Help - to sell or rent out?

DebbieMcM

Hi Folks

I am looking for some help on my situation.
My boyfriend and I have moved to London from Glasgow. We have rented a flat in London but hope to be able to buy somewhere in London in the next couple of years, ideally sooner. In the meantime we need to decide what to do with the flat we own in Glasgow.

Flat was bought for £105k with an outstanding mortgage of £89k and is valued at a measly £95k.

On a decent mortgage rate so mortgage only £385 per month with another £30 for our building charges including insurance. We have fully furnished rental quotes of between £450 and £550 per month. However we would first need to replace the boiler at a cost of £1100. It is also quite likely that we have a friend who would rent it initially thus avoiding agency fees.

Mortgage company ok for consent to let with no fees or change in rate though they only agree one year at a time. I also understand the need to register as a landlord, get an EPC and GSC.

So what do I do? Is it worth renting it out for a couple of years (maybe less) until we can buy in London? Or do we just cut and run and start again when we can buy in London even though we would end up with only a few thousand in the bank? Oh if it helps we have no debt to pay off.

Thanks
Debbie

kidmugsy

Personally, I'd be reluctant to undertake letting a property four hundred miles from where I was living, and also reluctant to hang on to a property which might yet wipe out my equity in it. In your shoes I'd sell.

helloyouu

As you don't have any commitment, and that the rent is actually giving you positive cash flow, why not keep it for a few years and rent it to your friend for let say £500?

Property market isn't that good outside london it may worth waiting few years until the property value rises again.

Or you can mark it for sale for 120K and see how the market react.. And rent it at the same time. That's what my landlord did: he put the house for sale with tenant inside during 1 years until sale has been agreed!

DebbieMcM

Thanks both helpful thoughts. Still struggling with the dilemma. If we didn't need to get a new boiler (we wouldn't do this if we were selling) to enable it to be rented out we would probably have rented it already. Considering we wouldn't really be making money from renting it out and we would only be doing so to try and get an increase in the capital value I'm a bit worried we wouldn't be making our money back for a while by the time we have paid the £1100. On the other hand only ending up with a few thousand and actually stepping off the property ladder for a while isn't particularly attractive either!
Nice thought putting it on at £120k but that's so far from its value we wouldn't get anyone coming to see it. One bed flats aren't that attractive at the moment as so few first time buyers can get mortgages so there isn't that much competition in Scotland for each property at the moment.

Oh what to do!?

Mallotum_X

What are your monthly mortgage repayments? Have you worked out your net cash position each month based on the rental/mortgage/repairs/agency fees etc

Have you enough spare income to cover the mortgage in void periods between tenants.

Personally I would not want a property so far from where I live, but thats just me, and would sell up and get what equity is still available.

motherofstudents

It's a dilemma isn't it. I have a one bedroom flat which I really wanted to sell as I had heard so many horror stories about renting. Had it on the market for about 9 months at a competitive price but no offers. The reason I let it in the end was that it was costing money to keep it there empty. There was council tax, £70 a month service charges, some electricity...so I have let it out to a really good tenant.

That is just my experience and I think I did the right thing for my circumstances. The fact that you are going to be so far away is one disadvantage, plus the fact that you have a mortgage. I would sit down with the figures in front of you and just work out exactly what position you would be in if you sell and if you rent out. Say 12 months from now, how will it affect your future plans.

AlexMac

If the friend's really up for it, and with the slight caveat that business relationships can sour friendships, I'd rent as an initial strategy, and maybe at a less than market rent to keep it let for as long as possible. Lots of info on this website about becoming an amateur landlord, and how you can manage the business of tenant references, the AST, gas safety certs, Tenancy Deposit Protection, etc yourself. I note the points about the cost of a boiler, but that's only a couple of months' rent, or the equivalent of the fees you'd pay to a letting agent. And if you line up a couple of decent maintenance contractors, you can phone an emergency electrician or plumber as easily from London as from Partick (or from Southern Italy as I had to do when my tenant's boiler failed).
And it buys time while you think about it. Even if you decided today to sell, you'd be lucky to be shot of it inside 6 months even if you dropped the price.
I wouldn't bank on capital gain in the next few years however, so maybe the advice above to go for a clean break is better. Nice dilemma, having what is in effect, a 'spare' property!

Nobbie1967

If you realy want to buy in London in the next 2 years, then I'd sell as I'm sure it would complicate matters having a existing mortgage. I see little to gain except stress by renting it out for less than two years. What if you find your ideal house and can't get the tenant out/sell quickly?

kidmugsy

The trouble is that owning a property in Glasgow doesn't really give you an insurance against rising house prices in London.

DebbieMcM

Thanks folks. Really useful thoughts again.
Mortgage is £385 and it's £30 for our service charge. Good thought on renting it out to my friend at a slightly cheaper price to keep it let as I had been thinking about doing that.
For me it's not so much about how much I will make from letting its more about keeping it to increase the capital value and keep ourselves on the housing ladder. I know it won't keep pace with price increases but at least it's something?
At the moment we are paying full costs of both flats so voids and maintenance won't really be an issue as that will still be considerably less than we are paying now.
I'm more worried that we might rent it for a year or so then want to buy and it either will be worth less as the housing market hasn't improved or we struggle to sell and then as someone indicated it would affect our London purchase. Though hadn't really thought about the point on how long it will take to sell, I just assumed it would be quite quick but if it's going to take months then it seems a bit pointless leaving the flat empty all that time and paying all the costs!