05-Mar-09 NEW: Sell or Rent Out Calculator
This "Sell or Rent Out" calculator was created specifically for a friend of mine (we'll call her Anthea) who came to me with a problem:
"I bought a buy to let property... Should I sell it now or rent it out ?"
Here's a screen shot: 
The big killer for her is the fact that the service charge is so high, and the rent so low that the mortgage is not even covered thus creating a cash black hole. She's also locked into a fixed rate mortgage with a redemption penalty.
Even assuming a property boom in 5 years time, she's still better off selling now.
There are 2 files here...
One with EXAMPLE values that we played with
One with zero values that you can download and enter your own numbers
Training Video explaining how to use the calculators on ExcelExperts.com:
- This one is for the "Buy or Rent" calculator but the principles are the same
Sell Or Rent Out Training Video:
Enter your own values, make your own market assumptions, and use at your own risk !
| Attachment | Size |
|---|---|
| sell-or-rent-out-zero-values.xls | 63 KB |
| sell-or-rent-out-example-values.xls | 75 KB |
Income Tax Advantage
If you're unable to cover mortgage with the rent, surely it's already a disasterous investment ?! Forget any income tax implications.
Doesn't work with underwater mortgages?
Correct me if I'm wrong, but it looks like "Wealth if Sell Now" column doesn't correct for the possibillity of a short sale and negatively compounds the loss.
underwater
I think it works fine, although it makes the assumption that you can borrow at your post tax investment rate.. borrowing rates are normally > investment rates, so set Post Tax Investment Rate = borrowing rate in this case..
If you have negative equity (Mortgage > house price), your wealth is negative (assuming you have no other investments).
If you sell your house, you will have to borrow to fund the sale... If you live in America, I think you can walk away from this by surrendering your house.
wealth if sell now negative forever
My wealth if sell now just keeps going down due to the formula in column Q which works out to: Loss at sale *(1+post tax inv rate). I understand that the money to cover the loss must be borrowed, but it also must be paid back and this treatment seems to just compound the loss infinitely into the future. It seems safe to assume that I could at least put an amount of money equal to the portion of the mortgage payment not covered by the rent toward paying off this balance, right?
Extra Income
If you have Extra income coming in, enter it in the Extra Income column, and that will go towards reducing your borrowing.
non-interest-only mortgage
Thank you for such an interesting and useful sheet. I was only wondering how I could go about using it for my case as I have a mortgage which is not interest only.
Regards,
Juan
repayment mortgage
hi Juan..
No plans to add repayment mortgages (unless you want to sponsor the work) , however, there's nothing stopping you from calculating the difference between an interest only mortgage, and a repayment mortgage, and entering those numbers in the "Extra Income / Cost" column.
Nick
Sell or rent out - Update
Based on the results of this calculator, Anthea decided to sell her flat, and is very happy to have exited this buy to let investment with a profit.
THANKS
Just want to say - FANTASTIC and SOOO HELPFUL Spreadsheet - i've searched google FAR and WIDE for this!!! Thanks