Decisions, decisions, decisions (UK to US)

[Sam Sale]

Introduction

Dear Bigger Pockets members.

I'm a long time listener and hopefully have an interesting situation for you to ponder.

I've lived my entire life in London, England up until November 2020 when I immigrated to the US to start a life with my wife who is an American citizen. We are living in Southern California and I can work on a L1 Visa whilst I wait for my green card to be processed.

Below I've outlined the current situation and also our property holdings. Also, we've listed the current options we are considering (please feel free to add to them if we've missed other potential opportunities).

Situation

When I moved to the US in 2020, I kept my London apartment and rented it out for the past ~2 years to some great tenants. It is now coming up to the end of the mortgage offer rate (0.94%) and we need to decide what to do next which is proving to be a difficult decision to make.

I'm currently 37 years old and we have our first child on the way. My medium-term goal is to have sufficient cash flow to leave corporate America/W2 behind so that I can spend as much time with my family and friends. With that in mind, I always favour cash flow vs growth when investing.

My wife and I are would be forever grateful for some valuable advice from other forum members on what we should do next.

Property Overview

We currently own two properties:

1 - Primary Residence (US)

We own and occupy a 2,000sq/ft home in Ventura county which sits on a 0.4 acre flat lot. We have no plans of selling as we love the place/neighbourhood and the lot offers a lot of opportunities for us to grow into.

• Current Value - $1,100,000
• Mortgage - $700,000
• Equity - $400,000
• Mortgage Rate (30 Year fixed) - 3%

2 - Rental Property (UK)

This is the London based one bedroom appartment that is currently rented out. Figures below are converted from GBP to USD

• Current Value - $505,000
• Mortgage - $303,000
• Equity - $202,000
• Mortgage Rate - 0.94%
• Rental Income - $1,700
• Rental Yield - 5.85%

Options

1- Remortgage and keep the London apartment

We could remortgage for another 2 years at a rate of 1.59% and achieve a yield of ~5.34%.

Pros:

• Continued monthly cash flow.
• We stay in the London property market and could benefit from a property price increase. It has been pretty flat for the past 3 or 4 years.
• We don't have the stress of looking for another property and getting it rented.

Cons:

• The continued stress of renting out an apartment that was finished to a significantly high standard (Quartz, wood floors etc.) as it was never intended to be a rental when I lived in it.
• We receive a relatively weak return on investment, especially with inflation rising.

2 - Sell the London rental apartment and build a rental apartment on our land

• We could sell the apartment in June 2022 at the end of the current mortgage term and use the proceeds to build a rental property on the empty land on our current home.

Pros:

• We own the land already, so we should realise a larger yield on our investment as we just need to pay for the building of the house and associated fees. With some additional savings we have, we could do it mortgage-free.
• We are in close vicinity should we choose to manage it ourselves.

Cons:

• My wife and I are private people and aren't enamoured with having others live on our plot. We'd need to be smart with how we separate the two properties.

3 - Sell the London apartment and purchase a rental property in the US

Sell the apartment in June 2022 at the end of the current mortgage term and find a US based rental property. This doesn't necessarily have to be in Southern California.

Pros:

• The property and tenant(s) are "out of sight, out of mind". So we can keep our privacy.
• We should get a better return on our money vs what we are getting now in London.

Cons:

• We know we potentially aren't generating as higher yield as possible vs option 2, as we are buying the land AND property. 

Please do let me know if you need anymore clarity and thank you for taking the time to read this far. 

[Don Konipol]

@Sam Sale

Well, so much of the decision is based on personal finances and personal preferences that it’s hard for someone else to evaluate. But I will just “remind” you of one thing. London is one of the three great cities in the world. The Germans were unable to destroy it by bombing in the 1940s, the Socialists weren’t able to destroy it by economic policies in 1945-1950 and 1972-1975, and the internet work from “anywhere” culture hasn’t been able to destroy it now. There’s a reason that the landed gentry will provide a 99 year lease to a developer, but NEVER sell a property - for any price.