Should I sell or rent out my flat?

MFR1990

We have been trying to sell our flat in Croydon for the best part of a year. We now have an offer but we’d be selling at a loss. We won’t be buying a new place straight away regardless as we are planning on travelling next year (covid permitting). We are wondering if we should continue with the sale or rent out the flat for a year instead in the hope that the flat market might improve next year and we wouldn’t have to sell at a loss.

To add to the complexity there is a new block of flats (same height as ours) being built over the road right now and it makes us nervous about future resale value if we were to postpone.

it would be great if anyone had any advice on selling now vs waiting it out and renting.

Hutch100uk

Have you checked with your mortgage company if you can change to a 'buy to let' mortgage?

MFR1990

Hi Hutch100uk we've confirmed that we shouldn't need a buy to let because we aren't buying another home and this would still be our primary residence. We've not 100% confirmed anything with our mortgage company yet because we are still weighing up options at the moment

MaryNB

Do you mean you don't need a BTL because a lender will grant you a consent to let on your residential mortgage?

It can't be both your residence and a rental property because you will be giving someone legal rights to reside there and will not be able to enter the property without their permission or a court order. Unless you are looking at getting a lodger; however, if you aren't living there for a long period of time you cannot be considered a live in landlord. 

[Deleted User]

MFR1990 said:

Hi Hutch100uk we've confirmed that we shouldn't need a buy to let because we aren't buying another home and this would still be our primary residence. We've not 100% confirmed anything with our mortgage company yet because we are still weighing up options at the moment

Who confirmed this? If you let the property it will cease to be your main residence. 

MFR1990

Sorry I'm just using the wrong semantics. We will be staying with family so we won't be live in landlords. I just meant that it will be the only property we own. We have been advised that should be fine though to get permission to let on our residential mortgage.

MaryNB

MFR1990 said:

Sorry I'm just using the wrong semantics. We will be staying with family so we won't be live in landlords. I just meant that it will be the only property we own. We have been advised that should be fine though to get permission to let on our residential mortgage.

A consent to let isn't always a given. You should definitely talk to your lender. It's usually at their discretion and just for a limited time, e.g. one year.

How will you manage the property while travelling? You'll pay a fair whack to a letting agency for full management. They won't take on your legal obligations so if something goes wrong it will still be your responsibility. 

It a lot of work letting out a property - repairs, GSC, EPC, EICR, deposit protection, also HMO requirements if you let out to 3 people from more than one household (e.g. couple and an unrelated single person if you have a 2 bed flat). Will they be using your furniture or will you store it? Will you be able to afford the mortgage repayments if they stop paying and you're not working?

Also after you come back you will have to go through the procedure of issuing an S21 to request your property back or sell the flat with tenants in situ.

AdrianC

You will definitely need consent to let from your lender.
You will quite likely need consent from the freeholder or managing agent.

I presume you'll be paying a letting agent to manage the property? Not only their fees, but premium pricing on any work they do.

How much needs spending to make it lettable?

Will letting it actually turn a profit? Or will you be subsidising your tenants in the hope of sale prices increasing?

And, when you return, will you be happy to live elsewhere while you wait for notice to your tenants to expire?
And will it be an issue for you if they don't pay and/or take a year or two to evict once that notice has expired?

BabyStepper

We're missing the point here. OP is asking for thoughts and speculation about what is going to happen to the property market in the next year or so, and trying to decide whether to sell up for a loss or wait and sell next year without taking a financial hit. 

None of us can predict what will happen in the future. I don't know the area you're talking about, maybe the new flats will attract more buyers to the area, or maybe there will be too many then and the value of yours will reduce, I really don't know. I do know this though. If you don't ever want to live there again, and you never had plans to be a landlord as a career, and you have a buyer prepared to take it off your hands, then that looks sensible to me. It's not easy to make money as a landlord any more, the property could become a liability, and it looks llike a whole pile of hassle to me.  

MaryNB

The risks of being a landlord are a huge part of that decision. Also if the lender and/or freeholder doesn't agree in the first place there's no decision to be made. There is a significant cost and effort involved in letting it out to begin with, and if the tenants stop paying rent and refuse to move out that could wipe any any potential gains made due to the increase in value after the year. It's far more complex than just hoping the market improves next year. 

MFR1990

Thank you all so much! I was really debating this but all of your advice has made up my mind to push on with the sale and take the financial hit (which isn't so bad as to limit our options). You've really given me clarity and it's hugely appreciated thanks