Keep house as an investment?

[Buy2Lett]

Blended family. We are looking to move in to a bigger property. We can buy it without selling our current home. Given inflation etc I am wondering whether we should hold on to our current house and rent it out for income, rather than sell it and invest the money. What are the pitfalls apart from the general PITA of maintenance, potential damage to the property etc? There is a mortgage attached which I'm aware we'd have to change or pay off. The house is the south east in a place where there is lots of demand for rented properties, and is close to transport links etc.

If it was left empty for a period of time could you afford both mortgages?

We can buy the new house outright.

Extra stamp duty on your new house, change of mortgage, which will incur costs. Do you have other savings, or is everything concentrated on the two houses? In which case, you could disproportionately suffer if there was a housing crash.

Tax implications of the rental income - who gets it, does it push you in to a higher tax bracket, etc..

A lot to think about

@Buy2Lett

We can buy the new house outright.

Ok, so the mortgage on the property you’d be renting out, if you had to continue paying that mortgage is it an issue?

We could still cover the existing mortgage.

Tenants could trash the house. I'd recommend not watching Nightmare Neighbours!

*Tenants even.

If you rent it out, do it through an agency. They take a a cut, but they also take all the hassle.

UK residential property has not historically provided as good a return (after tax) as a globally diversified portfolio of equities, although the leverage can help. There is a lot to be said for the diversification and liquidity benefits of equity vs property and the former is typically a pretty good inflation hedge too.

@babybrain77

UK residential property has not historically provided as good a return (after tax) as a globally diversified portfolio of equities, although the leverage can help. There is a lot to be said for the diversification and liquidity benefits of equity vs property and the former is typically a pretty good inflation hedge too.

100% this, was just about to say exactly the same thing. Leverage can help etc

It would be more tax efficient to sell it as it won't attract CGT tax if it is your principle residence.
BTLcan get messy with CGT and then the tax on the rental income. It is not as lucrative as in previous years and when you add in management and maintenance the income can be small for the hassle.
I would sell and invest in stocks and shares through you annual ISA Allowance and in a pension to maximise tax efficiency. You can relax, put you feet up and make money. BTL can be hard work and stressful if your tennant is a pain.

I would concur with @ saleorbouy.
Also there seems to be a possibilty of a swaithe of energy efficiency costs in the pipeline for landlords.
It is now unlawful for a landlord or agent to rent out a domestic property with an EPC rating of F or G, unless they have a valid exemption in place. Tighter regulations may follow, perhaps including regulations on properties that can be marketed for sale according to the rating.

Very risky business at the moment.