Advise my situation - Property sell with loss or keep paying mortage with loss?

everfor007

Last year bought the house and now got a job offer to work long term in aboard.   When i checked to rent  the house in my area, rent income is lesser than mortage monthly payment ie. Monthly mortage is around £2000 and rental expectation is £1700 - 1800.  if i decided to  top up amount every month from my pocket, also if i am not wrong, there is income tax i need to pay on rental income tax  through self asssesment on yearly basis i.e coming around £2800 . 

And also property market is not idle in current situation to sell it, it'll end up 8 to 10% loss.  Currently my mortage is 2 years fixed term i.e 2.4% and up's to renewal by end of this year, definitely with hiked interested rate my loss will scale more.

 I don't have much knowledge on future UK  inflation and economy, can any one advise, how to tackle this situation ? Whether i need to sell the property or rent it and bear the loss.. 

Definitley i am not  making any money or also i doubt near by property price will increase to earn in future,  is it possible to get atleast exemption in self assement yearly tax?

user1977

You sound quite keen to keep the property and become a landlord - why is that, given the figures you've provided? I would have thought most people moving abroad long term would sell up, rather than have all the hassle and costs of being a landlord back in the UK.

bobster2

If mortgage is £2000 pm at 2.4% - if it's a 25 year mortgage then that's for about £450,000.

If so, then I presume the property is worth a bit more than this - so realising a 8-10% loss means losing more than £40,000-£50,000. You could cover the shortfall between rental income and mortgage payments for many years without getting close to that amount.

theoretica

Will your mortgage lender give you consent to let?  When you come to remortgage you would probably need to take out a BTL mortgage - would you be eligible if this is your only property, do you have enough equity and have you checked how much higher BTL rates would be than residential?

user1977

theoretica said:

When you come to remortgage you would probably need to take out a BTL mortgage - would you be eligible if this is your only property

...and are living overseas (not impossible but I expect it will reduce options).

Stubod

..if you are not in th UK long-term I would sell it and take the "hit". Far better to take the hit now, one off and get it over and done with rather than a "slow drain" with lots of potential hassle if you go the rental route, (you would also need to factor in an agents fee for managing the property at 10% minimum of your rental income).....IMHO

_Penny_Dreadful

everfor007 said:

Last year bought the house and now got a job offer to work long term in aboard.   When i checked to rent  the house in my area, rent income is lesser than mortage monthly payment ie. Monthly mortage is around £2000 and rental expectation is £1700 - 1800.  if i decided to  top up amount every month from my pocket, also if i am not wrong, there is income tax i need to pay on rental income tax  through self asssesment on yearly basis i.e coming around £2800 . 

And also property market is not idle in current situation to sell it, it'll end up 8 to 10% loss.  Currently my mortage is 2 years fixed term i.e 2.4% and up's to renewal by end of this year, definitely with hiked interested rate my loss will scale more.

 I don't have much knowledge on future UK  inflation and economy, can any one advise, how to tackle this situation ? Whether i need to sell the property or rent it and bear the loss.. 

Definitley i am not  making any money or also i doubt near by property price will increase to earn in future,  is it possible to get atleast exemption in self assement yearly tax?

I have some first hand experience of this exact situation. The two main issues of letting property as an overseas landlord are:

1) Finding a letting agent that you can trust to manage the property whilst you’re overseas. My advice is to go for a small, local letting agent whose name is all over everything. Not one of those franchised, big name letting agents like Foxtons. 

2) Remortgaging when you reach the end of your fixed term. That will be nigh on impossible if you don’t have at least 25% equity in the property and expect the rates to be higher than a BTL mortgage if you were resident in the UK. The alternative is to stick with your lender’s SVR.

Yes, you will need to submit an annual tax return which you’ll need to do by post because for some inexplicable reason HMRC won’t allow people living overseas to do online. You should also submit a P85 to let HMRC know you’re living overseas and the NRL1 to apply for the non-resident landlord scheme. 

You will need consent to let from your current mortgage lender. Some lenders add an extra 1% to your mortgage rate for consent to let and usually there is a finite time to consent to let after which you’ll be expected to get a BTL mortgage or sell. 

How buoyant is the rental market in the area given house prices are fallen? Letting the property could work well if demand for your type of property is high and you can choose from dozens of potential tenants. If the rental market has also taken a dip remember that no tenant is better than a bad tenant. Remember that most of your mortgage payment is capital repayment so the cost of keeping the property is empty is only the interest portion well the CT and minimal utilities too. 

I can’t answer your questions about the future of the UK economy because I don’t have a crystal ball. 

How long term is long term? A few years or will you be emigrating because that would have a bearing on whether selling or letting would make more sense. Also, if this is your employer who’s sending you overseas what kind of relocation package are they offering and does it include help with housing?

In my situation I ended up with 2 crap letting agents that I had to manage more than I’ve ever had to manage tenants and after the second tenant moved out I left the property empty for 3 years until I returned to the UK. Despite already having been a landlord I found that property particularly difficult to let because it had been my home and I was too emotionally attached to it to let some bell end live in it and those tenants were total bell ends. 

BikingBud

Maybe you have to take a step back and decide what is important. An apparently well paid and attractive new job in a new city is exciting but is it all sunshine? What sacrifices might you be making that might impact your long term wealth?

If you are leaving, not coming back then sell up and go build the new life and enjoy..

If you are going but intending to come back what might you lose on the house and how far behind the property market might you be when you come back. Will the funds you can accumulate whilst away let you achieve this?

If you intend to come back and keeping the house and letting it out costs you £x per month then is this loss more than expected cost of getting back into the market? If less or perhaps significantly less then just treat it as a monthly cost and take it on the chin but ensure all you liabilities are covered, especially repairs, interest rate increases, tax and cover for void periods. If it's marginal then it become tougher to decide.

Also consider your NI status and long term pension planning, this alongside increases in property may make it unaffordable to come back and buy afresh.  If you stay away and miss a number of years will you be able to recover those or will your overseas job give you a pot large enough not to worry about missing a few years of state pension.

eidand

get another job I'd say, one that does not require massive sacrifices. Chasing the new shiny job is not really optimal when your losses can quite easily add up to big numbers.

GDB2222

everfor007 said:

Last year bought the house and now got a job offer to work long term in aboard.   When i checked to rent  the house in my area, rent income is lesser than mortage monthly payment ie. Monthly mortage is around £2000 and rental expectation is £1700 - 1800.  if i decided to  top up amount every month from my pocket, also if i am not wrong, there is income tax i need to pay on rental income tax  through self asssesment on yearly basis i.e coming around £2800 . 

And also property market is not idle in current situation to sell it, it'll end up 8 to 10% loss.  Currently my mortage is 2 years fixed term i.e 2.4% and up's to renewal by end of this year, definitely with hiked interested rate my loss will scale more.

 I don't have much knowledge on future UK  inflation and economy, can any one advise, how to tackle this situation ? Whether i need to sell the property or rent it and bear the loss.. 

Definitley i am not  making any money or also i doubt near by property price will increase to earn in future,  is it possible to get atleast exemption in self assement yearly tax?

Where do you get that £2800 tax figure from? I estimate the tax at £0. 

GDB2222

I’d also suggest making detailed calculations, including void periods, bad debts, agent %age, repairs, insurance. All the work will be organised by the agent, with you paying, and you can’t expect the agent to minimise the cost.