Sell or rent out?

Tillyanna

Hi everyone

My mother is in the process of selling her flat. She is moving into a rented warden assisted flat and wants to use the proceeds of the sale to pay the rent on her new place.

Two days after putting the flat on the market she found a buyer, but that was in August. Since then the buyer has had difficulty getting a mortgage. Last week he finally got a survey done of the flat and the estate agent told my mother that it had been valued at £10k less that the agreed price and the seller didn't want to pay any more than that.

We live in the south, but I still find it hard to believe that the price of a one bedroom flat can fall £10k in three months.

My mother is now in a difficult position. She can't really afford to take that big a drop as it won't give her enough money to invest.

We have considered renting out her flat until things pick up again, but we've never done anything like it before so we're a bit apprehensive.

Any thoughts or advice would be really appreciated.

Tillyannna

Doozergirl

If you've not done it before then I wouldn't start now.

Really, the agreed price is subjective - it doesn't necessarily mean that prices have fallen by £10,000. It means that the surveyor doesn't agree with the valuation - it is most likely to happen when the purchaser buying with a high loan to value percentage. It doesn't help that sentiment isn't good right now - the surveyor has to cover his proverbial.

You have to look at the difference and also appreciate that the 'boom' is over. I doubt you'll be selling for more in the short - medium term. If the flat is paid for outright, what return will she get on the money in a savings account compared to what she gets in rent, minus the associated hassle, wear and upkeep costs of letting a property. In the vast majority of areas, the savings route will win hands down.

sandy2_2

I'd rent out. Speak to a decent lettings agency, see what sort of rent you could get, furnished and unfurnished, what agency fees etc there would be and then decide

Doozergirl

sandy2 wrote: »

I'd rent out. Speak to a decent lettings agency, see what sort of rent you could get, furnished and unfurnished, what agency fees etc there would be and then decide

Can I ask, for what reason would you let it out?

Pez2

You need to do the maths.

First, figure out how much she'd be making from interest each years if she sold now and put the money in a savings account. Then ring round some letting agencies and get them to give you estimate of how much rent you could get for the flat. They should also be able to give you some idea of the costs involved, so subtract them from the rent. Then subtract another bit, say 10%, to cover yourself for the times when the flat is empty or the tenant doesn't pay.

If renting out will make you a lot more than the savings option then go for it. If the savings route is about the same or more then do that instead.

merlinthehappypig

If your mother is old enough to be moving into a warden controlled flat than frankly I would go for the option which offers least hassle and the most stability and security for her money. Even if the maths showed that renting would be slightly better financially it will be so much easier to put the money in a high interest account. Is she really going to want the hassle with tenants and repairs? There are some excellent fixed rate savings deals out there for older people.

PasturesNew

When the property was "valued" it was a guesstimate by the estate agent assuming that property prices only ever go up.

As part of the survey the buyer then had a mortgage company value it - £10k lower than the estate agent's optimistic pricing.

Surveyors/lenders are being very cautious over valuing property at the moment since: Northern Rock's run on the bank; the Credit Crunch in general; lowering confidence in the market-place; growing opinion/speculation on there being a house price crash for the next 1-10 years, not to mention news reports like this which came out today: http://uk.reuters.com/article/businessNews/idUKNWLB412120071205

If it were me I'd rip their arm off and take the £10k lower.

I'd not rent it out because there are legal obligations on this, you might not get a tenant, you might not get a good tenant, if the price of property continues to fall month on month for the next 5 years you'd be losing more each month than you'd be getting in rent; you'd be missing out on the interest on the hard cash banked from selling.

Tillyanna

Thank you so much for all your replies.

We thought that renting out would be an option until the market recovers, but in the light of what you've all told me it may not for quite a while.

I think my mother is happier with the idea of selling, although I would have dealt with the letting for her, it still would have been a hassle for all of us.

I think the best option may be to take whats on offer and get her the best investment deal I can find.

I really appreciate your advice and help, thankyou again.

Tillyanna

cats!

Best advice is to sell; comments like "until the market recovers" are consigned to yesterday's news I'm afraid ....

EdInvestor

Tillyanna wrote: »

We thought that renting out would be an option until the market recovers

It might be.Her buyer seems extremely lackadaisacal: one doubts whether this sale will go through.

I think my mother is happier with the idea of selling, although I would have dealt with the letting for her, it still would have been a hassle for all of us.

Renting out might be an option: You need to check whether the projected rental income on the flat would cover the rent on her warden assisted place after costs (service charge, voids, repairs/maintenance/refurbishment,insurance, agents fee) and not forgetting tax.

Ask the estate agent.What has the market been doing in your area and what is the outlook? What is local tenant demand like?

Much of the doom and gloom currently about is overdone.A slowdown is IMHO much more likely than a crash.In the long term your mother might like the possibility of more capital growth by remaining in the market rather than selling out at a discount.

Jonesya

chriseast wrote: »

If your mother is old enough to be moving into a warden controlled flat than frankly I would go for the option which offers least hassle and the most stability and security for her money. ...
Is she really going to want the hassle with tenants and repairs?

I think that's the issue, would your mother be able to manage the property or would it fall to you? If so, would you want the hassle of managing the property?