AIBU to ask if you'd keep or sell the house?

[Sunflowers095]

Partner and I moved to a new city. We have a 3 bed house in old city that we bought as our first property a few years ago. We won't be moving back to old city for at least 10 years if ever.

Property prices are similar in both cities, although recently have gone up where we are now.

For now we are renting our home out, but we will probably run a small loss or break even when factoring in all the costs, tax, etc (repayment mortgage).

Our choice is:

• keep old house, be landlords, buy another place in new city for us but smaller (we don't mind being in a flat instead) - more hassle and occasionally having to pay out for repairs, extra costs, etc. Risk with bad tenants potentially. But after 20 years a paid off property towards retirement
• sell old house, buy nicer/bigger place in new city for us, become mortgage free a bit sooner (since we'd put all equity/money into new property). Easier, less risky, but also no extra property owned in 20 years, just our own one

We're not very wealthy by any means so additional costs might be somewhat stressful, but we could definitely manage. Just not sure which option is better - tempted to sell but don't want to regret it due to lost opportunity for an asset/investment. Also new city we'd prefer a flat but selling a house to get a flat seems somehow like a bad idea.

Any thoughts?

Are you sure you would want to move back? That would be my starting point

@Mydogisagentleman

Are you sure you would want to move back? That would be my starting point

At it stands I don't think we will move back, and even if we did in 10 years or so we'd probably look at a different property (more central). So feels like we don't need to cling on to the house, unless it's financially wise to do so.

Just in terms of fewer hassles being landlords/repairs/broken boilers/risk of expensive repairs and tenants not paying rent etc.

I"d say sell old place and put the money towards a new home.

Absolutely sell your old home. I can't really see a financial benefit, unless you are almost certain prices will rise there faster than in your new place. Particularly as you will be operating at a loss.

If you are desperate to invest in property you could always buy the flat in your new city and buy a btl somewhere where the profit margins stack up? I probably wouldn't bother though, I'd probably invest in shares / pension options instead

Sell. There is no financial benefit, you either pay a management fee or do it yourself which is a pain in the arse. You could get voids or shit tenants. You're looking at running on a loss for ten years, why?!

We were in the same position 11 years ago but we were living in a fairly new apartment. We chose to rent it out and it was the worst decision of our lives. It has been nothing but hassle. We make zero money from it after all expenses. The current tenant after being there for 8 years has suddenly started being an arse and fueding with neighbours and breaching his lease causing us money and hassle. We have been great landlords. Recently replaced boiler and carpets we let him decorate. We fix any issues immediately. We don't do inspections. We basically leave him alone and haven't increased the rent the whole time he has been there. The value of the property hasn't changed in the whole 11 years. They are hard to sell. The service charge is extortionate and rent doesn't cover it. I could go on and on. Next year I think we are going to bite the bullet and sell. If we come out with 20k we will be lucky (take into account we've owned it for 20 odd years and prices have boomed all around us). I know selling it will be hell too and I can see the te ant being difficult throughout. My advice. Don't do it!!

Have you thought of AirBnB? It worked for us, we made a small margin every month (we did sell it eventually as we needed the cash, but there was more equity in it when we came to selling).

If you are not going to move back sell it

I’d get rid of the other house. DH and I spoke for ages about buying another house to rent out but decided against it due to the hassle. Instead we’ve just bought a gorgeous 4 bed detached and the plan in to downsize at retirement (if not completely paid off) and buy somewhere smaller mortgage free. As we’re only in our early forties I don’t see that as an unreasonable plan.

If your going to run at a loss then sell

I'd sell old home. Being a landlord is so difficult when you're not doing it as an occupation. Laws and regs change so often you might be setting yourself up for money claims if you don't comply with all the changes coming through

There's very little incentives and also very little joy these days in being amateur landlords in the position you describe. There is plenty of possible pitfalls.
Superficially it may seem an attractive proposition but I wouldn't recommend it.

Sell. We have a property we live in and one we rent out and I really wish we’d sold the current rental and just put the money into our home / stocks and shares. Even with a good tenant (which we have) it’s a real hassle keeping on top of looking after the property and keeping all paperwork up to date from a distance. We break even on ours, but only just - a broken boiler or a void can easily cancel out any profit for the year. Our plan is to sell if/when the current tenant decides to leave, as we’d never want to make him homeless but really don’t want to be landlords anymore.

Thank you everyone for the advice, it looks like selling does seem like the better idea based on the responses.

Only thing is, assuming we break even/make a loss of let's say £200 a year, will that not be outweighed by the benefit of being able to sell the house for £300k or so in 20 years? Vs if we sell it now we won't have that asset/money and technically the tenants will pay off most of the mortgage.

Or is it just potentially not worth the hassle even for that amount of money in the future? Thank you again everyone for all the advice so far!

