Renting out current home and buying another....

hugheskevi

I chose to rent out a property after living there for many years, prior to then returning to live in it and selling it. Some things I considered and found as an amateur landlord which may be helpful:

• Compliance costs - I paid about £1,650 to get the property ready to rent  (EPC, EICR, Gas Safety, Boiler Service, Inventory Service, Mid-term inspection, referencing, landlord insurance, key cutting, new fuseboard). Even if you try to get as much of this done by others, there is still going to be a lot to understand and ensure you have completed properly.
• Sourcing tenants - This is absolutely crucial, as you want to get your property back at end of tenancy and in a good condition. You would prioritise the tenant quality over rental yield to a very strong extent. I priced my property competitively to get a good amount of interest. But no matter what you do, you could still be unlucky.
• Property management - would you do this useful, or use a fully managed service from an estate agent? Personally, I decided to have an emergency service, but fix non-urgent issues things myself, although that was simply sending in trades to do things, not doing it myself. My past experience of estate agents is that they have far less interest than I would in looking after my property well.
• Insurances - as well as building insurance, would you want to insure against non-payment of rent, and cost of eviction.
• Income tax - this is potentially significant, depending on your tax status
• End of tenancy - I always planned to return to the property after 18 months away, then prepare and sell the property. But if planning to sell immediately after rental period then you would probably need to wait until the end of the tenancy and the tenant vacating the property, then get various jobs done (you have to plan for this, it would be surprising if everything was left fine, even if it is just things like scuffed walls, etc), clean the house and sell it. Taking into account time to sell, that is probably about 6 months or more vacant. Trying to sell it whilst a tenant is in situ will be problematic (they may not agree to viewings, many buyers wouldn't want to buy a property with tenants yet to leave, and house would almost certainly not be presented in its best state) and so reduce the price that could be achieved. Think about furnishing - would you let it unfurnished? If so, you would be marketing an empty property which can make it look less attractive.
• Capital Gains Tax - this is measured from when you purchased the property to when you sell it. The value at the moment has no relevance. The last 9 months before you sell the property would qualify for relief. Beyond that, you would take the cost of disposing of the asset from the cost of acquisition, pro-rata the time you spent there and the time it was rented, and calculate the capital gain from that. It may well not be very significant and is unlikely to be the most important factor in the decision.

I was reluctant in my circumstances to rent the property out, I wouldn't dream of doing it if selling after the rental period, it would be a whole lot of work just to then have to go through an even more difficult selling process whilst incurring huge risk that you get a tenant that doesn't pay rent and has to be taken through the courts to evict, leaving the property in an awful condition. In the ideal scenario of a good tenant who leaves promptly, there is little if any gain once you take into account the set-up costs, management costs, and then the costs of preparation for selling and a long period of the property being empty once tenant has left.

Anthear

Hi - thanks for all the comments:

- no mortgage
- of course would be upfront from the outset about timescales

Tabieth

It sounds like a bad option to me. The vast majority of prospective buyers in 9-months time won’t be interested until there’s full vacant possession. So that will very likely delay matters then, and certainly make the future sale more complex. You seem to be postponing a current problem for an even bigger future problem.