Rent out or sell?

Antelope19

Hi all, my not-so-new partner is moving in with me and we aren't sure what to do with his flat. It's still got a small mortgage on it, and he is just about to remortgage to interest only as he is barely spending any time there and trying to keep costs down.

Ideally we would sell it, and pay off my mortgage but my mortgage is fixed with high penalties for overpayments for another 3.5 yrs.

He could rent it out, but EA fees are high and we're not sure it is too high risk, with tenants doing damage etc.

Selling now, and then putting into a high interest rate account is also an option, but properties are not selling fast or reaching the prices they were before...

So, what would you do?

SiliconChip

Unless you want to run a letting business then selling is the simple answer. The chances of getting a better return than is currently available on high interest accounts is pretty low.

daivid

I would second selling and putting the money into savings. There's no indication of the amount but unless the flat is hugely valuable it should be straightforward to spread around institutions so it is all protected and earning good interest- good enough to beat the rate of your still fixed mortgage I would think.

Letting is not a business to go into lightly, as you have already identified it is fraught with risks. If the location is suitable and you are willing to put the work in air b n b type letting could be an option if you decide against selling - definitely has its own risks but may be a better option if you just want to hold onto the flat for a little while. For any type of letting lenders consent would be required.

catguru

If you can afford it I would look to sit tight for 12 months and keep paying the existing mortgage it may have a lower interest rate than a new interest only and the market for  sales should improve by then meaning you will get a better return.It depends where it is but to rent to the holiday market might cover the mortgage and give you a little more security of renting out without damage than via a short term agreement. Also worth a try is letting the big supermarkets etc know it is available for rent. Most big companies move staff around the country on a regular basis and will take a three month or six month term. Some insist you deal direct with the tenant but you know they will be in a good job and reasonably senior position.

While trying to help your partner just remember your own position. Once he moves in and contributes to the bills he will inherit a claim on your house should you ever split up.

PRAISETHESUN

Becoming a LL is a big responsibility and comes with a lot of risk. Personally I wouldn't bother with it unless you know you're clued up on the rules and responsibilities so you know what you're doing. I'd probably sell the property and then overpay the mortgage as much as you can, putting the rest into savings to pay off the rest off when the fixed term ends.

jimbog

I would do nothing until the spring. You may find that moving in together doesn’t work out and he would have burnt his bridges 

dimbo61

He may find getting an Interest only mortgage difficult if not impossible on a residential mortgage. 
He could ask for consent to Let out the property for a period of time from the mortgage company ? 
He would then need to comply with all the Rules in regard to Renting 
Deposit, references,  EPC GSC EICR etc
Do the figures stack up ?
Mortgage cost ? Rent ? Tax payer Higher rate or lower rate ! 
Costs to prepare the property for renting.
Management/Lettings agents costs ?
Some research needed.
Your future plans ???
Kids? Travel? Jobs? Careers ? 
Sometimes selling up and having money in the bank is best 

FFHillbilly

SiliconChip said:

Unless you want to run a letting business then selling is the simple answer. The chances of getting a better return than is currently available on high interest accounts is pretty low.

I agree with the bit in bold, but with a BTL investment your money is inflation beating. as in, in the long run, property goes up. 
so if you can get 5% return on a BTL right now, yes you could sell up and put it all in a savings account and get 6% but the value of that savings account is not really doing that well when inflation is so high now.
but also it's not easy to be a landlord so don't take it lightly. if looking after the property easts into your time you need to factor in how much your time is worth and add that into the calculation

Stubod

..sell sell sell...

Bigphil1474

I'd find an agent to manage it for me, and rent it out. Probably the better longer term investment. If it only has a small mortgage, the rental income would cover some or all of that, so when you can pay your mortgage off in 3.5 years time, the property will probably have gone up in value from today and you will probably have paid off that mortgage. As always, depends on location, but rental properties are in big demand. If you could pay off the small mortgage, then you don't need any permission to rent it out from your lender.
A mate of mine has a few properties here up North, and one is a city centre apartment that he rents out to a law firm with offices here and in London. He has no bother, and they pay a good rent (for him).