I would sell. We kept our flat when we moved abroad as we thought it would only be for 3 years (9.5 and counting!) and we have been so unbelievably lucky with amazing tenants who really look after it - we have a wonderful relationship and charge under market value to keep them there but everyone else I know who rents has had nightmare tenants at some point and lost a lot of money in unpaid rent and damages. I don’t know if part of it is we’ve never used an estate agent or management company, all
Tenants have been friends or friends of friends rather than ransoms got in by agents who don’t care and there have been rife issues with agents themselves whereas we’ve managed it from abroad on our own.

It’s a risk though if no financial gain for you. We’re moving back and even though it would be a wise investment to keep our house here (it’s doubled in value since we bought it 5years ago and is likely to continue that way) I just don’t want the hassle of managing a much bigger place

Think about what would happen if mortgage rates go up considerably

I would still give the same advice even with your comment about having the asset in 20 years. We would be in that position if we kept ours, but I still don’t want to do it. If you look at stock market returns, they often outperform property and are so much more flexible. If you sell and try to invest regularly in a stocks and shares ISA you should still have a good asset in 20 years (and no hassle in the meantime, and no capital gains to pay).

Have you considered the potential taxes? You will have to pay income tax on your rental income, before you can use it to pay the mortgage, and your mortgage costs may increase with a buy to let mortgage. When you do sell the second property you will have to pay CGT. The chancellor has been indicating that CGT may increase. There are a whole raft of new requirements for landlords coming into force, particularly for Energy. The government seem to be discouraging the buy to let market with practical checks.
You have to balance all this with the profit you could make investing your funds in something else or your own home in new city.
I would be interested to hear from a professional landlord as to what they think.

I would sell it - friend of mine had a flat she kept for investment & is now selling it because of the hassle. Whatever you made from the house you can invest elsewhere

I would sell. being a long distance landlord is expensive and complex and not worth it.

and remember, with the money you get from the sale you can invest in a different property or in the stockmarket or in your new flat in the new town. you have plenty of options.

@Sunflowers095

Thank you everyone for the advice, it looks like selling does seem like the better idea based on the responses.

Only thing is, assuming we break even/make a loss of let's say £200 a year, will that not be outweighed by the benefit of being able to sell the house for £300k or so in 20 years? Vs if we sell it now we won't have that asset/money and technically the tenants will pay off most of the mortgage.

Or is it just potentially not worth the hassle even for that amount of money in the future? Thank you again everyone for all the advice so far!

You will have to pay capital gains tax on any profit if the property is not your main residence. You have no idea what will happen to property prices over the next 20 years either. It is not guaranteed that prices will always go up. You can't rent out a property for 20 years without doing maintenance, replacing windows, boilers etc would all affect your profits and may affect the affordability of work needed on your main residence.

Inflation will hit 5% by summer. Mortgage rates are likely to rise sharply in the next few years. The UK economy is in a very unpredictable state.

Anyone with two mortgages is doubly exposed. In your shoes, I would only maintain a single mortgage (the rented house).

However, that would mean me, ie YOU, living in rented property. I would not choose to live in smaller /more expensive rented property while my tenant lived in better and/ or cheaper accommodation owned by me.

Personally I'd feel more secure if I had full financial control over one property which I occupied as my own home. And no exposure from a mortgaged property occupied by tenants.

a potential £300k in 20 year's time. ? If you can afford to keep this on the back burner then great . But there will be things need doing. You will have to sort out tax from the income , capital gains etc so apart from maintenance costs what will you potentially end up with. & At the expense of compromising on your main family home

Personally I would not keep that house rather than using the money for a better family home. I know you think tenants are paying your mortgage but look carefully at what you will be paying in maintenance and tax each year and when sold . It looks good on paper but the reality may be different. The equity you could as other posters have said coold be put into savings / pensions etc. But if you are rich a Croessus , that won't matter.

& what is 20 years' more of a nicer family home worth to you ?

But your choice - I would not do it - but I am not you .

Just an additional point. A fair few people are lucky enough to get a social housing property. If you have been homeless you are likely to value it and try to improve your situation, which sounds like is the case for your DH.

If you are married your assets are joint. In your case i would maybe look at buying something via the housing association along the lines of shared ownership depending on available properties and what age you are.

Ours is a social enterprise so any money paid in rent is ploughed back into the community anyway and benefits others.

There is a scheme whereby regular rent payments can improve your credit rating. This is useful for people who have seen hard times and then trying to improve their situation.

Not sure what it is called but it is on the Martin Lewis website.

The one thing that would concern me would be that you are not joint tenants. Officially that would mean that if you split up you would have nowhere to live, surely? And I'm not sure where that places you with the housing association if you were in dispute on this one...?

Sell the old house, buy a smaller flat (similar to what you would have bought if you were keeping the old house) be mortgage free sooner, throw "spare" cash at good retirement/investment pot.