Sell or let flat....can't decide.

[Maximum25W]

DH has a new job and we are moving out of London to the Midlands with our two DCs. We currently own a 2 bed flat and don't know what to do. The two obvious options are these:

1. Sell the flat now, bank the equity whilst we rent a place near to his new work and when we have settled and know the area well buy a lovely family house. The equity we take would (hopefully!) enable us to buy our dream home. Our budget for this would be £400-450k

1. Let the flat out now and rent a place near to his new work. This would then give us further options in 1-2 years time - either sell the flat when we are ready to buy a house (this may be more hassle than it would be now because it may be tenanted and we may be liable for CGT) or keep letting the flat long term in which case we would only have a budget of around £200k for a house (based on our current savings of £20k and DH's salary and 1-2 years future savings). We could conceivably get a 3 bed with this but would compromise significantly on location, size, parking etc etc.

We have worked so hard to buy our current flat and its very unlikely that we will ever be able to get such an asset again (yes, I know, I know it's wrong to see property as an asset but, let's face it, that is the way things sadly are in this country) Some family members managed to buy a house whilst holding on to their first property (albeit years ago when mortgages were a lot easier to get) and they have advised exploring every option before letting our flat go. I can see their point - years down the line I don't want to regret it. I have been thinking hard about future situations in which this may the case and the two that spring to mind are if our DCs are loaded with debt after Uni and are denied opportunities in London because they can't afford to live here or in our old age if we have awful pensions (we can't assume we'll have the benefits our parents have in old age). Neither of us have great pensions at the moment because of career changes and both of us have suffered from ill health at different points which may affect earning potential in the future.

I know this is an enviable dilemma to have (but please know we have worked very hard and made considerable sacrifices to achieve it). I would be interested to know other people's thoughts, whether anyone has done something similar or thought about it.

only in mumsnet fluff-land is it wrong to see property as an asset. In the real world you worked for it, you paid for it, it is an asset.

don't apologise for the results of work.

now FWIW my opinion - sell it. Your kids may not want to live or work in London; it is actually possible to get jobs and make a life elsewhere. You also need to protect yourself first with pensions etc. Student debt is not repayable until a certain salary level is reached, and is the responsibility of the student, not the parents.

of course the flat may well increase in value; but you'll have the hassle and costs of letting it. Look very carefully into those, especially with reference to voids, non-paying tenants, malicious damage, maintenance, etc etc.

Have you spoken to an estate agent regarding rental you would get. If that would cover your mortgage then I would lean towards keeping it. I would go the opposite and say keep the flat until you know what you want to do! you need to work out (estimated) price increase on flat for a year or two! opposed to what you will make on the money whilst in a bank account.

Sell it . £400k would get you a very nice family home. Managing property from a distance can be very frustrating and costly.

Thanks for the replies - yes the rent would more than cover the mortgage, our current mortgage plus service charge is £1350 but potential rental is £1650-£1700. It's very hard to know whether the flat or savings would make more money in the next couple of years, but given the current interest rates and the fact we wouldn't want to tie the money up anywhere we would assume the savings would make very little.

Re managing the property - yes neither of us want that hassle which is why we would get an agent to manage it for us.

So you'd have an agent taking at least 10% and be paying tax on any "profit". Is £1350 all interest or is there a capital repayment element. You can only offset interest and running costs/maintenance against the income. I suspect it will only just fund itself overall. What about vacant periods when you need to pat Council tax and utilities.

you will still get hassle, it is your business and you have to take responsibility for it. the agent may field the calls but you'll still have decisions to make, tax returns to do, things to chase up.

I also don't think those figures stack up. You are right that you'll make bugger all on savings interest (tying up savings pays LESS than current accounts, but you won't be able to put all that money in the interest paying current accounts). However with figures like that, the capital growth is the only money you'll make and you will be liable for CGT.

look into it very carefully.

It's a capital repayment mortgage - £1230 mortgage £120 pcm service charge. Sorry, as you can no doubt tell, I have no idea how it works, which is why I'm glad I've posted this.
Special - when you say the figures don't stack up do you mean they don't make sense or they don't make it worth letting the flat?
I'm getting the sense it's all or nothing - do it as long term option or not at all....
Yes, I don't want the hassle but I'm not working at the moment anyway (have taken time out as DCs pre-school) so I'm wondering if it's worth taking that responsibility.

You'll need to get consent to let or remortgage with a buy to let mortgage - have you factored in these higher interest rates?

I checked with the mortgage provider - I was told we had to pay a fee of £295, that was all. We are tied into a fixed rate until January 2017 anyway (and will have to pay a lot to get out of the mortgage when we sell it....grrrr)

We have looked at this recently

You need to keep in mind:

You'll need to switch your mortgage to a buy to let mortgage and the interest rate will be higher.

