To sell or let - what to do, what to do?

[MissCardew]

I'm sure this question has been asked many times before but I'm hoping for a little advice from anybody who might have been in the same situation and whether it has worked out for you.

We bought our flat in 2007 on a 100% mortgage and we are basically now in a position where we could sell the flat and pay off our existing mortgage. We could possibly make a few grand in the sale but certainly not enough to pay a deposit on a new house.

We now have a 2.5 year old and our current location is no longer suitable (very student-orientated, lack of outside space, not great schools) so we would like to move.

I guess the options open to us are to sell the flat and rent in a more suitable area and accept that we will not make any money but equally we won’t lose anything. Alternatively, we could consider letting our flat and rent ourselves in a better area and wait for the market to improve before selling.

Becoming a landlord is quite a scary prospect but at the same time it doesn't make much financial sense to sell now.

I'm really going round in circles with this one so any advice/experience/thoughts would be very gratefully received!

The most important thing to find out is what the rental market where you is like. If the rental market is good then it would probably make financial sense to rent out the property until you are in a position to buy again, if you can manage this within a timeframe of 3 years then you won't have to pay any capital gains.

Being a landlord isn't very hard. If you can you can be a landlord fairly cheaply by not using agents to manage the property though I would advise you to use an agent to find a tenant. I did this when I moved out of London - I rented out the 1 bed flat I'd bought and rented a two bed with garden for me and my daughter. 3 years later I sold the London flat and bought my current property.

The main concern is voids (times where your property is not let) but you can avoid this if the rental market is good.

You also need to check if your current mortgage lender will let you rent out your property.

They may want you to switch to a different mortgage, which will be more expensive, or if you have to remortgage you may face redemption fees.

If you do go ahead with letting it out, and want to manage it yourself, make sure you have a couple of really good handymen on good terms who you can call on when you need them. Use an agent to find the tenant and draw up the lease, and an independent inventory company to manage the check-in and inventory. They will usually charge a private landlord less than you would be charged via an agent, and there's loads about so you can shop around for the best deal.

Thanks for your reply Enb76 it's nice to hear that things worked out as you planned.

We are based in Devon and I think (from research on Rightmove/Zoopla) that our flat would be pretty rentable as it's close to the city centre and university so good for professionals and students/sharers. I think you're right though, I need to speak to some agents to get a more professional assessment of the market.

Thanks again

Thanks CQ for your advice. I spoke to the mortgage company last year (I've been going round in circles for a while!) and asked if they would give us permission to let on our existing mortgage - on the understanding that we weren't buying to let and this wasn't a long term plan - unfortunately, they said they would insist on moving us onto a BTL mortgage which I suspect is because we are currently on their SVR rate which is very low.

This was quite a while ago and I didn't mention the full details (moving for better schools etc) so perhaps they would be more open to consent to let - or perhaps I'm being a bit naive.

Would you consider selling and rebuying?

Could you get a big enough deposit to get for example a 85-90% mortgage?

I would say the way savings/investments look at the moment, the property market is likely to give you a better return on your money than anything else.

I don't really know the area you are in but would advise to stay in the market if at all possible.

I would love to sell and buy Stokey as it would definitely save a lot of hassle but unfortunately, we wouldn't be able to afford the deposit. We would potentially be able to afford one on a 95% mortgage in the next couple of years if they ever become more accessible again.

OP I think your last post has answered your question. You do want to own your own property, therefore it would be silly to step of now just as the market is picking up. Hold on to the property you currently have, rent it out and rent somewhere for yourselves.

I would think very carefully. We have ended up in this situation- we bought in 2006 at the peak of the boom. Then prices went down and we were in neg equity for a while. We needed to move for work, couldn't sell the house at a price that was enough to pay off the mortgage, so we rented it out.

It has been a pain- the rent we get doesn't quite cover the mortgage so we are £100 down every month. So far the fence has blown down, the boiler has blown up, the dishwasher has broken.... there is always something.

We are renting a lovely house in a great area but we won't realistically be able to buy the kind of house we want until we sell the old house. It will prob be another 4 years or so before we have paid off enough equity to have the slightest chance to have a deposit on another house. Until then I feel like we're in limbo.

HaveToWearHeels you're right. It's the most sensible way to proceed - I think I've just read so many landlord horror stories that I'm a bit hesitant. I'm not one for taking risks so the option to cut our losses and sell to rent appeals. Think I just need to be a bit braver tbh.

Thanks blackandwhite - if you could sell your property to pay off the mortgage and continue to rent would you? Or are you willing to stick with being a landlord in order to stay on the ladder and hopefully reap the benefits in a few years?

It sounds like your property is in an excellent location and will rent easily.
DH and I own a property that we let out. It is not difficult at all as long as you are prepared! Before letting you property out, make sure everything is in very good condition to avoid tenants calling you to fix problems (this may mean some initial investment). Use the services of a good company to do a very thorough survey.

If it's your first time, I would use a letting agent although I really dislike them! They charge you for not doing much, so bare in mind that not all the rental income will be yours to use.

If you are looking to buy a long term home for your family, I have found that renting in the area for sometime is a very good idea. So renting your current flat will give you a chance to take your time looking around but not having your capital depreciating... (not a financial expert, just talking form experience)

If we could sell it right now and just pay off the mortgage I would. No question. That is our particular circumstance though. I just think to be a landlord you need to have an extra stash of cash for if things go wrong- if your tenant moves out and you have a few months with no rent what would you do? What if something goes wrong in the house? We had a tenant who moved out and had left the house in a terrible state- we had to go to mediation to recover the bond.

Something else to consider: I think the law was changed recently by Osbourne, capital gains tax on a second home used to apply after 3 years of moving out of the home, but now it's 18 months.

Also I should point out our situation is a bit more complicated as we moved hundreds of miles away from our house- not ideal!

OP, DH and I manage 5 BTL properties and are currently in the process of buying our 6th and we both work full time. It is a steep learning curve I admit, but it is not rocker science. We find if you are a good landlord and respect your tenants but also make sure you make them aware of your expectations things work pretty well.

I was in the negative equity trap back in the late 80's so rented out a flat (100% mortgage) to buy a house (100% mortgage), as soon as I broke even I sold. I have regret that decision ever since. I had a 48k mortgage on that flat and it would now be worth 160k and the mortgage would have been paid off last year