Rent out or Sell??

anneliza

Hi

Opinions please.
We are moving out of our current house into another property we have acquired.
We have lived in our current house for 21 years.
We have taken out a mortgage on the current house to purchase the other property outright.
What would be the best way forward now? The house has been valued at £270000. Rental could be achieved £900 pcm. I am well aware of the pitfalls of renting a property out as I have done so before, my sums tell me that at the current interest rate we are paying on the mortgage and with other expenses taken (including tax) we could achieved £3000 profit a year, if interest rates went up that figure would decrease. If we sell and pay off the mortgage we would have a figure after expenses of £90000 left to invest. We do not need that money to live off. I am also aware that we would need consent to let.
Are there any experts out there who could advise me?
anneliza

Cannon_Fodder

Interest rates will rise. No-one can tell you how fast or by how much.

This will eat into your profits. Or improve your return on savings.

At £270k, you might find you only get offers at £250k because of the stamp duty threshold - more so, if the budget changes criteria today.

You will probably need to bring a house with 21 years "lived-in" feel, upto date, as well as getting the usual Landlord pre-requisites covered. Visit landlordzone for regulations/paperwork/tax details etc.

Is there strong demand for rental in the area, or might there be void periods?

When rates rise, the market may be flooded with properties that people have to get rid off because they've been hanging on by their fingernails up until now, so being ahead of the crowd might be an idea.

Swings and roundabouts. Toss a coin.

Estate_Agent

If you can afford not to sell the property I would advise keeping it. Find a good reputable letting agent and let them deal with the tenancy. It's good that you've had previous experience of letting.

If you have a family they will now have a decent inheritance. If you are concerned that at some point in the dim and distant future you may have to have some level of care, this asset could provide the funding for it.

If nothing else, when you come to retire, why not sell the house and blow the kids inheritance on whatever floats your boat?

ET1976

Is there any reason why you might want to keep the property, e.g. returning to it in future, passing it on to family etc?

If not, I say sell up. Max £3k/year can't be worth it.

missile

At £900pcm, I think you are being optimistic with profit from rental, but you know your return from previous rentals.

If you are a bascic rate tax payer(?) it would be very easy to get a better return. Sell and save the £90,000 in a Nationwide 3 year bond = £3,420 profit with zero risk.

anneliza

Hi

This is great! So many viewpoints.
Thanks guys!

anneliza

Estate_Agent

Whilst it is important to know that there is a £3000 profit to be made, what is being missed is any potential capital appreciation in the value of the property.

Cannon_Fodder

Or any potential capital depreciation...

Estate_Agent

Very apt point Cannon Fodder

franklee

anneliza wrote: »

We have taken out a mortgage on the current house to purchase the other property outright.
...
I am also aware that we would need consent to let.

Have you asked the lender what the terms for consent to let are in your case? I'm worried that if it's a new mortgage they may not be happy to grant ctl as it may look like you took it out intending to let. Did you tell the lender at the time the was mortgage taken out that it was so that you could buy and move elsewhere?

Also in your calculations have you included the loss of any income the 90k you have invested in the house could make if you sold and put it to work elsewhere?

anneliza

Hi

It is a good point about Consent to Let, whilst I appreciated that I needed to obtain it we did take out the mortgage in full knowledge that at sometime in the future we would need to let the property. I contacted their advice line at the time and was told that as long as the mortgage had been held for 6 months they would just charge £225 for Consent to Let, before then we would need to change mortgage product.

However from what I have read on here attitudes have changed and it may not be as straight forward.

anneliza