Moving abroad... sell or rent out our house?

mush

Hi

This is my first post on this forum, and I hope to get some friendly advice, all of which is gratefully received.

Basically, we (my family and I) are migrating somewhere warmer next summer. We plan to rent for a year or 2 when we arrive, check out areas, schools etc, without being too committed to one place straight away.

The decision we have to make is what to do with our house. It's a 3/4 bed semi (one bedroom downstairs) in greater London. We need to sell it eventually, so we have the money to buy a house when we want to settle permanently abroad. In the meantime, we could either rent it, or sell it in February / March time, and put the money in the bank for a couple of years.

The pros / cons as we see so far:

If we sell...

• Get 5% + in the bank, safe and guaranteed.
• Less hassle
• No fall back if the move goes pear shaped.
• Lose out if the value of our house rises more than we get in the bank. (I know the general opinion of ppl on here - a crash or reduction is imminent, however it has been for years, and historically house prices always go up)

If we rent..

• Basically, the opposite of the above.
• We would get 4% or 5% rental income compared to the value of the house. But have still to pay the mortgage, management fees, any extras, tax, insurance etc. We figure maybe 2% return after everything.
• Have the comfort of a disaster abroad
• If house prices do go up for a semi in a nice location near good schools in greater London, we benefit from the increase until we sell.

What do you all think?

Thanks

pinkshoes

1) How much could the house be rented for?
2) How much are the management fees?
3) How much is the monthly repayment mortgage going to be?

If if [1] - [2] > [3] x 1.3 then renting it out is a feasible option, if not then selling would probably be best.

The factor of 1.3 times the cost of repayment mortgage is to allow for unoccupied periods, and expenses such as new furniture/boiler etc...

pigeonpie

You've brought tears to my eyes - we left London (Battersea) in the mid 90s and anguished over buy or sell the terraced house. In the end, because of the 'hassle' factor, it needed rewiring and would have yielded middling rental returns, we sold it. In 2004 the same house sold for 5x what we sold it for - and we were unhappy where we were abroad and had to return. We now live in a flat. Plus have a much bigger mortgage.
London is London and will stay so imo. I would sell it only if and when you are happy abroad and need the money.
Now I will go and bang my head against the wall yet again....!!

mush

pinkshoes wrote: »

1) How much could the house be rented for?
2) How much are the management fees?
3) How much is the monthly repayment mortgage going to be?

If if [1] - [2] > [3] x 1.3 then renting it out is a feasible option, if not then selling would probably be best.

The factor of 1.3 times the cost of repayment mortgage is to allow for unoccupied periods, and expenses such as new furniture/boiler etc...

Thanks for your replies - we've been told we have to pay 22% tax on the rental income, after expenses (including mortgage). How does that factor into your equation?

SquatNow

Pretty much everyone says house prices are going to drop.

If you want the maximum return for your property then you'll sell it now and rent a place until you move.

If you choose to stick with the place make sure your happy to keep it for 20 years... until the next peak in prices. (The last peak was in july 2007.) Don't forget to factor in voids and maintenance/refurbishment into your calculations.

Given the state of the economy it make take 2 housing cycles for prices to recover to current levels. (Inflation Adjusted.) Be prepared to be in it for the very long term.

EdInvestor

mush wrote: »

Thanks for your replies - we've been told we have to pay 22% tax on the rental income, after expenses (including mortgage). How does that factor into your equation?

Won't it be covered by your personal allowances? (note there is a special Non Resident Landlord Scheme for expats, where rent is paid gross of tax, details on HMRC site).

The big risk is getting priced out if you sell, which is especially likely to be a problem in London. If you can find a good agent I would tend to rent as there's plenty of demand, whereas selling is quite difficult at present because of the uncertainty.Things will improve when rates come down.

If you're not in any rush to buy where you're going I'd keep all options open.