Sell Up or Rent Out?? What would you do?

bigmommamuppet

I've posted this question on the DFW board and haven't had much feedback, therefore would appreciate your opinions.

Link to original thread here:

https://forums.moneysavingexpert.com/discussion/4175263

I have the oppurtunity to move (on a long lease rental term min 3 years) to an ideal bigger and nicer house, right next door to mine so no moving costs:). No credit checks needed etc as the neighbours who are our friends are moving back home and are wanting to keep the house as a rental oppurtunity. Consent to let in place, lease etc will be done via a LA, so all above board. They've also said we can treat the home as our own ie decorate, hang pictures etc etc. and potentially buy the place from them in 3-5 years time when they might want to sell. Hopefully by then we would potentially be in a position to buy i.e when our defaults drop off.

So my question to you guys is?

Sell up and pay off our debts (currently 46k) and have a few spare ££ in the bank. Then save the 2.5k a month debt repayments to cover deposit etc when we come to buy again. Are we mad to consider stepping off the property ladder (I've never rented, homeowner since I was 21).

The other option is to rent out our current property and sell up when we're ready to buy, but not sure if I want to become an 'accidental landlord'.

We're in the fortunate position that we can afford the mortgage and rent on both properties until we sell/ rent ours plus the housing market is still quite healthy in the NE Scotland in terms of the rental and selling markets. Therefore I'm keen to have a fresh start so to speak but worried of the risks that may ensue with stepping off the propertly ladder.

Decision, descisions.. to stay on the PL or step off for a few years?

BitterAndTwisted

FORTY-SIX GRAND'S-WORTH OF DEBT?

Sell up and pay them all off and put then that 2.5k a month of debt repayments in savings for another deposit. In two years you'll have sixty grand put away

n.b.: there is no such thing as a property ladder

Mickygg

Obviously the danger with stepping off is if prices rise you may struggle to get back on. Also there are the huge moving fees to consider. I personally would not step off. I toyed with it earlier this year, to sell or rent, but decided to sell and buy another as I knew I would be constantly checking the market and hope it didn't increase.

Werdnal

First point, never ever take a LLs word for it that you can treat the place as you own, decorate etc. Get this permission in writing. Verbal arrangements with friends (who quickly become ex-friends where money is concerned) are doomed to failure. Protect yourself, get it in writing!

As for letting, are you sure you want to live next door to your tenants!!!!! You need to gen up on all the legal requirements and obligations of becoming a LL. Read this:
http://uk.mg41.mail.yahoo.com/neo/launch?.rand=duua8kpq2g45e and all the links it contains. Some info may not apply in Scotland, but the majority is OK, plus LLs in Scotland need to register - none of this "they are friends so its OK" arrangement!

Would you still be able to afford your own rent and living expenses if the tenants stopped paying, trashed the place etc - it may sound like scaremongering but you only need read some of the regular posts here to see what can go wrong.

Do you want tenants knocking at you door every 5 minutes asking questions, reporting problems etc. What about 3am when they have a burst pipe!

Will you be able to afford to maintain your letting property - boiler fails, you cannot just tell the tenant to put an extra jumper on and live with it until you can afford to replace. TBH, if you are thinking you can rent, maintain a let and still save money I suspect you could be way wide off the mark, but thats just my own opinion!

Sell and move next door is the better option in this scenario!

G_M

The 'property ladder' is actually a game of 'snakes and ladders'.

It makes perfect sense to sell before sliding down a snake (property price slump) and then buy at the foot of the next 'ladder.

Of course, no one knows if property prices will pick up next year, or fall further, or what (if we did we'd all be millionaires). I'm just saying, this fear of 'getting off the ladder cos I'll never be able to get on again' is misplaced.

It may be the best thing to do.

(and with £46K debts it almost certainly is!)

Fire_Fox

Sell up and pay off your mahoosive debts: you will have much less stress every month, you won't end up bankrupt if you have tenants that trash your house and don't pay rent, fall ill or injured and cannot work, get made redundant. Do you know how much interest you are paying each month between the mortgage and the other debts? It's not a property ladder, there is no guarantee of making any money at all, many homeowners make a hefty loss and some end up bankrupt. There is no such thing as an accidental landlord, only professional and unprofessional ones.

bigmommamuppet

Thanks guys for your input.

I think we're going to sell. Clean break and all that. We're currently on NRAM's SVR and due to defaults etc don't have a cat in hell's change of getting another mortgage for a few years at least. Our v. large debts are all interest free due to most of them being sold on to debt collection agencies, we've not been financially savvy in the past so want to make sure we're not making another mistake. If next door wasn't moving away we wouldn't have considered moving so maybe it's fate and at least we will become debt free in the process.

flutterby123

We're in a similar position but have decided to rent ours out for 12 months and see where we are financially then. We are also moving into a friends, larger house which we may get the opportunity to buy too!

We found that for us selling wouldn't be that beneficial at the moment. I need to get another year's worth (at least) of accounts together to prove income to get another mortgage but we need to upsize desperately.

Would be interesting to see how your situation pans out as there are a lot of similarities to ours.

Good luck

PasturesNew

I think it's a bit weird to buy a house from somebody who will then live next door.

I do think you should sell and start again though; house prices aren't going anywhere soon .... so you won't 'miss out'.

BitterAndTwisted

How much did your mortgage lender charge you for Consent-To-Let, or did they increase the interest-rate?

Werdnal

BitterAndTwisted wrote: »

How much did your mortgage lender charge you for Consent-To-Let, or did they increase the interest-rate?

OR both ...!