Advice on renting out versus selling

davem7

Hi all, me and my wife are looking for a little advice, or really what you'd all do in our shoes. Here's our general situation:

• My wife and I own a 4-bed house in Coventry, valued between 280k and 300k. Rental income estimated around 1000-1250/month, but not too many non-student houses of this kind of size on the market so a bit of an unknown quantity.
• Our mortgage is 110k (£700/month), we have savings of around 25k. Assuming we could sell for around 270k, then we have equity around 160k.
• We're moving to Exeter (~175mi drive) in around 3 months as I have a new job, salary just under 40k. Wife will be getting a job, but ideally not initially to take care of our little one (1 year old) in the short term so we are assuming no income from her at all. She's currently employed up here.
• It seems similar houses in Exeter (or villages around it) are on the market at around 325k-350k. Estimating we might be able to buy for 310k, this means we need a mortgage around 150k since I imagine savings will be used up in stamp duty, moving costs, estate agent and solicitors fees.

Our dilemma is really this: do we try to get a mortgage on just my income and buy immediately in a bit of a unknown area (it seems like this should be possible, but also looking for advice on that front really as well), or rent our house out and rent down in Exeter, then sell in 1-2 years?

Pros/cons of renting:

• Pro: Can try out the new area before we buy
• Pro: Might make a little bit of money from rental income in the short term to help cover our own rental costs
• Pro: Gives us time for my wife to find a job and might be easier to get a mortgage on a new property, and perhaps afford a little larger/nicer house
• Con: We're landlords, so there are a number of responsibilities and requirements for maintenance if things go wrong -- we do however have family & friends in the area that say they'd be willing to help out
• Con: There is of course the risk of property damage and loss of income, mitigated a bit with our savings
• Con: Our mortgage deal is up in October, so interest rate will go up and rental profits will go down/cease to exist

Pros/cons of selling:

• Pro: Gets the move out of the way in one go and no responsibilities of a landlord
• Pro: We're pretty sure of which area we want to live in as we have a pretty selective set of criterion (schools, transport links and proximity to place of work) so not sure we need to trial the area too much -- we could however turn out to hate it
• Con: Might be difficult to secure a mortgage (new job so probation period for me, no immediate income from my wife)
• Con: Could take some time to actually sell the property so might need to figure that aspect out

Would really appreciate some help and advice from anyone that's been in a similar position. The job is a great opportunity (a permanent position in a field where short-term contracts are prevalent) and there's no question we're going for it whatever, but the number of variables and possibilities with the move is really doing our heads in with crippling amounts of indecision! Hoping this thread might help unclog that a bit

Cakeguts

You are making the assumption that the house you live in now is the kind of house that tenants want to rent. It isn't always the case.

There is nothing to stop you from selling the Coventry house and then renting for a short time in Exeter until you know where you want to buy.

If you let the Coventry house and the tenant doesn't pay the rent could you manage to continue to pay the mortgage on that house and the rent on a house in Exeter?

[Deleted User]

I agree with the above post. It would make more sense to me to sell the house in Coventry so you know for sure what you have in the pot.., no stress renting (and paying a LA fees), no stress while you are paying mortgage on empty house while selling (presuming you would).., no rush to sell,, no need to complete by a certain date, wait for right price.., no refurb of wrecked house if you get the wrong tenants.

Move to your new job.., and rent, while you find out which area you want to live in.

AnotherJoe

Another vote to sell, rent, then buy. Removes a fair bit of hassle in several respects and being a long distance landlord is no fun, do you want to be doing that whilst starting a new job, in a new area?

Also more practical, you can apply once your wife has been in her new job and get the place you really want rather than compromise due to lowered income.

Rain_Shadow

I had this exact problem a few years ago. I rented in new location while selling in old location and then looked to buy in new location. I did have the advantage of working a couple of days a week in old location so I could keep an eye on old house before it sold.


I would definitely recommend this approach. Apart from anything else it gives you a chance to get to know new location before committing to buying.

Pixie5740

Another reason to sell now and rent in Exeter is that when you come to buy in Exeter you won't be dependent on the sale of a property to be able to proceed. You'll be chain free with cash in the bank which would put you in a stronger position as a buyer.

Letting the current place out means that when you want to buy somewhere in Exeter you will need to evict the tenants and then sell the place which all takes time.

Lokolo

Also remember the +3% in stamp duty for second home if you decide to keep and rent out vs. selling

That's an extra £9k in stamp duty owed (on £300k) if you keep and rent out.

