Rent or Sell

pearlcz

Can anyone give me some advise on "Rent" or "Sell" for my house. I have a house I live in worth £240,000 of which the mortgage is paid off. I would like to move from the area with my job and thinking of selling putting the mney in a high interest account and using the monthly interest to rent a house close to my new job....but many people are saying rent the house out...then rent another on the money rent gained....or get another mortgage on the house....however the repayments for another mortage will be too high (looked at £150,000 repaymets were over £800 month....too high). I have been told by estate agent I can get about £650-£700 month rent.

Can anyone give me some solid advise....for my move and long term investmant.

Cheers,
Simon

itgirlinuk

If you don't want the house to live in, then I would suggest renting it out. But this decision should be based on the fact that houses in your county/area is estimated to rise in value.

One way good way to let might be corporate lets. If the house is furnished nicely and done up, you might be able to get a company to lease it for an extended period of time and will also maintain the house for you. And this removes the hassle of managing letting agents and having periods of it standing empty.

Doozergirl

Renting out the property is not an option. Even £700 a month is only a 3.5% return on £240,000, that's pointless. You have to pay for an agent to find you a tenant (you lose at least one months rent), you have issues with how the property is managed when you're nowhere near the house to do it yourself, and all of your fixtures and fittings will be deteriorating. What are you really making? I wouldn't bank on much capital gain either; property prices haven't risen much in the past couple of years and they just can't maintain much more of an assent.

You're far better off having that money in the bank. You'll make quite a bit more in interest off even a half decent savings account; plenty to rent another place in your new area with maybe a bit left over.

You could play other markets if you want; even a smaller BTL if you want to keep in the property market would be a better option than your current property; you could spend £150,000 and get more than £700 a month in London. Generally speaking, the smaller the property, the better return you get in rent.

PS. Welcome to the boards!

van_persie

Simon,
This is a vast sum of money to be dealing with and you ultimately have to do a lot of research. Also, it very much depends on the liquidity of your investment; might you need to get your hands on that cash at short notice?

However, looking at your options:
Letting property out
Forget about rental yields - that's just the icing on the cake. Most investors look for capital gain. How long are you in it for? If you do decide to let your property but need to cash in after 5 years, you may lose money if the market goes down. You have to decide whether or not property prices will rise sufficiently over the period of investment. Investing for 1-5 years? It's not looking good. Hold out for longer and you may do better. As many will tell you, long term property investment can provide impressive returns.
Right now, however, there are many other forms of investment out-performing property and with IR rises on the horizon, many believe property will crash.
Ever considered investing in property abroad? Risky but yields could be huge.
Again, do your research and decide.

Selling up
This option allows you to realise your 'paper' profit in the property. Hopefully, you will get close to your asking price and, after fees, have around 230K to play with.
The obvious bonus here is that you're not relying on the property market to sustain your equity; you'll have it in hard cash.
Then you can assemble a portfolio of investments (low to high risk with tax breaks where possible!)
eg:
180K in high interest internet account 4.85% gross (Cahoot, or similar) LOW RISK
30K in premium bonds (TAX FREE, recommended for high rate tax payers) pays on average annual 'interest' 3.7% and you could win the big one! LOW RISK
7K MAX ISA (varied portfolio, TAX FREE) MEDIUM RISK
13K STOCKS (varied portfolio) HIGH RISK

This is certainly a safer porfolio - you're not exposed to the drops in the property market, but then again, you won't benefit if it rises. Which is more likely? You have to decide. And again, how long would you want to keep this investment? Is it likely that you might need to dip into it at some point?

Finally, if you do decide to cash in on your house at what many believe to be the peak of the market, you can always buy back in if prices drop...then you're quids in!

Hope this helps.
VP

Tassotti

Is there any reason that you don't want to buy another house instead of renting? If it is because you believe the market will fall, then why consider keeping the original house at all?

Why not sell this house and buy one closer to where you work?