You will have managing agent costs and costs of things like tenants insurance, checks on boilers etc

The rent you get will be subject to income tax (This is the one people forget about)

Only once you've considered this can you work out whether it would cover your mortgage payments.

In your situation I would sell the flat and buy a home.

You need to work out what your liability for tax purposes would be . Say rent is 1700 deduct the mortgage interest element , service charge, agent fee, insurance, repairs etc and you would need to include that amount on a tax return. You can split this between your and oh income if the flat is jointly owned so if you aren't working you may not pay tax on your share unless you have other sources of income.

Your mortgage company may insist on you remortgaging to buy to let which would affect the cost, landlord insurance and you may need legal permission from your freeholder.

I wouldn't sell a london flat. It'll be appreciating by about £10 a day at the moment and not really set to stop.

I would be tempted to hold on to the flat for a few years and rent in the new location.

1. You will "have to pay a lot" to get out of the mortgage before 2017
2. It gives you a chance to properly scope the new area and find the best location for schools etc
3. It gives you time to find the 'right' house; you will not be panic-ed into buying something you don't really want because of time constraints
4. while you are waiting, the London property will go up in value more than Midlands property
5. there shouldn't be much of a tax problem on selling the flat: you will only pay CGT on the time when it wasn't your home and two people's CGT allowance will cover a lot of the gain (but get proper advice).

Is this a forever move or are you likely to relocate again?

I used to rent out a property and it was a huge pain in the arse. I wouldn't do it again. There was always expenditure and I see always worried the boiler or something else big would break.

Was so happy to sell it and get rid.

and insurance.
you need good incurance in case the place gets wrecked (intentionally or unintentionally).

also decorating. should you get a new tennant each year/every 6 months at least touching up paint, new matress etc is required.

do your sums and then decide.

If you are going to rent in the Midlands, I would rent out your flat in London until you are ready to think about buying in the Midlands. This gives you time to get to know the area, decide where you want to live, and most importantly, if you decide you hate it/your DH hates his new job, it'll be easier to go back.

Give yourself a year. Reassess at that point.

Thanks for further replies - the first thing we need to do is sit down and go through all the figures and I have a much better idea now of everything we need to factor in.

In terms of whether it's a forever move - it's impossible to say. I'm hoping so as we need to put down roots for the DCs but who knows what may happen? DH may be made redundant/get bored with job very quickly/neither of may like the area very much (it's completely unknown to us at the moment, have only been there on a day trip to get a sense of the place). So yes, it seems risky to get off the ladder in case we have to move on again....

I would definitely rent it out. You will have an appreciating asset and the mortgage being covered for you. You might have some tax to pay, but it will be worth it.

Whereabouts in the Midlands are you talking about?

I would rent it. If you can keep a foothold in London then do it, otherwise the likelihood is that you'll be forever priced out if you ever want to return.

We have just done something very similar; when we were unable to sell in time to relocate for new jobs in the Midlands last summer, we let our London house.

Rather than get consent to let on our residential mortgage, we remortgaged with a BTL mortgage (repaying the interest only) and released a chunk of equity as a deposit to buy in the Midlands. We found a good managing agent and the property let quickly. In retrospect, we should have remortgaged at a higher LTV, but we were anxious about being able to cover any void periods. We make a very small profit, on which we of course pay tax, and which we are banking to cover any ongoing maintenance for the London house. Longer term, I believe it's recommended to minimise your tax burden by taking the highest possible LTV.

We are now renting in the Midlands and in the process of buying another property in which to live. We had little choice but to let the property at the time but we now consider it a great privilege, and a big responsibility, to be in this situation. We are 'accidental' landlords but we believe very strongly in being good landlords. If the time ever came when we could not afford to maintain the property at a standard that we would accept, we would sell immediately.

Please do PM me if you'd like to chat further about any of this; our situations are remarkably similar!

The move is to Warwickshire - the area is quite expensive housing-wise (but obviously nowhere near as expensive as London, there is no way we could afford a house where we live currently).

There are some nice areas in the Midlands where 250k would buy you a nice family home in a nice area. Of course, 400k would get you a bigger house, but it is do-able on your "keep the London flat" budget.

If it were me, id keep the flat til 2017, and rent in the meantime. Id try and get a long term tenant in, but I dont know how common these are.

2017 - sell up. By this point you will have an idea of where you want to live and house market. It may be that you can bank a lot of the profit for the future and still get a good house for your smaller budget.

PS if you decide to let in the short term, CGT is only payable once the house has no longer been your main home for 18 months. We had to weigh this up as our BTL mortgage locked us in for 2yrs.

MaraThonbar - that's interesting, timing is an issue for us also as DH starts job late April but there is no way we could sell flat before then so likely we would have awkward in-between time when we stay here, DH has digs in the Midlands and comes back for weekends which is far from ideal. Also DC1 starts school in September so we need to have an address sooner rather than later so we can get a school place....aaargh so much to factor in.