Existing property owners immigrating 'down under' early 2022; rent or sell?

nathanscott90

Hi All,

My fiance and I are putting the wheels in motion to immigrate to Australia at the beginning of 2022. We own a 2 bedroom flat in south west London and are 3 years in to a 5 year fixed rate mortgage due for renewal July 2022.

From a  financial point of view, I know the best decision is to keep the flat on an rent it out (Option 1). However, selling the property and living a bit more care free (Option 2) would mean less worry and stress. 

With Option 1 I would opt for a fully managed property rental through a letting agent (typically 15% fee of rent). The rent would need to cover the mortgage (come to this in a bit), managing agent fee (including buildings insurance), landlord insurance (for defaulting rent payments etc.) and a contingency/reserve fund for if things go west. What I am not sure about is the mortgage side of things. We would look to remortgage before we go, and might be liable to a small fee if we remortgaged a couple of months before July 2022. Does anyone have any experience with this? Do we explicitly need a buy to let mortgage? Our aim is not to receive an income, because quite frankly, we would probably just break even when considering what the rent will be covering, but if we keep the property on, a) it is a safety net should we want to come back to the UK, and b) we would reap many benefits including our mortgage being paid and an increase in property prices. 

With Option 2 , as mentioned above, from a financial perspective is not the best option. I just need to understand some low-risk investments for anything between £60k - £100k? Remember, this option is all about minimal stress, so nothing risky. 

I would love to hear from you all, please share your experiences and knowledge.
Best regards,

Browntoa

You will need a BTL mortgage for option 1 .

I'd always personally opt for selling and putting the money in fixed bonds with fixed returns . Avoids all the stress of dealing with a rental property from the other side of the world

AdrianC

Do you REALLY need the hassle, worry, ball-ache of running a residential letting business on the opposite side of the world? Even paying a substantial proportion of your business turnover to an agent...

Think, too, about the numbers. What raw yield will you be getting on the property? 5%? Yet you're happy to pay 3x that to the agent... And what about when all the service charge, mortgage, maintenance, income tax etc are covered? You are going to be subsidising your tenant's accommodation... You say your "aim is not to receive an income" - that income is the profit after all the expenses are covered by the rent. If you aren't in profit, you're making a loss. Every month. Before the tenant does a runner on the eve of the possession hearing, leaving a debt of months of unpaid rent, legal costs, a dead boiler, trashed decor...

Yes, your lender will need to either give you consent to let or you'll need a BtL mortgage.

You want minimal-stress, minimal-risk investments? Don't even contemplate renting the flat... Put it in a bank account. Yes, the interest's lousy. But at least it's predictably and consistently positive and zero-hassle. There are plenty of more lucrative low-risk investments...
https://forums.moneysavingexpert.com/categories/savings-investments

Comms69

nathanscott90 said:

Hi All,

My fiance and I are putting the wheels in motion to immigrate to Australia at the beginning of 2022. We own a 2 bedroom flat in south west London and are 3 years in to a 5 year fixed rate mortgage due for renewal July 2022.

From a  financial point of view, I know the best decision is to keep the flat on an rent it out (Option 1). However, selling the property and living a bit more care free (Option 2) would mean less worry and stress. 

With Option 1 I would opt for a fully managed property rental through a letting agent (typically 15% fee of rent). The rent would need to cover the mortgage (come to this in a bit), managing agent fee (including buildings insurance), landlord insurance (for defaulting rent payments etc.) and a contingency/reserve fund for if things go west. What I am not sure about is the mortgage side of things. We would look to remortgage before we go, and might be liable to a small fee if we remortgaged a couple of months before July 2022. Does anyone have any experience with this? Do we explicitly need a buy to let mortgage? Our aim is not to receive an income, because quite frankly, we would probably just break even when considering what the rent will be covering, but if we keep the property on, a) it is a safety net should we want to come back to the UK, and b) we would reap many benefits including our mortgage being paid and an increase in property prices. 

With Option 2 , as mentioned above, from a financial perspective is not the best option. I just need to understand some low-risk investments for anything between £60k - £100k? Remember, this option is all about minimal stress, so nothing risky. 

I would love to hear from you all, please share your experiences and knowledge.
Best regards,

Here goes:
You would receive an income the second rent was paid. You may not be making much 'profit' but that is a different matter. 
Does your lease allow this to happen? If so, is there a fee?
You would need a BTL mortgage, or consent to let from your current lender.
Whuilst it might be a long term safety net, it takes 6-9 months to evict a tenant, so i wouldnt rely on it for emergencies if you need to return.
On which note, if you need to evict, you'd need a solicitor, as a letting agent cannot evict a tenant. (extra cost)
Also on that note, can you afford it, if the tenant decides to stop paying rent?

Low risk: £60-100k in premium bonds. 

nathanscott90

Thanks for your responses. I was always leaning towards Option 2, and it is nice to hear other people's opinions. 
@Comms69:
Sorry, when I mention income, I just wanted to distinguish myself from someone looking for an immediate profit, (after expenses). Our block of flats is full of renters so I presume it would be okay re the lease, however that is duly noted thank you. 
@AdrianC:
Not looking to run a business, although you could argue it should be treated that way. Income tax would be 0, because as I mention, after the deductibles (including contingency), I would probably only just break even. The other two respondents mention premium bonds, is there any reason why you mentioned a bank account instead? 
@Browntoa:
I presume I can find a lot of information on premium bonds within this website, right?

