Unsure whether to rent out inheritance or sell on? help me decide!

[sayerville]

I am in the fortunate position of inheriting my family home which is a semi in Yorkshire probs worth around 175K. I intended to rent, I have quotes from 600-700/month plus agents fees etc.I have 3 scenarios...we only have a tiny mortgage.

1. Sell up and develop into other properties (always wanted to do this)
2. Tenancy find only then manage myself (know a builder but would agents really care who they found)?
3. Get agent to fully manage thus not yielding as much but is it more hassle free?

Read some horror stories about renting and given it's my family home I'm feeling precious about it, agency said i would not have any dealings if fully managed....I just don't think I could get this kind of return if I sold up and invested it.

agent talking cobblers. It would still be your business and your decisions to make, and many agents are useless. You must also detach totally, someone else will be living in it.

You certainly can't make any money on the money as cash. Go for option 1.

You could achieve a yield of 4% net if you invested for income. I think property is very often a red herring where income is concerned.

How much is the mortgage per month in the property?

I had this choice last year and in the end sold. Id have had a mortgage of £200 per month on the property. By the time Id paid income tax, landlord insurance, either had it managed or had the hassle myself but just paid finder fee, new carpets/damage repair after each tenancy decided it wasn't worth it.

investment yields are never guaranteed of course.

I agree that property rental is only going to return 3%-ish at best. Not sure what development does.

Agree with whoosh

Same position a couple of years ago and sold. Half regretted it, as it was mortgage free so sensible thing seemed to be to let, take the income and still have the asset. But take out all the expenses of letting, the tax on the income, and the responsibility for a property you have no control over, I think I did the right thing in selling and using the capital on our main home.

special, no of course not, but I've got people that we've had in income funds that have (net of charges) returned 4.2 -6.5% for the last 15 years. This is 'natural' income ie. generated by the investments and it leaves the capital intact. We've either got them in a pension or an ISA structure - no CGT (unlike a house), far more liquid (unlike a house), no hassle (well you have to see me or another IFA).

We don't take capital and we get some growth too (we could get higher income but you give up some inflation protection). For me people get far too distracted by the story of property which really isn't the answer to everything. The massive growth in capital is history.

I think I need to know the funds you use!

you're quite right about property, I agree that the big rises are done and dusted.

Are you in the industry special?

There is no mortgage on the property so like silverfingers situation it's all income, before of course costs and taxation, maybe I'm just precious as it's my family home and want to keep it, it's difficult

I'd take the sentiment out of it if possible, hard but this is 'business'.

If you do not immediately need the capital, I would rent it out. You can always sell it later.

Rental yield. You need to deduct agents fees, income tax, maintenance, check in/check out fees, void periods etc. You may find there is little left after all this. You can off-set mortgage costs if you have a repayment mortgage.
But the real value of keeping the property will be the capital growth - if there is any. In recent years London landlords have been making 15% plus on the value of the property. But that has tailed off significantly this year. Depends what part of the country the property is in.

no, not in the funds industry. Just that mumsnet favourite, the immoral, money-grabbing, slum-renting, tenant-harrassing, detestable landlord.

(of course the rental property is perfectly decent, modern, clean, well-located, well-insulated - but I'm a private landlord so it is by definition a slum)

special the reason I ask is that I would always want to caveat anything I say within someone's individual circumstances BUT I would say these funds are very good when you're seeking pure income.
I like some stuff from F&C and Premier. Those returns are net of charges so don't be mislead by the TER (that could be 5% if it pays it back and more - which it does)

I've nothing against landlords (done a few carve out trusts recently for some of my clients that are starting to shift some of their portfolio), quite like them in fact

Also, you have to detach from this property emotionally. It is no longer your family home, it is a financial asset. Remember tenants can trash it.

I know I have to detach, don't need the capital, I want to keep it for my DD one day, I suppose I could give it a year see how it goes, hopefully anyone paying £700 would be 'decent' but who can tell. I just can't see anywhere where I would get this kind of return per month, and retain capital, plus I would be losing some in estate agent selling and conveyancing fees, there I talked myself out of selling!

there is so much vicious anti-landlord bile on here that I save everyone the trouble and type it out myself.

sayerville seriously I'm not making it up when I say there are plenty of investments that would do that. You can even have it tax free once you get it in an ISA (unlike a house), put some in a pension and pass it on without IHT. Go and see a good IFA and talk about it, it won't cost you a penny to talk.

If I were you I'd use option 3. Since all your income is income you will get a tax break on the agents costs. This is especially worth it if you don't live close to the property. I live across the road from mine so it's easy to keep an eye on, plus I shared a house with one of my tenants for 2 1/2 years so I don't have the same worries as some people would.

We had this with mums house when she went into care, as she owned a property she has to fund herself, no mortgage on the property , we had to either rent and use that income to fund her or sell and out money in bank to fund her, we chose option 1 and it's been no problem, we got a number of agents local to mums house round got a feel for the way they worked spoke to other customers who'd used them etc. We picked an agent and left everything to them they take 10% but mum still gets a decent sum each month which along with her pension etc pays for her care home. We've had 2 tenants in 3 years never been any problems, agents ring me occasionally if problem arises that needs a workman eg problem with boiler etc.

I've not been near since someone else moved in, keep in touch with mums neighbours who tell me current tenant is lovely and they hope she stays forever! house gets checked every 6 months by agent and is apparently in great condition. Definitely the right thing for us especially as prices have risen in the past few years, as mum is a pensioner she doesn't pay income tax on the amount as it fall below what she's allowed.

As and when the house is left to me I doubt we'd keep it although that was my original plan, now I'd rather take the lump sum and pay our mortgage off and extend our current home.

whooshbang.....really, I am sure there are but correct me if I am wrong but if a good return is expected then surely there has to be an element of risk..and I'm not a risk taker unfortunately!

sayerville, well if I was to line it up against property investment I would suggest it is about the same level (I'm not being facetious).

If you imagine investments on a scale of 1 - 10 then property is usually rated a 4 and the funds I'm talking about are also rated at a 4. They contain lower risk elements (2's and 3's) and some higher ones (6's & 7's). The FCA (financial conduct authority and our regulator) is quite clear that this is acceptable risk rating (the providers have to demonstrate this).

Perhaps you regard property as a lower risk as you are more familiar with it, but in reality many investments are lower risk and can bring other tax planning and liquidity benefits to the party too.

For example a house as most peoples largest asset is a huge exposure to the residential property market. To add to this with one investment property you could argue is loading your risk massively in one asset class.

I know investments seem more risky but actually the way the ones I'm talking about work you wouldn't be able to 'lose it all' as they apocryphal stories go.