should i sell or become a landlord?

chiefdave

My wife and I have been looking casually for a while, problem being in the area we want to be in there's not a lot that meets our requirements, at least not in our price range!

Anyway we've found somewhere we want and have an agreement in principle with Lloyds (who we bank with as it was quick and easy). Today we put in an offer and tomorrow, following the final valuation, we were planning to put the flat on the market.

So this evening we went to see a IFA and now have all sorts of options.

OPTION 1
put in an offer on the house (we've actually already done this) and put the flat on the market - wait for it to sell (it's owned outright with no mortgage) and hope the house we want isn't sold to anyone else before our flat is sold.

OPTION 2
take a buy to let mortgage out on the flat and then a slightly bigger mortgage for the house and hope the amount of rent exceeds the extra cost (if there's someone in it there's no problem there). Then a couple of years down the line, when prices hopefully go back up, put the flat on the market.

OPTION 3
The flat is currently owned outright by my wife, they suggested she could take out an interest only residential mortgage for the flat and I can take out the mortgage on the house. Then when the market recovers she sells the flat and puts the money into paying off some of the mortgage on the house and becomes joint owner. The suggestion was we could either leave the flat empty or rent it ourselves to a friend essentially cash in hand!

From the figures the IFA did we could afford the larger commitment that comes with option 2 or 3 even if there was noone paying rent. The big selling point seems to be that we would likely be able to knock about £5K off the price of the house we want if we're not relying on selling the flat and can move straight away and if house prices recover we will get £10K more for the flat than we would now.

Any thoughts, advice or potential pitfalls welcome!