Sell or rent out house

[Movingon2024]

Wondering if anyone can help me decide as I'm on my own with this.

Moving abroad for work. Own a UK house, with 11 years of mortgage to go.

Unlikely to return to the UK but can't rule it out of course.

Had estate agent round. They said it would rent for more than mortgage payments - about £500 more/ month. Their fees would absorb £300 of this to fully manage, which I would need.

Sale value is around £550,000 (outstanding mortgage £150,000).

I've spent loads on it over the last 5 years so this would not quite cover costs. Plus keen to keep a UK base in case I do return/the Dcs eventually need it (both at uni).

On this basis it looks like renting it out - in an area of high demand - would be best. Mortgage gets paid, and also management fees; we keep the property, giving us potential entry back into UK housing market if needed: estate agent fully manages so minimal hassle for me.

What am I missing? Does this make sense?

Thanks

If you have had the property for a long time already and then sell in a few years, you will have a CGT allowance and May will cover any liability depending on what the market does.

It's only 20% of the interest payment of the mortgage now. They changed the rules. If you pay £1000 a month mortgage and half of that is interest then your income tax bill at 40% would be £4800 so you would keep £7200. But you get a discount off the £4800 of 10% of £500 x 12 so it would be reduced from £4800 to £3600. So you keep £8400 of the rental income. There are some other deductions that can be made off the tax but it's not a lot and are usually counter balanced by the costs of being a landlord. No wonder the economy is a mess!

My cousin wanted to keep her house in the UK, when she moved to the USA earlier this year, by renting it out. Her family lived close to her existing house and agreed to help look after it, with a letting agent.

However, it was very difficult for her to obtain a mortgage so she could buy a house in the USA because of her home back in the UK. In the end she sold the house in the UK so that she could get a much cheaper mortgage rate.

Different countries/banks will have different rules, so you might want to check this out.

Yes if you are classed as non UK resident you will get your personal allowance and if no other UK income it can be used against your rental income BUT there are specific rules on wether you are classed as UK non resident for tax purposes so check then first.

At the moment you are only considering sell or rent your existing property. You also say both your children are in the UK at uni and would appreciate a UK base. Have you considered selling your current home and downsizing to a British bolt-hole, eg 2 bed flat, that would be mortgage free? This way you have a property that reflects the UK property market meaning you could afford to move back if you wished, and your kids would have a place to stay in the UK.

Ok thanks again. This is all really useful.

from what I thought was a no-brainer, I can now see it’s a lot more complicated.

but things are much clearer. Basically, instead of just assuming it’s a no-brainer, I need to do the actual sums, using the input from this thread (tax situation etc).

maybe the best thing for ease would be to rent it out for a year, while I figure out whether to sell completely/sell and buy small apartment/continue renting out.

will get some other management fee quotes too.

thanks all

OP a very real risk is that with the ever-increasing tenants' rights you may not get your house back when you want it. Banning s21 will make it even harder as you may have to go to court and wait many months/years for your slot. Possibly whilst your tenant stops paying rent entirely. There is even a risk that the judge decides if the tenant is worse off moving out that they can stay (recent headlines). Be very very very careful is my advice. Read through some of the landlord news articles on landlord today and the comments below.

Do not rent it if you are emotionally attached.
What if someone trashes it? Won't move out? Doesn't pay rent?

unlike most people I think renting it is possibly a good option, mainly to keep a foothold in the in property market, in case you want to return. You need to do the sums though and mortgages for non-residents are expensive. If it’s a nice place in a nice area you’d be very unlikely to get a tenant who trashes it. You will need to plan to fix things and replace things but these are costs and are paid pre-tax.

To clarify, I mean mortgages are expensive if you are not resident in the uk.

The consensus is to sell.

Apart from the numbers and the risk of void months, income tax, higher interest rates, CGT, insurance and other landlord costs, sorting out problems while you are overseas and working full time is going to be incredibly stressful.

The agent will earn more than you without taking any risk.

You will pay tax on it, but £400k in a fixed-term saver can still generate 5% = £20k pa
That is substantially more than you’ll earn renting and you’ll be able to sleep at night. You are currently considering getting a £2400 return although it’s likely to be less.

