I have inheirited a house. Rent it out or sell it?(38 Posts)
It's my dad's house; he died in June.
To begin with I couldnt bear the thought of parting with it. He had it built for him and my mum when they got married and we grew up in it.
However, I'm starting not to associate it with him so much anymore. There was a flood there last winter and lots of re-building has had to take place so it doesn't look like dad's house any more, iyswim.
It will be finished in the next month or so and I'm starting to see it as more of an investment rather than the sentimental thing it was. If I sell it, is that more sensible financially than renting it out and saving the rental? What would be a better investment for our dds: for us to sell it, pay off our mortgage and save for the future, or rent it out, invest the income and keep it for an investment the dds when they are older?
and what about tax?
oh god, I have no idea, but didn't want to R&R - I'd personally rather sell it as it'll be less stress & management in the long term - cash is a little easier to take care of. I think. But I'm NO expert on money so don't take my word for it!
I personally would rent in this market. If you sell you get a lump sum of £X if you rent you get the rent and hopefully property will be increasing in value so if you decide to sell in 10 years when the market is better you will have had the rent plus a sale price of >£X.
I don't know much about inheritance tax but i think it has to be +++£ to have an impact.
If you do rent, use a management company, it will cost but save you so much worry and stress. Most people don't like using them for the cost but as you dont need to pay a mortgage out of the rent then for me it's a no brainer.
Invest in bricks and mortar, that way the bastard bankers can't get to it!!
Same thing happened to me 6 years ago. Wouldn't have dreamt of selling or even renting because of personal connections, memories etc. Thought we would be able to maintain 2 homes and use the inherited house as a holiday home. In fact we spend very little time there and it has become something of a bind. We have decided to rent it out and that is something I am comfortable with. If you sell Capital Gains may be an issue. Rental income will have other tax implications. Could you consider giving it to a child/children(if you have them?) Would reduce the impact of tax at least for the time being
Well you are going to get mixed message here but I think at this time a property would be a liability.
It will probably cost you money to maintain and prices, will, I believe, reduce for the next 10-15 years. I'd sell (while you can...I think it is going to get more and more difficult) and put the cash in a 4% interest account. In a couple of years those accounts will be paying 6 or 7% at least.
Have you got a mortgage of your own? I don't think there are any guarantees about house prices rising at all so I wouldn't hold on to for that reason. Remember there'll be 2 lots of council tax to pay as well after 6 months.
how would you feel if you rented it to someone who really horribly trashed it? (apart from majorly pissed off like any landlord, I mean from the point of view of it being your dad's house?)
I think I'ld either live in it and keep it a family home, or sell, not rent! if you want to rent use the money from the sale to buy an impersonal rental property with no sentimental stuff attached
Where in the country is it? this has a big impact on what the best thing to do is. If you are within the M25 I would definitely rent it out.
I think you need specialist financial advice, answering questions which will give you the best guess as to what will be the best decision long term.
Find out what sort of rental you could raise on it, and would that rental income cover your own mortgage payments? What would your capital gains position be in a few years? How much is the house actually worth? Would the sale pay off your mortgage, and would you then choose some other way to save or invest for the future? Is this likely to be your only 'extra' for the long term future, or do you expect to be able to build considerable savings for your dds?
I think these are all things to think about, and worth an appointment with an independent advisor of some kind.
Sorry about your dad Oneofsuesylvesterscheerios.
If it was me I would be minimising my property exposure right now, because if it goes down it could be a very long time before it goes up again and possibly never to the same levels in real terms. Unless this is prime London property, which I imagine it isn't, the optimistic forecasts are the ones predicting stagnation for a decade or so, rather than a full-on crash. So I think the odds are you would get more out of it by selling straightaway. I have heard that many BTLers get less income than they think they will out of their property because they haven't factored in enough maintenance, management costs, times when there are no tenants or the tenants don't pay the rent, etc.
However. If it is the kind of property that rents out easily (and AFAIK there is oversupply of some types and undersupply of others), since you are thinking seriously long term, ie decades, I can see the logic of keeping it as a sort of backstop against everything else in the economy going even more haywire than the property market (eg crazy inflation). Even if it isn't worth more in 30 years than it is now, it should still be worth something.
