance requirements • Section 21 abolition: Concerns aboutdifficult evictions • EPC requirements: Cost of upgrading older properties •Interest rate increases: Reduced margins on leveraged properties

The FinancialAnalysis: What Are Your Numbers?

Calculate Your TrueReturn:

Annual Rental Income:£________

Less: • Mortgage interest •Insurance • Repairs and maintenance • Letting agent fees (if applicable) • Voidperiods (estimate 2-4 weeks/year) • Safety certificates and compliance •Accountancy fees

= Net OperatingIncome

Less: Income Tax on RentalProfit (Remember: mortgage interest is now only a 20% tax credit, not adeductible expense)

= After-Tax CashReturn

The Section 24Reality

Before 2017, you could deductmortgage interest from rental income before calculating tax. Now, you pay taxon the full rental profit and receive only a 20% basic rate tax credit oninterest.

Example for a higher ratetaxpayer: Property: £350,000 Mortgage: £250,000 at 5% = £12,500 interest Rent:£18,000/year Other costs: £3,000/year

Pre-Section 24: Taxable profit:£18,000 - £12,500 - £3,000 = £2,500 Tax at 40%: £1,000 After-tax cash: £1,500

Post-Section 24: Taxableprofit: £18,000 - £3,000 = £15,000 Tax at 40%: £6,000 Less 20% tax credit oninterest: £2,500 Net tax: £3,500 After-tax cash: £15,000 - £12,500 interest -£3,500 tax = -£1,000

This property that made £1,500profit now makes a £1,000 loss on a cash flow basis.

Opportunity Cost

What else could youdo with the capital tied up in your property?

If you sold a £500,000 propertywith £200,000 mortgage: • Sale proceeds after costs: ~£490,000 • Mortgagerepayment: £200,000 • Capital Gains Tax (estimate): £30,000-50,000 • Netproceeds: ~£240,000-260,000

That capital invested at 5%would generate £12,000-13,000 annually with no management hassle, no regulatoryburden, and no risk of bad tenants.

The Hassle Factor:Beyond the Numbers

Many landlords who aretechnically profitable still exit because the hassle isn't worth it.

Time demands: Finding tenants,handling maintenance, conducting inspections, managing contractors, stayingcompliant, dealing with disputes.

Stress and worry: What if thetenant stops paying? What if there's major damage? What if regulations changeagain?

Life stage: What made sense at40 might not make sense at 65.

Reasons to Stay: WhenHolding Makes Sense

Strong Fundamentals: • Highequity/low mortgage (Section 24 has minimal impact) • Strong positive cash flowafter all costs and tax • Good tenants in place with stable tenancy • EPCalready at C or easily achievable

Strategic Position: • Long-termcapital growth focus (20+ year horizon) • Property is your pension/retirementplan • Income diversification • Limited company structure already optimised

Bath Market Strength: • Strongtenant demand (professionals, students, tourists) • Limited housing supply(UNESCO restrictions) • Rental yields now reaching 8%+ in the South West •Capital values supported by lifestyle desirability

Reasons to Exit: WhenSelling Makes Sense

Financial Stress: • Negativecash flow—property costs you money each month • High mortgageproportion—Section 24 is killing your returns • Remortgage risk—facing higherrates you can't absorb • EPC upgrade unaffordable

Personal Factors: •Burnout—exhausted by the management burden • Life changes since you bought •Risk aversion increasing • Better alternatives for the capital

Property-Specific Issues: •Problem property with ongoing maintenance headaches • Difficult location tomanage (you've moved away) • Listed building complexity • Leasehold issues

The "AccidentalLandlord" Factor: If you never intended to be a landlord—inherited aproperty, couldn't sell, ended up letting—you may never have been suited tothis role. There's no shame in acknowledging that and moving on.

Selling Options

Sell with Vacant Possession:Best price, widest buyer pool. Requires tenant to leave first.

Sell to Another Investor:Typically 10-15% discount vs vacant possession, but no void period needed.

Sell to the Tenant: Can be ator near market rate if tenant wants to buy.

Portfolio Sale: If multipleproperties, selling as a portfolio to a larger investor.

Making Your Decision

There's no universally rightanswer. Some landlords are thriving and should absolutely continue. Others aremiserable and should have sold years ago.

The landlords who struggle mostare those who neither commit nor exit—who continue half-heartedly, resentingevery maintenance call and tax payment, but never taking action.

Whatever you decide, decideclearly. If you're staying, embrace it. If you're exiting, do it thoughtfully.

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