To sell or not to sell...

sartois

Hello,

I am thinking ahead a little and just wondering what the best thing to do is. I have been working hard on getting a passive income which has paid off, so later this year I am off to sunnier climates where the cost of living is lower than where I currently live.

I am currently almost 4 years into a 25 year mortgage on my flat in East London. I bought it for £300,000 and one of my neighbours recently sold the equivalent flat for £410,000 about 6 months ago. The amount outstanding on the mortgage is £200,000.

My dilemma is should I just sell up or make the effort to keep it and rent it out?

There are a couple of additional factors.

I used Help to Buy to help with the deposit which was £60,000. I am unable to rent out the property under the terms of this and would need to pay it back if I wanted to rent the place out. I would also need to pay back £80,000 due to the increased equity which I don't have at the moment so would need to do some mortgage jiggery pokery in order to clear it - if thats even possible.

I will have an early repayment fee of 2% of the outstanding balance and this comes to about £5000.

So from my rough calculations if the property sold for £400,000 then after repaying the HTB loan, the early repayment fee and the estate agents fees I should clear approx £100,000 and I wouldn't need to worry about any of the hassle of renting out the place. Is this about right or am I missing a big expense involved in selling a property?

Or is this short term thinking? Is the wiser path to try and find a way to keep the property, even if it means paying a higher price for the mortgage and the potential of the hassle of renting it out, even if I offload the responsibility for this to an agent?

Thanks in advance wise people of the internet

need_an_answer

Do you want to become a LL and all it entails?

If not managing the property yourself from abroad which is never easy you will need to factor in the cost of a letting agent and the fees they charge typically anything from 6%-15% of the rental income.

consent to let would also need to be factored in

How do your projected rental figures stack up?...care to share them and someone may be able to give you a more balanced view on the rental side v selling

victoriavictorious

Quick reply from personal experience - try not to burn all your bridges and keep a property over here if you possibly can, at least until you're sure your new life overseas is going to be right for you.; if not that flat, then maybe another, cheaper one.
You can always sell it later on when you're certain things are going to work out, but it can be very hard or impossible to re-enter the market once you've left it.

sartois

need_an_answer wrote: »

Do you want to become a LL and all it entails?

If not managing the property yourself from abroad which is never easy you will need to factor in the cost of a letting agent and the fees they charge typically anything from 6%-15% of the rental income.

consent to let would also need to be factored in

How do your projected rental figures stack up?...care to share them and someone may be able to give you a more balanced view on the rental side v selling

Thanks. I have never wanted to become a LL and my dilemma is based on family pressure to keep the flat - they think I am a bit crazy to consider selling.

The rental for equivalent properties in the same building is £1400 per month but I have no idea if that includes other things like service charges (£100 a month) and ground rent (£100 per quarter). My current mortgage is £1000 per month but this would of course go up if I remortgaged to clear the £80k help to buy loan probably (and this is a guess) to around £1200 per month.

So on that basis unless I could persuade the Help to buy people to allow me to rent it out without clearing that loan there is no way I would even break even?

dawyldthing

I wouldn't rent it out - watch some of the channel 5 programmes.

need_an_answer

Ground rent and management charges are the responsibility of the leaseholder and would therefore be paid by you.
Assuming your figures above to me it looks like the income via rent would not actually self fund the running of the property therefore you would need to be topping it all up on a monthly basis.

Add in an allowance for a void period where tenants are not in the property and combine that with other running costs that you would need to cover and to me it looks like a non profitable proposal.

AnotherJoe

I agree with vv, don't burn your bridges but this particular property doesnt seem to be to be the right one to keep to establish that foothold.

Given your relatives seem so keen on you being a LL, is there one who might want go halves with you on a rental and would take over the daily chores of management ? Because managing it from abroad will be more costly than managing locally.

need_an_answer

AnotherJoe wrote: »

Given your relatives seem so keen on you being a LL, is there one who might want go halves with you on a rental and would take over the daily chores of management ? .

OP is this a possibility,do you have a relative who is able to step in and in effect take on the role of a letting agent for you?

Finding a tenant
credit checking them
Drawing up a tenancy agreement
inventories
Protecting deposit
collecting rent
dealing with maintenance issues
complying with legislation
Paying any associated bills

When you have no tenants in regular bills such as council tax and utility bills also swap back to your responsibility.

and whatever else crops up.

If the relative also has to fund the project because you cant afford to,what impact will that have?
if I had to continually top up a relatives long term investment to the tune of maybe £100 per month and manage it for them without any future gain how would that pan out if the value of the flat went up or indeed down?

You could look at an agency just finding you a tenant and completing the relevant move in paperwork for you but even this service via an agent is likely to cost you at least the first months rent.


You said in your opening post that you are moving abroad where the cost of living is lower and presumably the pace of life slower.

The way I see it is you will be supporting a property with any funds you are hoping to gain from the cost of living being lower.


Whilst you are paying to support the rental of the property there is no financial gain,whilst I agree that its a good idea to maintain a property in the uk for investment purposes I am really not sure that the current property you own is the one that will benefit you at present from renting it out.

sartois

Hi thanks for all the responses.

My brother would be an ideal candidate to help as he manages a chain of Estate agents, albeit in a different part of the country. However, he has been a LL himself and after getting his fingers burnt he has sold all his BTL properties - I doubt he would want someone else's property to manage after that experience.

I don't have any family living in London who could look after it so that would mean buying a place in another part of the country. Potentially I could ask my brother to give me a heads up on properties in his area that would make a good investment, but as mentioned I'm not sure how he would feel about managing someone else's property after getting out of that game himself.

Based on the responses I am now in the mindset that keeping the flat seems like a lot of expense and a lot of potential hassle for a gain that I am not sure is there right now due to the property prices in London being fairly flat just now. If a property that is worth £400k is probably going to be worth £400k in a year, I am not sure its worth subsidising it while I am away when even best case scenario means I would be making a loss, with a worst case scenario of bad tenant and/or other potential disasters it seems too high risk with too little reward.

The money I would make from selling is not money that I need right now to live and can be invested elsewhere or provide an injection to grow my business and equally would provide a handy safety net and/or could be used as a deposit on another property if I decide to come back.

Thanks again for the responses... its really helped clear things up in my head