Moving to Australia - Sell or let our house?

Savings_Schmavings

We are looking at moving to Australia as soon as they lift the international travel restrictions so hopefully early 2021.

We have a house in Edinburgh worth around £500k which we own outright. Potential rental income is around £1700/month before fees. Management fees seem to be around 10% and I guess we would probably need to budget around £100/month for maintenance/repairs on top of this.

We're debating whether to sell or let the house out.

When we arrive in Australia we plan to purchase a home with a budget around $1M which we will mortgage. If we keep the house in Edinburgh we would have to mortgage 80% of the Australian property and use some of the income from the Edinburgh house to help us to pay off the Australian mortgage. We expect to work for another 5-10 years in Australia before we take early retirement and hope to have paid off the mortgage in that time frame. Alternatively, if we sell the house in Edinburgh it means a much smaller Australian mortgage and allows us to invest in other areas or simply not work so hard. 

We are conflicted, not just because of the financial/taxation implications but also the stress/hassle associated with renting our house out while we are overseas.

Would be interested to hear from others with similar experiences.

FinallyStoppedLurking

Sell the house. Really not worth the hassle when you are so far away. Invest the money elsewhere. 

foxy-stoat

Sell the house and use the money to have a lower mortgage would be my choice.

steampowered

An 80% mortgage 10 years from retirement is a high LTV and a tough ask for lenders. I would be worried about whether Australian lenders will be willing to give you that sort of mortgage. Especially as you will have no address history and no credit record in Australia. Perhaps speak to an Australian mortgage broker?

You also need to think about tax. As a non-resident landlord, your tenant or letting agent will need to deduct 20% from the rent. You will also need to declare the rent in Australia so you might pay Australian income tax on it too. It's all achievable but it is hassle and it does cost. Have a read of https://www.gov.uk/tax-uk-income-live-abroad/rent.

Personally I would sell the Edinburgh property and move my cash to Australia. You then have a lot more flexibility on your new mortgage. Money not required for the new mortgage can be put into other suitable investments (such as stocks & shares, or a pension).

Savings_Schmavings said:

When we arrive in Australia we plan to purchase a home with a budget around $1M which we will mortgage. If we keep the house in Edinburgh we would have to mortgage 80% of the Australian property 
...
We expect to work for another 5-10 years in Australia before we take early retirement and hope to have paid off the mortgage in that time frame. 

So you would have a mortgage of AU$ 800,000 which is about £450,000.

If you wanted to pay off that mortgage in 10 years, you would need to repay £45k of capital per year, plus the interest. That's a lot, even if you are letting a property in Edinburgh. 

NinjaTune

Sell.  I doubt you want the hassle of being a Landlord especially when you are living so far away.  Just because you have a letting agent in place it doesn't mean you won't end up with the tenant from hell who wrecks your property and refuses to pay rent/move out.

Savings_Schmavings

Hi, thanks for the replies.

We are both 49 so have a bit of time before my regular retirement date, however we would like to retire between 55 and 60.

Both my partner and I have good incomes, both here and in Australia so servicing the mortgage and making overpayments is not an issue. We have dual citizenship and have lived in Australia previously with mortgages, taxes etc, so we know what to expect with all that. 

Having said all that, I'm leaning towards selling the house and having a small Australian mortgage. Less stress all round.

Marvel1

Savings_Schmavings said:
If we keep the house in Edinburgh we would have to mortgage 80% of the Australian property and use some of the income from the Edinburgh house to help us to pay off the Australian mortgage. 

not just because of the financial/taxation implications but also the stress/hassle associated with renting our house out while we are overseas.

What happens if the tenant doesn't pay? 

 Why I would sell, too many complications.

Salemicus

Another way of looking at it is this - if you didn't already own the house in Edinburgh, would you be taking out a larger mortgage on the Australian house to buy such a property to let it out?

Sell.

[Deleted User]

Savings_Schmavings said:

We are looking at moving to Australia as soon as they lift the international travel restrictions so hopefully early 2021.

We have a house in Edinburgh worth around £500k which we own outright. Potential rental income is around £1700/month before fees. Management fees seem to be around 10% and I guess we would probably need to budget around £100/month for maintenance/repairs on top of this.

We're debating whether to sell or let the house out.

When we arrive in Australia we plan to purchase a home with a budget around $1M which we will mortgage. If we keep the house in Edinburgh we would have to mortgage 80% of the Australian property and use some of the income from the Edinburgh house to help us to pay off the Australian mortgage. We expect to work for another 5-10 years in Australia before we take early retirement and hope to have paid off the mortgage in that time frame. Alternatively, if we sell the house in Edinburgh it means a much smaller Australian mortgage and allows us to invest in other areas or simply not work so hard. 

We are conflicted, not just because of the financial/taxation implications but also the stress/hassle associated with renting our house out while we are overseas.

Would be interested to hear from others with similar experiences.

I moved to Australia in January and let my former home which is in Scotland.  I'm not sure that I want to stay in Australia permanently so that's driving my decision to keep my former home as I might want to move back at the end of 2021.  My situation is a bit different in that I have a mortgage and with the rent I receive I break even, no more no less.  The first two months rent went on paying letting agency fees and getting the property reading for letting: landlord registration, PAT, EHIC certificate, gas safety certificate, legionella risk assessment, extra smoke detectors and a heat detector in the kitchen.  I went with a tenant who is a key worker and provided good references so, touch wood, the tenant shouldn't be furloughed or face some other drop in income.  I spent time meeting with letting agents before I went to Australia so I could choose the best, or since we're talking about letting agents the least bad, and so far so good but I still need to stay on top of things.   I involved myself in the tenant selection process and I've told them I want to see all inspection reports.

If you're certain you want the move to Australia to be permanent then sell the Edinburgh property.  If I knew I was going to see out the rest of my days down under I would sell too.

Savings_Schmavings

Thanks for all the sensible feedback. Food for thought...

pinkpiglit

We are in a similar position - although our move to Australia is planned for 2022 rather than 2021.

In theory I'd prefer to sell up, so much less stress and worry.  But similar to Lover_of_Lycra, there is an outside chance we may decide that we want to come back to the UK.

As such, we are going to be renting out our London home for two years and then - assuming we like Oz - will sell up and buy down there instead. 
 

Of course that means in the meantime we have to worry about tenants refusing to pay rent, or not leaving when we go to sell etc.  It's already giving me grey hairs!