Which property choice would you make?(24 Posts)
We currently have 2 properties having inherited one (lost both my parents young) and have some lovely choices as a result but can't decide what to do.
Selling house we live in for sure
Not sure whether to keep inherited house to rent.
These are our options.
1. Buy massive family home and keep inherited house. Would need to take a huge mortgage initially but would have kept the investment property.
2. Sell inherited house and buy massive family home but would have eased up on the mortgage. Still a fair whack of mortgage though and no rental income.
3. Buy a modest family house and keep the investment. Problem is that properties in this price bracket in our area are like gold dust and they are all going for silly money (think buyers from London moving to a commuter town). There is so little on the market and anything that goes on sells in a couple of days for well over asking price. I don't think the houses in that bracket are worth that much plus we've lost out three times on houses in the last 2 weeks despite offering asking price! We have four in our chain and are being beaten by people with shorter chains willing to offer over the odds. I actually think that the houses in the next bracket up are better value despite being so much more.
Being a landlord sounds like a PITA so I'd go for option 2.
Unless you're sentimental about the inherited house, it's just something else to worry about.
You do know you will be subject to extra stamp duty charges when you buy if you own a second house? Also that the tax regime around rental income has changed. I think your options will only make sense and reflect reality if you plug realistic numbers in.
If you are sentimental about the inherited house, definitely dont rent it out. Over the years you will have to redecorate, refurbish, change kitchens, bathrooms for cheaper durable fittings, plants in the garden will die, some tenants will treat it like crap = it will break your heart.
If you can detach from it, then renting may be an idea, but it is NOT an easy option.
I wouldnt take out a massive mortage unless you can still afford it when interest rates rise to say 5%
Thank you for your comments! We would fix mortgage for 5 yrs. option 2 level mortgage is fine if rates go up.... Option 1 not so much.
The rent would not be a great return we have looked at tax etc in some detail but we would be banking on houses continuing to rise with regards to it being a good investment. I think over the long term they will even if there was a 10 per dip like in 2006..... Here prices are massively over what they were before the crash..... Commuter town effect again....
I think we'll be OK on extra stamp duty too as we are selling our main residential home and buying a new main residential home so we don't pay the extra.
I think option 2 is it for me also just worry that if we sell the second property we could be losing out on a big investment opportunity and an asset which could be a pension and deposit for kids in later life etc. I have no pension!
I'm not overly sentimental about inherited house as mum only lived in it last few years of life and not such happy memories due to her illness then. We have been landlords before though when we couldn't sell due to negative equity and it was stressful! This house everything is modern though so possibly not so much maintenance.
You will still be hit by stamp,duty regardless as you will own two homes so you will need to factor this in. Does the inherited property have a mortgage on it that you'd need the rent to cover?
Thanks Tree for looking it up I panicked for a moment!
There's no mortgage on inherited house at the moment but if we kept it we'd take a smallish buy to let on it as well as our residential mortgage to afford the big house.
Could you sell your current home and live in the inherited property (which you intend to rent) whilst looking for your modest family house (option 3)? This would put you in a chain free position and so may make it easier in the competitive market you describe?
zampa yes that is an option except inherited home is too far away for schools and both DD1 and DD3 have secondary and primary applications coming up in October and January for which we need to be in the right area.
We also don't want to delay our own sale as our current house is in a different category which was quite hard to sell!
Possibly renting for 6 months to get as a chain free buyer that modest home.... I worry about stretching ourselves.....
I'd go for option 2, and sell both current houses in order to pay off as much of the value of the new property that you possibly can. Over the term of any mortgage you pay so much interest that the more you can pay off upfront, the better. Renting houses is a pain, especially if you don't live particularly near. Move to a lovely family house whilst your children are still young and you can all appreciate the extra space.
Being a LL is a pain, especially if you aren't local to the property and you have an emotional attachment to the home.
Buy the nice house and enjoy it.
Extra money that would have otherwise gone into that larger mortgage, put half into a pension to be tax efficient. Make sure it is a pension that you can cash in at 55. Will help make for a comfortable retirement. Then I'd stick the other half into savings for that "we need a new car" emergency,
shortlass and queenofblah I like the thinking of "enjoy it while we can" and especially while we actually need a big family home for re kids.
We're currently a family of 5 in a small 2 bed (3 kids under 10) and i feel we'd all get on much better if we had more space! "Massive house" is a decent 4 bed detached house with garden, "modest family home" is a 3/4 bed semi or a more modern smaller detached if we're lucky (stupid money!!)
And I will definitely start my pension saving!!
Can you hang fire until the school applications are done? Maybe rent out the inherited prop for 12m?
Once the kids are in their preferred school could you move a little further out and sell both props?
We probably should napqueen but our house is not in the easy to sell bracket and we've found a buyer for a good price after 3 months on the market with not so many viewings so I wouldn't want to lose them! We could rent somewhere near schools ourselves but I think we need to decide whether to sell the inherited..... I saw a lovely house this week which would be perfect but too much of a stretch without selling inherited and I'm sure it will be gone by the time we have sold it.
Oh moving out further (more house for money) is a good idea... However we are on the county border so cheaper houses mean moving out of county and then we wouldn't get DD2 into secondary in 3 years time!
Are you in Bristol by any chance? I'd probably keep rental and get today home or sell up rental and get a nicer home but not anything too fancy so you don't have a huge mortgage still x
No we're Home Counties confused. Commuter town for London commuters. I will definitely not want to overstretch ourselves if we sold both, a nice home but small mortgage so we have money to put away for rainy day having lost the investment. However too small a mortgage and we're back in that crazy overinflated price bracket! Such a weird market!
Ah I see. Everyone from London moving to Bristol atm pushing our prices up. It's rather annoying!! Hope you make the right decision for you x
Sell your family home, move into investment home as interim measure.
This will put you in the stranger position as a buyer as you won't have a chain. Personally I'd go for the larger mortgage for your family home if the inherited an investment home in its true sense of the word.
Having gone through a 'mare with school applications I would make decisions based on that. So can you find a suitable house within catchment of your preferred school(s)? If so, is that in the massive or normal size range? How rentable is the inherited house? Is it in a good area/school catchment? Both of those last two questions should help you see how useful keeping the house is as an investment.
An alternative option is to sell both your current and inherited property, buy the right family home now (whether normal or massive) and then buy a different investment property when you are settled, and dependent on how you are managing with the mortgage on the family home. In the short term it will give you the chance to have some breathing space, especially with the market being as you describe.
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