To rent or not to rent ....

little_benson

Hi all,

My partner and I have a three bed detached house in a reasonably sought after area in Reading which has been valued at £280k, the mortgage we have is £159k. I've been on the same mortgage deal with my lender (Alliance and Leicester) for 6 years, currently paying 6.840%. We have no kids, which isn't likely to change.

We've had it with the rat race and have decided we wish for a simpler life and would like to move to Cornwall. We both plan to continue working full time (we're both late 30's) but enjoy a slower pace with less stressy jobs in a nicer environment.

We've considered two options ....

a) Sell the house, move to Cornwall and rent for a while whilst considering geography, then buy a circa £200k house leaving a £100k mortgage with all fee's and expenses said and done.

b) Keep the house but on a better mortgage deal, rent it out via a managed agency so we break even per month but keep it as an investment. Rent down in Cornwall and when we get settled with regular incomes look to buy a smaller property.

We wish to do everything by the board. I believe the first option is reasonably straightforward but the second makes more sense from a strategic perspective but it does throw up complications such as:

• Will we get a new deal if we intend to rent the property out and if so, will it be any better than our current rate ?
• Will we break even each month considering the extra expense associated with engaging a property management firm ?
• What hidden costs are associated with renting out our house (Corgi gas surveys etc...)
• Can we have Sky+ and broadband in the place we rent I know this sounds silly, but does anyone have experience of such services in rented property ?

Thanks in advance,
Tony

Mrs_pbradley936

I would keep your house and rent in Cornwall. For one thing holidays in a place are a far cry from living there and you may like it for a month or two and then decide it is not quite what you want. In my opinion it would silly to incur buying costs, (solicitors and estate agent fees, stamp duty, moving all your furniture) only to find out it does not suit you and have to do it all again to relocate.

The expenses you will incur with an agent is the commission about 8 to 10 per cent of the rent per month. The Corgi inspection costs around £75 and has to be done annually. You will have to pay income tax on the rent.

You can have Sky in a rental property but you need permission for the disk from the owner and you usually have to have a yearly contract (unless you transfer the service from your house in Reading). Same thing with broadband. Just treat it all as if you are moving for all utilities.

If I were in your position I would rent a furnished placed and let the house in Reading out as furnished too. So the only items you have to take are bed linen, cutlery, pots and pans and perhaps a TV. Beds, sofas, tables & chairs cost a lot to move and/or store.

Have a great time!

lynzpower

You will be able to have sky & broadband where you rent.

Personally, Id do the former.

What would happen if you are on more modest salaries in Cornwall and no one wants to rent your house for a few months? Will you be able to fund this from your savings? Would you want to? Only YOU know if you will break even under these circumstances

keepthereceipt

You've got quite a few things to consider.

To deal with your final questions first:-

1). yes you will get a better rate. I find Std Life Bank quite competitive so have used their rates as a guide. You could remortgage now and get 5.12 fixed for 3 years or 5.15% for 5 years. There is a booking fee.
These rates are for home owners. You could probably get this deal even if you then decide to subsequently let the property out, although you may need to inform your lender. If you keep Reading and remortgage as a B2L, you can still get rates of 5.39% fixed for 3 years.

2). Breaking even will depend on the figures. I recently did this sort of calculation for someone else and it's just a matter of entering it all into a spreadsheet. You need to be sure about the facts. Speak to local agents to find out what you can rent Reading for. It depends on whether you rent furnished/unfurnished etc.

3). Factor in £200 pa for 3 star BG cover on a boiler - a must have if you are going to be in Cornwall. If you leave furniture then it must meet the fire retardant standard. If furnished you also need to leave all the kitchen utensils etc.

4). If you are renting > 6 months which is pretty standard then you can have all these things no problem.

With regards to the calculations to help you decide what you should do, I have a spreadsheet which I can send you to help you play with the figures. PM me if you want it and give me your email address. I wish I could post it here as an attachment!!

After quickly entering some figures, it looks to me as if:-

1. Sell Reading, Buy Cornwall
I have not factored in renting there for 6 months because it seems sensible to do this in any case to get to know the area and decide if you really want to do it.
Your monthly payments could drop from 1266 to around 702 per month. But you could reduce your current mortgage simply by re-mortgaging anyway.

2. Keep Reading, Buy Cornwall
I looked on the findaproperty site and it seems you could get in the region of 230-265 per week depending on furnished, area etc. Based on this you could remortgage Reading at 75% LTV to release cash to put down on a property in Cornwall. You might then be breaking even on Reading. I have assumed 10% to cover management fees and boiler service costs. In Cornwall you would then have a mortgage under £1100. So it might depend on what your income expectations might be in Cornwall.

Hope this helps.

clutton_2

NEVER give a tenant 12 months for the first agreement - if they become the tenants from hell, it becomes much more difficult to get them out, and it could cost you several thousands in unpaid rent and legal fees.

use a managing agent - its a much more complex job than at first sight. Professional "scamming" tenants can suss out amateur landlords at 10 paces, and can squat for months and never pay a penny, moving on to yet another unsuspecting new landlord.

BobProperty

My biggest concern in all of this is what work do you expect to be able to get in Cornwall? From websites and press reports, the locals don't get paid much and the place is full of outsiders driving up the property prices so they are no longer affordable to the locals. I can't see any of this working unless you can get work in the area.