Advice on home situation, to rent or sell?

JP07

Hi,

I have fairly recently bought a new house, then took a new job which comes with a house as the job requires residency. My partner has fallen pregnant and we have decided it makes sense to live in my job house. The rental value of our own property is about £120 per month less than the mortgage monthly payments, then we have letting agents fees, landlord insurance etc. to consider. The other option is selling where we should make about £7000 on what we paid in December. Given the costs of child care post maternity pay, subsidising a rental property worries me but so does coming off of the property ladder.

Any advice would be very welcome.

G_M

You'll be stretching yourselves hugely at a time of increased costs at home.

Don't forget you can't guarantee tenants 12 months per year. 10 months should be what you base you budget on.

And what if there' a big expense eg new boiler?

Or tenants from hell who run up arrears/damage?

It's a no-brainer.....

JP07

Thanks for that, I should have added my employment residence only has utilities to pay and the early repayment charge in the mortgage will basically negate any profit on the sake of the house.

Propertyauthor

The best way to look at this is to run through the numbers properly.

When renting, your property will need a gas and ideally an electrical safety certificate and to pass the HHSRH (health and safety). You should be able to use your EPC from the purchase. Use an agent that is ARLA, NALS or RICS - otherwise they are unlikely to protect your rental income via insurance or be trained in letting legals.

Voids (when the house is empty) mean you will need spare money to cover all your costs from 3 weeks to 2 months during the year.

Maintenance and upkeep need about £1,000 a year put aside.

Depending on what mortgage rate you are on now, you'll need to stress test income versus costs at 5-7%, if you are on repayment at the moment, you could switch to interest only which might help if you go for a BTL mortgage. You will have to have a letter from your lender OK'g for you to let the property or you will be in breach of your T&Cs.

But if you switched to a BTL interest-only mortgage would mean the need for a 15%+ deposit too, normally 25% for a decent mortgage rate. Normally you would need the rent to be 120-130% higher than the mortgage, so checkout if this option is available to you.

Whether you hold or not really depends on the capital growth as the income isn't covering the costs. Check on 'sold property prices' what the average growth rate is each year for your property on your road, then you will have an idea of what it might grow by in the future.

If you make £7k by selling now, does this include selling costs? If not, it might be worth running the numbers on a 'worst case' scenario if you rented the property for 6-12 months, so you pass a new job probation just in case things don't pan out as you hope and you still have your 'old property' to go back to.

To help crunch the numbers, visit http://www.propertychecklists.co.uk/articles/kate-faulkner-property-calculations it's free to use and there are lots of calculators to help you know the true cost of renting the property.