Sell then rent in this climate?

ec112

Hello! Posting on here for a bit of advice and perspectives that we may not have considered! Or experiences from people who've been in similar situations.

A bit about our situation:

My partner and I bought our house in 2021 during Covid as FTBs, having moved out of our rental near the city centre to a small town/village to a house with more space. The main reasons we chose the house was that it was only £197K at the time, and we had an ok deposit, so we ended up with nice low mortgage repayments, and it was within driving distance to a couple of major cities for family/friends/work needs.

However, we didn't anticipate the amount of work that needed doing to the house so that's taken up all our spare money and then some, so in total we have spent about 30K doing it up which is mostly on 2 credit cards and a loan. But the house is now basically done with new kitchen, bathrooms, boiler, flooring, doors, garden revamped, etc.

Our main goal was always to stay here for 3-5 years to do the house up, make a bit of money on it and move back to the city when we could afford a house that we liked. (If we'd bought there originally, we'd probs just been able to afford a flat).

As much as it's been a decent financial decision, we've both been quite unhappy here as we're both city dwellers and like being out and about. As you need the car to get anywhere from here it's been quite an isolating and hard going experience with all the DIY which we've mainly done ourselves, lack of social life and not much access to amenities etc. We think the pull of low mortgage repayments and more space during covid clouded our judgement a bit although the only other option would've been to continue renting. We don't have kids so we know that moving back to the city to a smaller house than this will be ok for us, as we have more space than we need here and I'd like to be going into the office a bit more.

Now the house is done, we've recently had a valuation and they valued it at 285K. We'd like to put the house on the market this summer as it is really lovely in the summer months with nice views and so on. Plus we found the winters here really depressing and isolating and we imagine there will be issues that will inevitably crop up over winter that we'll have to fork out for. (Obviously sorting out any issues before selling on to anyone.) Also, our mortgage repayments will increase this month by £250 so with that increase plus the debt repayments, we're struggling and would be financially better off even in the expensive rental market for 6 months as it stands so could put £1000 per month into our next house deposit savings over those months that we'd be renting, which is more than we'd be paying back into our equity in monthly mortgage repayments with the new interest rates.

Our provisional plan is to put the house on the market soon and see what happens then if it sells at around a price we're comfortable with:

1. Move into rented for min. 6 months
2. Pay off remaining debts
3. Use remainder for deposit, we're aiming for a 90-100,000 deposit (minus what's needed for stamp duty) which we anticipate being around 5000-6000.
4. Use the savings we've designated for moving/EA fees/rental deposit etc.

The main reasons for moving into rented and not selling/buying together are the debt, and risking not being able to get a decent mortgage deal if any, don't want to feel rushed and be part of a chain and have to buy a compromise house to not lose our buyer, and we're not sure we can face another long winter here (though we know we may have to).

Main concerns are getting stuck in rented for longer than we'd like because mortgage rates are increasing and then not being able to afford what we want. Also, house prices increasingly dramatically and then we've already sold ours for lower than what we would've got this time next year. We have 2 cats so that adds a layer of difficulty to the rental situ. All this is hard to predict and house prices might also fall next year so our feeling is to put it on the market and see what happens as it may take ages to sell anyway.

Thanks to anyone who took the time to read all that

MultiFuelBurner

There is no definitive answer 

What I can do is give you my own personal opinion.

Never leave the property market for more than a year (you might not get back on where you left it or worse still £10,000's behind)

Everything is a gamble at the moment from energy prices to house prices. April showed a small increase in house prices, what will May show.....What will the Bank of England do?

The good news is.in your current house you appear to have a nice healthy increase from the work you have done. So don't forget to pay yourselves on the back.

Would you consider doing this sort of renovation again as build up to what you really want regardless of what the market is doing?

I think prices will stagnate and maybe fall 10% over the next year but in the price bracket you are looking at its not that much per month over a 25+ year mortgage so if the right property comes up and you are already in rental you are ready to pounce.

Lastly again well done for building up you deposit pot and whatever you decide good luck 👍

Gavin83

This question is impossible to answer. Despite what some might suggest it's not possible to guess where the market will go and what will happen to house prices. If you sell and go into rented it could benefit you but you could also find house prices have risen further and you get less house for the money than the one you sold.

One thing that we can tell you though is that renting is difficult at the moment. There aren't many available properties and those that are available are generally substantially increasing their rents. I'd look into this and what's available before selling your house.

dimbo61

I think with all the rate rises and more to come that huge increases in House prices won't be happening  this year.
Maybe prices dropping if anything.
So if you hate the country  life put the house on the market.
Buyers love the idea of buying something  ready to move into and hopefully  you have made a good job of the renovations.
However as reported in the papers this week that over 10% of properties  for sale were former rental properties so depending on your area finding a Nice place to rent maybe a problem.
Forget some big cities like Edinburgh,  Glasgow, Bristol, Parts of London, 
Check your local rental market.
Lettings agents, openrent, rightmove, etc

caprikid1

"Never leave the property market for more than a year (you might not get back on where you left it or worse still £10,000's behind)"

I have always viewed the property market as you go short or long but never exit.