I get the bolthole idea. I sold in the UK to live abroad and bought a 1-bed as a safely net so that I’d always have somewhere to stay (and keep my most sentimental bits and pieces). It worked out well because when I returned I could then live exactly where I wanted (and I kept the 1-bed for several more years as a holiday place).

As a LL there is always the risk that everyone (agent, taxman, trades, bank) gets paid but you. And none of them are investing 400k of their own money in the enterprise. There is also the risk that you don’t get the £400k later due to damage or lower prices.

Good luck with your decision.

@yumscrummy You are quoting a management fee of well below 10%. That’s virtually impossible. I’ve paid 10% many years ago but that wasn’t full management. 15% is fairly normal.

Until a few years ago, letting it would have been a good option. Things have changed so much now in terms of the finances (not really being able to offset mortgage costs), more checks and admin, really hard to get anything back from the tenants for damage at the end of the tenancy, court delays - and that's before the s21 changes come in.

Honestly, I wouldn't.

@TizerorFizz yes that's right, 7.5%

The rental landscape is seriously changing as a landlord and most experienced landlords are looking to leave the sector especially with the extra regulation councils are bringing in as a revenue earner for them. I’d be looking to sell.

How did you (or your DDs) decide where to invest?
Would you also avoid owning a holiday let?

Thanks all.
seeing the numbers written down like that - £20,000 pa interest on the asset vs 2400 if I let. - does make it a lot starker.

I guess the rationale for letting is that the increase in property price over time is where the growth is.

the house is indeed in a ‘naice’ area & v much a family home so not likely to attract the house-trashing type of tenant.

I’m in it right now before moving away and that is clouding the decision for sure.
Listening to so many of you, I can see it would be an emotional rather than rational decision to rent it out.

going to write down the figures - @beenaboutabit thank you so much for that - and hopefully that will confirm it in my mind. Take the emotion out of it.

also look up s21.

Thankyou all.

@TizerorFizz yes I got some other quotes yesterday from other agents and round here seems 15% is the norm.

See my user name!
We're selling a rental. I'm tired of feeling like I'm looking after another household. Our tenants and their neighbour had an on going dispute and it used to rattle me.
I feel we were always waiting for something to go wrong. Previous tenants missed payments.
For all these reasons we're out.

In your position I'd sell. Then when your DC are ready use some of the proceeds to give them a start in the property ladder. Invest the rest.

If you do come back you'll likely want a smaller property anyway, just for you and your DH.

It's a tricky decision, but that's my two pen'orth

Costs can be high but if you sell and later rebuy that is also costly and you may not be able to afford the area you had before (our neighbours couldn't).

Looks like I'm a lone voice but I'd rent it out. Profits won't be high but you'll keep the house and pay off a bit more mortgage.

I rent out my old house, and although there's always the unknown cost of any repairs/damage etc, I see it as a long term plan. I chip away at overpaying the mortgage with whatever profit I make (after tax) and add a few thousand extra each year from my own savings if I can. At the minute, I don't have any immediate benefit from it as I put all the profit back into the mortgage or to pay for work that needs done on it. Ideally I'd have the mortgage paid off in 15 years, at which point I would then benefit from a monthly income from it. And of course I know I can sell it if I need to. It's in a desirable area with a lot of demand for rental property from professionals, and I also know it should sell quickly if needed.

@AccidentallyFellAmongBiscuits One used the money as a deposit for a flat in London and the other is invested in bonds and high interest savings that can be accessed as she might want a property too, but just not yet. If she wasn’t buying, we would have done longer term investments. As CGT is likely to go up, I’m glad we are out.

We do still have a holiday let and I wish we didn’t. We have tried to sell so need to lower price.

15% for residential lets is normal, 20% for holiday lets.

If you are emotionally attached to the house, then definitely DO NOT LET IT OUT. Yes you might get good tenants, but there is also a real risk you could get tenants who trash the place. Or at best subject it to modest wear and tear, which can also be heart-breaking to see if it was your much loved former home. I'd say sell, because being amateur landlady is not easy, especially from remote.

@Movingon2024 can I ask what you decided to do in the end? we are in a very similar position, looking to move abroad this summer and wondering whether to sell our family home or let it out. Thanks :)

You may know more than me but my understanding was that there would be provisions for people who had previously been owner occupiers who were moving for work and intended to return.

I used to work abroad in the old old days before S21 and my tenants used to sign a form saying they recognised that I was an owner occupier who were.