Should you sell your rental before 2030?

About a quarter of landlords say they'll sell some or all of their portfolio because of the EPC changes. Another third say they haven't decided.

That's a lot of people making a fairly big call, and from what I can tell most of them are doing it on gut feel rather than sitting down with the numbers.

The numbers are worth doing. They don't always say what you'd expect.

The three options, not two

The way this usually gets framed is do the work or sell up. There's a third one that gets forgotten.

If reaching a C rating costs more than your spending cap, you spend up to the cap, register an exemption, and carry on letting. You've still spent money, but a lot less than the full job, and you keep the asset.

On a property where the full works are £25,000 and your cap is £10,000, that third option is £15,000 better than doing the job properly and it's frequently the best outcome available.

So the question isn't really sell or improve. It's which of those three leaves you best off.

What actually tips it towards selling

Having run a fair few combinations through this, a pattern shows up. Selling tends to win when the property doesn't wash its face and you're relying on the price going up to rescue it.

The specific things that push it that way:

• A thin yield. Rent of £500 a month on a £200,000 property is 3% gross. Once you take off voids and management there isn't much left to absorb a £10,000 bill.
• A mortgage at today's rates. This is the one people leave out of their own sums. £100,000 outstanding at 5% is £5,000 a year. If your net rent is £4,500, the property is losing money before anyone mentions insulation.
• Modest price growth. Leverage is doing a lot of the work in most buy to let cases. If you think prices are going sideways for a few years, a big chunk of the case for holding disappears.
• Somewhere better to put the cash. If you can genuinely get 6 or 7% elsewhere after tax, the bar for keeping a low yielding property goes up.

What tips it towards keeping

• No mortgage, or a small one. Without interest eating the rent, the income does the work and holding gets much easier to justify.
• A decent yield. Anything around 6% and up and the works tend to pay for themselves inside a few years.
• A long horizon. Over fifteen years, compounding on the full property value usually beats compounding on the smaller pot of equity you'd walk away with.
• Buyers discounting you anyway. This one's counterintuitive. If purchasers knock money off for a poor rating, selling now locks that discount in. Fixing it and holding avoids it.

The number that usually decides it

For most properties it comes down to one thing. What you think prices will do.

There's a growth rate at which doing the work and selling up come out level. Above it, keeping wins. Below it, selling does. On a lot of the examples I've looked at that line sits somewhere between 2% and 3% a year, which is uncomfortably close to what most people would guess as their base case.

Which is a polite way of saying a lot of these decisions are much closer than they feel, and small changes in assumptions flip them.

If the gap between your options is a couple of thousand pounds over five years, that isn't a result. That's a coin toss dressed up as a calculation, and you should probably decide it on how much you want to keep being a landlord.

What's missing from any calculator

Tax. Capital gains on the sale and income tax on the rent both depend on your own position, and they can be big enough to change the answer on their own.

Anything you read online, including our own tool, is a starting point for a conversation with your accountant.

Also worth noting that nobody's modelling the hassle. If a property has been a nightmare for three years, that's a real cost even if it never shows up in a spreadsheet.

Where to start

Get the actual cost of reaching a C rating first, because most people are working from a number that's too high. Then run it against what you'd walk away with.

Our sell or improve calculator does both sides, including the mortgage interest, and tells you the growth rate at which the answer flips.