Your first house is a home, the rest are investments. When you leave the property market a year is a very short time to get back in, why do 2 moves when you can do one.

CSI_Yorkshire

If you're in the market, the value of the house you sell and the house you buy rise and fall broadly together 

If you're out, your cash doesn't change but the house price does. Fall you win, rise you lose.

That's how I think of it anyway.

Divorcing_Dad

MultiFuelBurner said:

Never leave the property market for more than a year (you might not get back on where you left it or worse still £10,000's behind)

Despite what Crashy will now come in and say, I couldn't agree more with this.

If you look at my username and when the account was created, 17 years ago I was forced out of the housing market. I did the right thing - left the marital home with the wife and children and once all her debts were taken into account (and her a few thousand to do a roof replacement and so on), I ended up with about £3k which I used to buy furniture in my new rental and the deposit, so basically nothing.

It took me 13 years and pulling together every investment, car boot sales/ebay, savings and a grandparent passing to be able to get back on the ladder, by which point I was in my late 40s.

Starting again, particularly when I moved out of a house in 2006 worth around £150k and buying a house about half the size for £260k in 2019, was very tough. I sold the house 18 months later for £330k and it's now worth in the region of £350k, you can see the size of the mammoth task it would have been had I waited until after Covid.

As it stands, whilst interest rates were low, I fixed the mortgage for 5 years and set the monthly repayment as high as I could afford (which actually is only about £200 more than the rent I was paying). By doing this, I hope to have it paid off by 67. But if rates continue to be high and I remortgage at 5% or more once the fixed term ends, I'll be extending that. I actually hope in the next few months to start overpaying by the maximum 10% I'm allowed.

My goal, like most people, is not to have to pay rent or a mortgage by the time I retire, so that I can actually enjoy what will be a fairly reasonable pension (around half my current salary when all is said and done).

Jonboy_1984

Depending on your area shorter term rentals may not be possible. We were looking at potentially breaking a chain last year, and there wasn’t a single rental for less than 12 months within a 20 mile radius of us.

Sarah1Mitty2

Jonboy_1984 said:

Depending on your area shorter term rentals may not be possible. We were looking at potentially breaking a chain last year, and there wasn’t a single rental for less than 12 months within a 20 mile radius of us.

That would suggest that landlords are not planning to exit the market in the numbers some people predicted?

Mr.Generous

Sarah1Mitty2 said:

Jonboy_1984 said:

Depending on your area shorter term rentals may not be possible. We were looking at potentially breaking a chain last year, and there wasn’t a single rental for less than 12 months within a 20 mile radius of us.

That would suggest that landlords are not planning to exit the market in the numbers some people predicted?

It would equally suggest that those currently choosing to remain won't take a 6 month tenancy. They can afford to pick and choose, partly because of the exidous of LL's, and changing a tenant costs the LL a minimum of a grand, so nobody wants to do it any more frequently than they have to.

I'm waiting to see the details of the legislation, but the energy efficiency C is probably a bigger concern than the renters reform stuff. If that goes ahead I won't be spending 10-15K getting any property to a C - they will be sold.

Sarah1Mitty2

Mr.Generous said:

Sarah1Mitty2 said:

Jonboy_1984 said:

Depending on your area shorter term rentals may not be possible. We were looking at potentially breaking a chain last year, and there wasn’t a single rental for less than 12 months within a 20 mile radius of us.

That would suggest that landlords are not planning to exit the market in the numbers some people predicted?

It would equally suggest that those currently choosing to remain won't take a 6 month tenancy. They can afford to pick and choose, partly because of the exidous of LL's, and changing a tenant costs the LL a minimum of a grand, so nobody wants to do it any more frequently than they have to.

I'm waiting to see the details of the legislation, but the energy efficiency C is probably a bigger concern than the renters reform stuff. If that goes ahead I won't be spending 10-15K getting any property to a C - they will be sold.

That doesn`t really add up though because if landlords can pick the best tenants they can easily afford 15k to get a flat up to standard, and attract even better tenants? I don`t think the landlord "exodus" will happen to be honest, not on the scale some on here think anyway, and if landlords who have been taking in rental income for years can`t spend 15k the people who they want to buy the flats so they can exit the business won`t have the money, not with rising mortgage rates and cost of living?