Fuzzyness

i'd say dont become a LL for a year or two. it can be a lot of hassle and not very rewarding. why not sell up and sit on the cash and rent whilst you make up your mind where you want to live.

Guest101

davem7 wrote: »

Hi all, me and my wife are looking for a little advice, or really what you'd all do in our shoes. Here's our general situation:

• My wife and I own a 4-bed house in Coventry, valued between 280k and 300k. Rental income estimated around 1000-1250/month, but not too many non-student houses of this kind of size on the market so a bit of an unknown quantity. - Assuming you're avoiding students, you may want to consider renting it to / via the local NHS trust.
• Our mortgage is 110k (£700/month), we have savings of around 25k. Assuming we could sell for around 270k, then we have equity around 160k. - Indeed but you want to have a back up for a new roof, or new kitchen or...
• We're moving to Exeter (~175mi drive) in around 3 months as I have a new job, salary just under 40k. Wife will be getting a job, but ideally not initially to take care of our little one (1 year old) in the short term so we are assuming no income from her at all. She's currently employed up here. - Fair enough, will you be buying or renting?
• It seems similar houses in Exeter (or villages around it) are on the market at around 325k-350k. Estimating we might be able to buy for 310k, this means we need a mortgage around 150k since I imagine savings will be used up in stamp duty, moving costs, estate agent and solicitors fees. - £25k would be a lot for that.

Our dilemma is really this: do we try to get a mortgage on just my income and buy immediately in a bit of a unknown area (it seems like this should be possible, but also looking for advice on that front really as well), or rent our house out and rent down in Exeter, then sell in 1-2 years? - I'd suggest renting until you have 2 years employment at the same company. Prior to that you have zero security.

Pros/cons of renting:

• Pro: Can try out the new area before we buy
• Pro: Might make a little bit of money from rental income in the short term to help cover our own rental costs
• Pro: Gives us time for my wife to find a job and might be easier to get a mortgage on a new property, and perhaps afford a little larger/nicer house
• Con: We're landlords, so there are a number of responsibilities and requirements for maintenance if things go wrong -- we do however have family & friends in the area that say they'd be willing to help out
• Con: There is of course the risk of property damage and loss of income, mitigated a bit with our savings
• Con: Our mortgage deal is up in October, so interest rate will go up and rental profits will go down/cease to exist

Pros/cons of selling:

• Pro: Gets the move out of the way in one go and no responsibilities of a landlord
• Pro: We're pretty sure of which area we want to live in as we have a pretty selective set of criterion (schools, transport links and proximity to place of work) so not sure we need to trial the area too much -- we could however turn out to hate it
• Con: Might be difficult to secure a mortgage (new job so probation period for me, no immediate income from my wife)
• Con: Could take some time to actually sell the property so might need to figure that aspect out

Would really appreciate some help and advice from anyone that's been in a similar position. The job is a great opportunity (a permanent position in a field where short-term contracts are prevalent) and there's no question we're going for it whatever, but the number of variables and possibilities with the move is really doing our heads in with crippling amounts of indecision! Hoping this thread might help unclog that a bit

I'd sell and rent. keep the savings, maybe invest in something low risk

cyantist

I also agree it’s not worth it, especially if only for a year or two.

If you try to sell in 2 years is how much it will cost you to do this. Will you sell while the tenants are there? It’s not easy to do this (especially if they aren’t thrilled about having to move out) so often the best thing is to get them out, do any repairs and decorating and then try to sell it. But this means covering the mortgage/council tax/insurance for that property for however long it takes to get it on the market and then sell it, and that might be a while. I imagine you’ll be looking at close to £1000 a month you’ll have to pay out while it’s empty.

It’s exactly the issue we have an as we can’t afford the £600 every month to cover these costs so we are stuck renting the house.

davem7

Thanks all for your thoughtful replies, it's really useful to have some external feedback, particularly from others who have been in a similar position!

I think you're all broadly correct in saying that the rental income would be nice; however the hassle of being far away, combined with potential issues of maintenance, problem tenants and ending the tenancy in a reasonably timely/amicable fashion are not worth it. Cakeguts also had a really good point in that I don't know whether there's a market for our house at the moment.

I guess our concerns with selling up and renting is the risk of being priced out, and also that we might be leaving the house empty for a reasonable period whilst it sells, which I seem to recall is also against the terms of our mortgage/insurance.

Potentially a common ground here might be for me to rent out a small 1 bed place and commute up and down at the weekends for the short term, which would also allow my wife to work a bit longer and bring some additional funds in.