Rent out my house or sell it?

Janie1975

Hi all,

I have moved in with my partner and can't decide whether to rent or sell my house (it's currently empty). If renting I would do this through an estate agent and pay a management fee. 
My current situation if it helps:

Age: 50
Value: c. £250K (remaining mortgage £39K and paid off in c. 2.5 yrs)
Rent: I would get would enough to cover the mortgage payment and management fee

My dilemma is that in 2.5 years I'll be mortgage free and the rent income would be around £1K per month that we can literally throw straight into a savings plan as well as (hopefully) the house price rising in value when the time does come to sell it. If I sell it, we don't need the money at present, so would be looking at the best way to save this to realise a decent return on this amount of cash but I have no idea where to start with this. 

I could do without the hassle of renting if things go wrong, but the enticement of having £1000 per month to save as well as the value increase is attractive!

Any advice would be welcome

Thanks in advance. 

RAS

Do you have current savings to cover non-payment of rent for s year or more, costs of eviction plus a trashed house when it's finally retrieved?

Do you understand that if the managing agents make a mistake or fail to comply with any of the legal requirements, you are the one who gets sued/fined, not the agency?

Do you understand that you have to pay income tax at your highest rate once allowable maintenance costs are deducted?

Plus Capital Gains Tax when you sell?

mebu60

Any gain in value on the rental property, which is not guaranteed, will be subject to CGT.

Personally I would sell and look to generate a similar return on the lump sum which should be achievable even with a relatively low risk strategy and certainly less hassle. Use of ISAs would mitigate tax.

Where are you in terms of pension? 

anselld

You seem to be forgetting about tax.  Only the mortgage interest can be offset against tax and even then limited to 20%.  Rental income can push you into higher rate prior to the mortgage element deduction so you can pay income tax even if the rent barely covers the mortgage.  Obviously once you become mortgage free the income is fully taxable before you can invest.
Also, don’t imagine that paying an agent for management gives you an easy hands-free life.  You are still ultimately responsible for everything so trusting the agent is very risky.

p00hsticks

Janie1975 said:

I could do without the hassle of renting if things go wrong, but the enticement of having £1000 per month to save as well as the value increase is attractive!

Personally, balancing the possibility of an £1k a month income (which may get gobbled up in voids, tenants who don't pay, management fees, maintenance and repairs) and the hassle of being a landlord against the return on a £200k+ lump sum of cash invested in a variety of passive savings accounts and investments, I know which I'd go for....

laidbackgjr

You would be gaining almost £1k a month in interest in a high interest savings account on a balance of £250k, which would be significantly lower stress and not have the downside of suddenly having to pay £5k to repair the roof / fix boiler etc.

From a pure investment strategy it doesn't seem a great rental opportunity - if you really wanted to get into renting properties - you might be better selling up and buying another property(s) specifically for renting that offer a better return on your money.

Janie1975

Thanks all for the EXTREMELY helpful advice. You have all mentioned things that I haven't considered and think you have made my mind up for me. 
I really don't want the hassle of renting it but thought it would be a wiser investment decision, I hadn't realised the other costs involved, especially the CGT element. 
I really appreciate the sound advice. 
Thank you all. 

Janie1975

mebu60 said:

Any gain in value on the rental property, which is not guaranteed, will be subject to CGT.

Personally I would sell and look to generate a similar return on the lump sum which should be achievable even with a relatively low risk strategy and certainly less hassle. Use of ISAs would mitigate tax.

Where are you in terms of pension? 

My current pension pot is just under £200K and partner around £350K (he's 52). Think I'm definitely looking at selling. Just where to put the money with no/very low risk!

mebu60

Janie1975 said:

mebu60 said:

Any gain in value on the rental property, which is not guaranteed, will be subject to CGT.

Personally I would sell and look to generate a similar return on the lump sum which should be achievable even with a relatively low risk strategy and certainly less hassle. Use of ISAs would mitigate tax.

Where are you in terms of pension? 

My current pension pot is just under £200K and partner around £350K (he's 52). Think I'm definitely looking at selling. Just where to put the money with no/very low risk!

Post back on here when you're close to completion and you'll get plenty of suggestions.

Boosting your pension is likely to be a tax efficient option plus low risk savings including Cash ISA (and maybe even NS&I Premium Bonds) to meet your risk tolerance level. 

ReadySteadyPop

Janie1975 said:

mebu60 said:

Any gain in value on the rental property, which is not guaranteed, will be subject to CGT.

Personally I would sell and look to generate a similar return on the lump sum which should be achievable even with a relatively low risk strategy and certainly less hassle. Use of ISAs would mitigate tax.

Where are you in terms of pension? 

My current pension pot is just under £200K and partner around £350K (he's 52). Think I'm definitely looking at selling. Just where to put the money with no/very low risk!

Premium bonds, drip into a money market fund held in an ISA and savings accounts, the vibe out there feels like higher inflation/volatility/higher interest rates to come in my opinion. The landlord route may be difficult, and if you have an empty flat now in some council areas you will be asked to pay double council tax I believe?

Albermarle

Janie1975 said:

mebu60 said:

Any gain in value on the rental property, which is not guaranteed, will be subject to CGT.

Personally I would sell and look to generate a similar return on the lump sum which should be achievable even with a relatively low risk strategy and certainly less hassle. Use of ISAs would mitigate tax.

Where are you in terms of pension? 

My current pension pot is just under £200K and partner around £350K (he's 52). Think I'm definitely looking at selling. Just where to put the money with no/very low risk!

When it comes to investing and saving, it is not advisable to put everything in no/low risk products.
The reason for this is that long term you will miss out on growth, and struggle to even just keep up with inflation.
So ironically taking no risks is actually quite a risky strategy.
Investing for most people is not about trading shares or buying bitcoin, but means investing in mainstream diversified funds where risks are controlled and in the long term ( >10 years) you should see some decent growth.

Almost certainly your pension pots are invested and with over half a Million between you, then it would be good to understand how they are invested, if you do not already.