Browntoa

Im talking fixed income bonds , for example say 1.5 % for a 3 year fix . Moneys safe up to 85,000 in a UK bank and you cannot get tempted to access it for that period without penalty

[Deleted User]

nathanscott90 said:

Hi All,

My fiance and I are putting the wheels in motion to immigrate to Australia at the beginning of 2022. We own a 2 bedroom flat in south west London and are 3 years in to a 5 year fixed rate mortgage due for renewal July 2022.

From a  financial point of view, I know the best decision is to keep the flat on an rent it out (Option 1). However, selling the property and living a bit more care free (Option 2) would mean less worry and stress. 

With Option 1 I would opt for a fully managed property rental through a letting agent (typically 15% fee of rent). The rent would need to cover the mortgage (come to this in a bit), managing agent fee (including buildings insurance), landlord insurance (for defaulting rent payments etc.) and a contingency/reserve fund for if things go west. What I am not sure about is the mortgage side of things. We would look to remortgage before we go, and might be liable to a small fee if we remortgaged a couple of months before July 2022. Does anyone have any experience with this? Do we explicitly need a buy to let mortgage? Our aim is not to receive an income, because quite frankly, we would probably just break even when considering what the rent will be covering, but if we keep the property on, a) it is a safety net should we want to come back to the UK, and b) we would reap many benefits including our mortgage being paid and an increase in property prices. 

With Option 2 , as mentioned above, from a financial perspective is not the best option. I just need to understand some low-risk investments for anything between £60k - £100k? Remember, this option is all about minimal stress, so nothing risky. 

I would love to hear from you all, please share your experiences and knowledge.
Best regards,

It doesn't matter if you are letting the property to make money or not you will either need consent to let on a residential mortgage or a buy to let mortgage because you will be letting the property and not living in it as per the terms of a residential mortgage. Now as you are emigrating at the beginning of 2022 and would be looking to remortgage by March 2022 there's a good chance that if you go down the residential route and try to get consent to let straight away that the lender will tell you to jog on.  That leaves you with getting a proper BTL mortgage.

How have you concluded that option 1 makes most financial sense given that by your own admission you will only just about break even assuming you have calculated the profit and tax correctly?  It may well be that option 1 is the better option for you to give you that safety net but I don't think it is necessarily the best financial option.

I'm two years ahead of you in that I moved to Australia at the beginning of this year for an initial two year stint.  Originally I was going to keep the property empty for two years with family checking on it weekly because I poured my heart and soul into making it my home and I wasn't ready to have someone else living in it.  Then when I got to thinking that I might just stay in Australia for 4 years because my 494 visa gives me the option of PR after 3 years and citizenship a year after that, it would be silly to have the property empty for 4 years and by the time I come back I'll probably want to redecorate anyway so I may as well let the property out.  Providing I get a decent tenant and few voids I might come out ahead but if I break even I'll be happy.  I was meant to be flying back this week to get it ready for letting but obviously that's not happening now.  I had already visited several letting agents to get the cut of their jib and selected one who seemed to know what she was on about (and had an adorable spaniel puppy).  In a strange way I'm thankful it's empty right now or I could easily have started off with a tenant unable to pay rent due to COVID-19 so that would have been the worse, all the risks and none of the reward.

The other ex-pats out here tell me it takes two years to decide if you want to stay or go back so now I'm swinging back to just keeping it empty for the two years. (Yes I will have buildings and contents insurance to cover this).

Comms69

nathanscott90 said:

Thanks for your responses. I was always leaning towards Option 2, and it is nice to hear other people's opinions. 
@Comms69:
Sorry, when I mention income, I just wanted to distinguish myself from someone looking for an immediate profit, (after expenses). Our block of flats is full of renters so I presume it would be okay re the lease, however that is duly noted thank you. 
@AdrianC:
Not looking to run a business, although you could argue it should be treated that way. Income tax would be 0, because as I mention, after the deductibles (including contingency), I would probably only just break even. The other two respondents mention premium bonds, is there any reason why you mentioned a bank account instead? 
@Browntoa:
I presume I can find a lot of information on premium bonds within this website, right?

Premium bonds have no guaranteed return of profit. 

You put £100 in, you get £100 out, it's a bit like a lottery, but it's government backed, so your money is never at risk (aside from devaluation due to inflation of course). 

Fixed rate bonds are guaranteed, but you cant access your money as easily. As in once it's in there it's in there for the full term.

Bank accounts are middle ground, some interest, and easier access. 


Dont neglect the cost of eviction. You're otherside of the world, it could run you £3-5k to evict a non paying tenant. 

nathanscott90

How have you concluded that option 1 makes most financial sense given that by your own admission you will only just about break even assuming you have calculated the profit and tax correctly?  It may well be that option 1 is the better option for you to give you that safety net but I don't think it is necessarily the best financial optio.

@Lover_of_Lycra , Option 1 makes more financial sense when you consider the mortgage will be getting paid and the property price will likely increase. So breaking even on a monthly basis is still very profitable in the long run. 
Thanks for your response, good luck with your decision!

Thrugelmir

When you say the mortgage will be paid. Remember only the interest element of the monthly repayment is tax deductible. 
Have you allowed a budget for internal reburbishment ? 

nathanscott90

@Thrugelmir Oh really? I didn't know that. As an example, our repayments are about £1250 a month at 2.99% interest, how would that implicate us?
The property has just recently been renovated, but I take your point.