I think you need to look into both the rental market and house prices in your area before you come to a decision. It will also depend on your other assets, eg do you have lots of savings, do you have much of a mortgage.
If by selling it you could be mortgage free with a bit put away for a rainy day then that would be my choice.
If you were already mortgage free and already had some cash then I would keep it and rent it out.
Thanks for all these viewpoints. Yes, we will definitely get some proper financial advice but just wanted some immediate thoughts. We've been left some capital as well. We have a mortgage of our own but none on dad's house. We've got 2 dds, 10 & 6. I'd hope they will both go to uni or equivalent (although its hard to say fir definite obviously) so that's worth bearing in mind.
The house is very rentable/sellable and if we sold it we'd do it in the spring. We're in the midlands. The house would be split between me & my brother but even then my share would pay off my mortgage.
Is the housing market really going to stagnate/get so much worse before it gets better? That's grim.
Few things to consider I suppose. Property as an investment is certainly not a one-way bet - consider Japan, a small crowded island enjoying years of low interest rates (much like the UK) where prices are still around 60% lower than they were 20 years ago. And prices in the UK have already dropped by up to 20-25% over the past four years, depending on where you live.
Also, rental yields are pretty high currently, however this is mainly due to buyers staying out of the market - again think about the impact this will have on capital depreciation (and they've actually been rising from quite a low base). And when you've done your sums, you'll realise that there is a significant difference between gross and net yield. Additionally, local housing allowance has been reduced a number of ways recently and this will IMO eventually feed through into falls in rents across the board.
The clincher for me though would be the the worry about neglect to a house with an emotional attachment and IME this will make acting professionally as a LL more difficult too.
You can use the income to help fund your kids through uni.
Then you can either sell it Or keep it and the rent would be very helpful in your retirement.
depends how desperately you need the money. I personally would rent it out. And it also may come in useful when your children are young adults in case they need somewhere to live for a period of time.
If I didn't need the money I would keep hold of it and rent it out. I would get a mortgage on your dads house and use the money from that to pay off your own mortgage. That way you're mortgage free on your own house and the interest on your dads mortgage is tax deductible.
what is your brother's current financial position -could he do with the money now?
with it being jointly your's and your brother's I would sell now -what happens in the future if one of you wants to sell and the other doesn't? families have fallen out over less
workshy has a good point. If you sell you could then decide whether you wanted to buy a btl that doesn't have the emotional attachment as an investment for your childrens future or you could realise the money and repay your mortgage.
KenDodd makes the most sense here - an interest only mortgage on your Dad's house would mean you could offset the most tax. And pay off your own mortgage and use the rent to make the mortgage payments. Keep it as an asset unless you really need the money. You never know, rainy days and all that and knowing you have that ace up your sleeve will be a comfort.
But is it an asset or a liability? Remember the Government are (very) short of cash. I know some accidental landlords who have within the last year sold their properties because they fear a huge increase in capital gains tax and perhaps even a higher rate of tax on rental income.
Remember it can be very hard work being a landlord, maintaining a property and finding good tenants. Have you worked out the return you think you'd get for doing that? There are bank account paying circa 5% just now.
Thanks again. I guess what I've gathered is that it's not a no-brained anymore! I'm still completely undecided... Although I'm starting to enjoy the thought of no responsibility towards the house anymore to be very honest. I had 18m of caring for dad as he was ill and it had a big impact on all our energy levels and emotions. I'm starting to feel that it might be time to move on and say goodbye to the house. It's all very hard...
If you have some debt of your own I would sell the house and pay that off.
The other issue is that renting out a house takes time and effort. Repairs costs, void periods, paying agents and dealing with the tax issues all reduce the gross rent you will get. The fact your brother is joint owner makes it even more complicated.
Yes that's a good point. My brother lives abroad and so he is nit an executor. The solicitor told me yesterday that therefore the house will be in my name (which db is fine with). If I rent it I'd just pay half (less expenses) into an account for him; if we sell it, I guess he'll just get a big lump sum. Which he'll have to pay tax on as well.
I need a financial adviser! Will sort one out this week.
I am in the same situation and doing what kendodd said.
Yes property may go down further but it may not so I am going to use the income which it will generate for years to come. Also speak to a rental specialist agent and see how much there services cost.
I currently pay 10% to them and with insurance I have got rent guarantee and damage ect insurance so everything is covered.
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