To sell or to rent?

becky4131

Hey,

I have lived in my appartment 3 years in May and bought it off plan as a new build as a firts time buyer. I put down 20% deposit and have a mortgage for the remaining amount, i bought it as part of a scheme for first time buyers so got it for 75% value.

I have always wanted to travel and now i have managed to save some money to get me to Australia and i can work over there (my job is very sort after) so thinking about going for 6-12 months on a working holiday.
I can't afford to leave my flat empty whilst away so will either have to sell it or rent it out. I know the sensible option is to rent but i have heard horror stories of tenants destroying properties (it will also be fully furnished). To be honest don't really want the hassle of renting it out if i am the other side of the world....surely any contact is going to be difficult with time differences etc.

My other option is to sell....even if i didn't go travelling i would want to sell in near future as would like to buy a house so i have no long term plans to stay living where i am. My dad thinks i am crazy to step off the property ladder but if i put all money made from sale away (including sale of all furniture etc) i would have a good amount for a deposit when i arrived back in the uk.

What do you think is the best option?
I am a 25 year old single female and pretty clueless about these things!

G_M

Read the post below and then think about whether letting is for you:

New Landlords (information for new or prospective landlords)

Werdnal

Most things are covered in GM's linked post above, but the obvious ones you may not have thought of are:

Is it leasehold - does lease permit letting?

You would need consent to let from mortgage lender - some agree, most add extra costs and clauses, some refuse.

Similarly, your normal insurance would no longer be valid, so you will have to change to a landlord policy.

If you bought on a reduced price FTB deal, are there any restrictions on letting?

Being overseas, you would need to employ an agent, or someone else local to manage it for you.

By law you need to give tenants an address in England/Wales for contacting you - not an email or phone number, a postal address (obviously agent would be fine here).

You also need to register with HMRC as a non-resident LL for tax purposes as tax on your rental income needs to be deducted at source whilst you are away (again, agent can help you with this).

If you are planning to return after 6-12 months, bear in mind that even if you only issue a 6 or 12 month fixed contract, it can take several months to evict a tenant who refuses to budge (quite legally as you need to go through a formal process and possibly a court order to end a tenancy). Will you have somewhere else to live when you return incase the worst happens?

becky4131

Thank you both for the information. There certainly is alot to take into account and to be honest selling might be much less hassle.

It is leasehold and i was aware about getting permission and also about asking permission from mortgage.

The only downside to selling is i will have to get rid of all my furniture (it has taken me 3 years to kit it out how i would like) or pay storege fees.

I can stay with my dad on return to the UK, it would only be temporary until i got back into work and could rent/buy somewhere.

Breeze_Hill

Hi - I have rented out my flat for 3 years now and have on the whole found it pretty pain free and have managed it myself, although the reletting etc is all agent managed. As you will be on the other side of the world you would need an agent. I have found things to be pretty strict, so you can deduct from deposit for damages to the property etc. Agents do credit checks, reference checks etc on tenants now. I always ask to see all of that information. Your Dad could also keep an eye on things for you perhaps. It would be worth working out how the figures stack for you though, what with the tax bill etc.

becky4131

I have worked out the figures and if i could rent the flat for average monthly rent for the area it should pay for itself providing it doesn't need lots of repairs.

I have contacted a few letting agents and i am thinking it would be better to manage myself (well my dad could sort repairs etc whilst im away) as the fees they charge for full management are very high.

Would it be worth taking a gas/electricity insurance policy like homeserve to cover boiler mishaps whilst im away? The flat was built 3 years ago so shouldn't have any problems.

AlexMac

I have rented as an amateur for 15 years ago and recently bought a second flat to let. I use agents to thoroughly ref-check and contract tenants (bank, employers, landlords , credit refs...) and sort the Deposit Protection (although you can do all these yourself). But then I manage myself and - touch wood - have never had a problem, debt or damage! Just make sure you can disengage emotionally- it's no longer YOUR flat or YOUR stuff (no matter how you love it) and that dad can cope with the occasional leak/boiler breakdown etcc and replace things like fridges the day they fail. But it's been fine for me, so go for it, take the advice above and stick to the law; in fact go beyond it- treat tenants right and IME they reciprocate.
And one possibility- check with your local Council and Housing Associations as they may be taking on places on 3-year leases to let on to people on their housing need list. Several do this in my area of SE London, so my second, recent purchase is let til 2014; and they handle management and repairs; guaranteed income and no fees- worthwhile even if there is higher than average wear and tear!

AlexMac

Sorry- missed the second Q "Would it be worth taking a gas/electricity insurance policy like homeserve to cover boiler mishaps whilst im away? The flat was built 3 years ago so shouldn't have any problems."

I wouldn't bother; although if it included the £50-90 you'll have to pay anyway for the mandatory annual gas safety check, it might be worthwhile. I've only had 2 leaks (£100 a time), and one replacement boiler ( £2k) in 15 years, and that was on an old installation, so that averaged £150 a year, but I'm still ahead financially, as the boiler was too old to insure. And as you say, your place is new. Any major problems with the sewers will presumably be the freeholder's problem, so you'd only be insuring the gas, water and power systems... Calculate the odds?

Werdnal

AlexMac wrote: »

.
And one possibility- check with your local Council and Housing Associations as they may be taking on places on 3-year leases to let on to people on their housing need list. Several do this in my area of SE London, so my second, recent purchase is let til 2014; and they handle management and repairs; guaranteed income and no fees- worthwhile even if there is higher than average wear and tear!

Be very, very wary of this. I have seen several posts here and on other LL forums about the pitfalls of this type of deal. Sounds good on paper, guarantee rent etc, but you have no control over who they put in the place, how many times the tenants change during the 3 years deal etc. Often repairs are not done between tenants, or at all, and property is used and abused and handed back in a very sorry state. In this type of arrangement the Council or HA is the "tenant" not the actual person living at the property, and if anything goes wrong it is very difficult to end the agreement early if you need the place back or your circumstances change.

I would always prefer to rent to tenants on a normal AST, than tie myself to a deal where I have no control or exit clause. If you needed the property back asap, and have rented on an initial 6 month term, allowed to run to SPT, you can issue your own notice and persue your own repo of the property. You also have a secured deposit and a direct line to the tenant to persue any claims for loss or damage.

OP also remember to look into the tax issues if you are living overseas.

AlexMac

Good point (to caution about public sector subletting by social landlords) Werdnal. I'm a glass half full type, so tend to apply rose-tinted foresight! In the case of my current 3-year license to Hyde housing, however, I went in with eyes open, and accept that:

-while the upside is a very toppy rent of 7% gross of purchase price pa, no agent fees or maintenance costs, and no voids for 3 years (so by my calculation I'm £10k+ over my original 3-year income projection
- the downside is that the place may be returned in poor condition so I may be into a full or partial bathroom or kitchen refurb, a new carpet and full internal re-decoration; lots of which I can do myself.

So you're right to caution that this option may not be best for Becky, who plans to re-occupy the flat in future, and who'd prefer to offer it furnished (which a HA wouldn't want)