Update then rent out or Sell?

greenstick

Myself and another family member have been left a property in a relatives will.

We are trying to decide whether to sell the house or rent it out. Before the house would be in a rentable state, it would be in need of some updating and a rough estimate for this work is £15k, which we could cover from savings.

Now, my limited understanding of BTL is that it is usually covered by an interest only BTL mortgage and the rent covers the cost of the interest +25% to cover fees. With the bulk of the “Profit” being made from the rise in the propertys value.

As we are not in this situation, is renting out the house still a good way of using the property or would we be better selling the house and investing the money (I have a £60k mortgage and the other person is a mortgage free homeowner)

It has been suggested that we could get a BTL mortgage and effectively buy the property back from ourselves to release the bulk of the value of the house but I am a little unsure that this is the best way to approach this.

Any advice or guidance would be appreciated.

Conrad

For most serious investors its all about yield.

Cash yields about 4.5%, has no risk and is hassle free.

Property now often yields similar amounts. For example a £150000 flat here yields about £600 per month rent (about 4.8%). However, there are always ongoing costs such as occasional repairs (especially when a tenant leaves), gas checks, possibly letting fees or adverts, accountancy fees, insurance an so on, so the true yield (most amateurs miss this point) is more like 4%.

You may get a little higher but this can fluctuate and in any event letting aproperty is a lot more hassle than cash in the Bank.

Dont get me wrong, I had a property portfolio but as everyone jumped on the B2L bandwaggon yields became to low so I sold the lot.

Now I invest in off - plan property abroad as the returns are vastly superior (sometimes above 50% per annum net return).

silvercar

If you took a BTL mortgage the proceeds would go to you. Your property would then be like a business with the interest payments allowed against the rental income for tax purposes. So effectively you wil be getting a lot of the value of the property and the rent would cover the mortgage - so sit back and enjoy!

But life is not that simple. Do you want to be a landlord? Can you manage the property and do you want the hassle? If not, sell the property to release the cash and walk away.

The other option is to do it up, then sell.

vansboy

You don't say how 'saleable' the place is, in present condition - you might find it makes far more than you think, as quite often people pay over value, for something, to make it 'their way', rather than it's 'done up' price, after your hard work & tastes!

If you wern't looking to become a property investor, but the circumstances have now made you think this way, probably better to just sell & reduce your own mortgage & save/spend what you need to pay on mortgage costs currently.

If the other person wants to buy your share, to do up/rent out, it'll be a good way of saving estate agent costs remember.

VB