To let out or sell?

R.O.S.S.I

R.O.S.S.I

R.O.S.S.I

Soldato
Joined
16 Nov 2002
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Change in circumstances means i'm going to be going to Australia on a WHV at the end of September which means i'm going to have to sell all my stuff and either let out or sell my house.

Now without going into any boring back story the house is a house I bought with my ex but has just been signed over to me so I am solely responsible for it. Based on the valuation the mortgage company gave when reapplying for the mortgage under my own name there is about £40k of equity in the house.

My parents and other family members think I should just sell up and pocket the equity and then if/when I return back to the UK I should rebuy.

I'm a bit conflicted in this as I've had a valuation for rental and the amount I could get for rental is way more than i'm paying for the mortgage - even when taking away letting agent management fee's it will still leave me with a £120-£150 "profit" each month (not really profit I know as it will just be kept to one side as a fund for if the house needs any work doing).

I've no idea what is going to happen in Oz and I have enough money saved to support myself for a good while should I somehow not manage to find a job over there but i'm just wondering what the general consensus is on here?

Mine is to keep it and let the equity in it grow over the next 2 years and if I need to at any point I can sell it anyway, or just keep renting it out for as long as i'm out of the country. I don't think I'll have any problem getting tenants for it as its in a desirable location with good schools in the area and its a perfect small family starter home (3 bed semi, fully refurbed throughout 2 years ago, new bathroom 2 months ago, new patio and artificial grass back garden) so could be moved straight in. I could even let it our furnished if necessary but i'm not precious over some of the furniture in there as we inherited from the past occupants so its not like i'm losing out on anything!

Just looking for some other considerations I may have missed I guess? What would you do if you were leaving the country for a min of a year, most likely 2 years and maybe permanently (if things work out!)?
 
Are your mortgage provider happy for you to let the house out, what about the cost of insurance and fees such as gas inspections and the such?
 
I have had brief discussions with my mortgage lender and doesn't seem like it will be a problem.

Cost of insurance in terms of what? I have buildings insurance, the tenant would get contents, or are you referring to a landlord insurance policy?

Not sure on gas inspection fees? The boiler etc is serviced every year but will enquire about that.
 
Your buildings insurance will probably specify that you are living at the address and don't leave it untended for a certain amount of time, best to check otherwise if the tenant burns the house down you will be without cover.
 
You'll need a landlords' insurance policy. You've said that the house is in a desirable location, which is good for both selling and renting. The big issue for you is, "What if something goes wrong?" Perhaps the tenants stop paying and you need to evict them. Perhaps there's a legal dispute with the neighbours. Whatever. You need to consider the possibility and what you would do in that event. A round-trip flight from Oz would eat up much of your profits and take a lot of time.
 
Expat Landlord here.

Take into account the following :

1)Will your lender allow you to lease it out? Consent to let is an option which will allow you to lease the property on your current deal on the basis that you intend to return to the UK to live in it at some point. This can get extended if your circumstances change. Failing that the routine BTL method will work but you will have to go through the affordability criteria etc and hit the LTV requirements.
2)It seems like you have already done a basis assessment of your potential cash clearance every month with expenses. Do take into account though the following :

a)rent protection option (highly recommended, its about 3% of your rental income if your agent provides it, or go private but then there is a bit of legwork to do with ensuring references the agency gets fall in line with the demands of the policy)
b)Tenancy setup fees - this might go up now they are taking costs away from tenants
c)Limited deposit now. One month only. This will be a headache potentially. If you dont use an agent make sure you use a TDS or you can get shafted hard. If you use an agent they will do this for you.
d)Gas checks etc....annual
e)Landlord insurance policy. Normally about 150% the cost of normal insurance
f)Are you leaving it furnished or unfurnished? White goods insurance policy needed etc?
g)100% get the property managed. It will cost you around 8 to 12% of your rent. Agents can be haggled on this.

3)In respect of taxation as long as you fulfil the non residency guidelines of not being in the UK for too long in a tax year as an expat you will retain your tax free allowance, so although you will have to do a SA its unlikely you will be pushed over the threshold even with the new rules on interest payments deductables coming into effect. So unless this rule changes soon, you shouldnt be paying tax as long as you fall in line with non residency.
4)Maintenance, someone already mentioned it. That leaky tap you would put up with??? Your tenant wont, and this can get expensive as it all mounts up. With a small clearance from rent to expenditure if something 'big' comes up be in a position to move funds over to the UK as and when needed.

Just a few thoughts.
 
If you're planning on returning, rent it out. That 40k of equity would get swallowed up if house prices continue to rise and you plan on returning, but having an asset that will follow the trend is a good safety net. Our neighbour moved out to Aus for a full time retirement, after 2 years they were bored and returned but couldn't move back into the area due to currency differences and house prices. I'd rent it out for a couple of years then decide what you want to do, if you need that safety net or renting out is costing too much.
 
Also an expat landlord here, and I would echo above advice, I haven't regretted keeping property in the UK, and it gives you something to return to should you go back.

If you plan to go back, definitely keep it. As above though you will likely get hit with a lot of bills in the first year as your tenant / agent expects you to get it up to 'rental standards' - very different to personal domestic.

Also agree, 100% go for management. Insurance etc. is cheap compared to all the other costs you will get initially.

Even if you don't plan to go back, it generates cash flow, which is lovely, though it may not generate profit - for a while anyway.

You can always then sell it at a later date if you choose.
 
FurryLemon said:
Sell.

Renting out a single house which you dont own outright is pointless.
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I agree! Sell up

I think there will be to many what ifs involved. Renting it out and then leaving you with a small profit, but then if something goes wrong you'll have to fork out and pay for it. Or if you have it managed you'll have to pay a monthly fee...

I think for the sake of a hassle free time in Aus, I'd sell and keep the profit in the bank to accumulate on interest.
 
FurryLemon said:
Sell.

Renting out a single house which you dont own outright is pointless.
Click to expand...

Well that very much depends on how much your house price goes up over that time frame.

Renting won't make you cash rich initially but it will allow you to profit with the house price increase. Which in two of my properties is substantial.

It's a hassle though and a constant thought so only you can balance that.
 
Doesn't seem that pointless when he's still expected to gain after fees etc are covered on a property that will continue to increase in value faster than most other investments in the UK, granted some of that equity increase would have been from refurbishing the property but it's still increasing in value much faster than if he'd leave the money in the bank, which could be an issue if he wants to return to the UK.
 
Not knowing anything about this kind of thing I would rent it out.

There is nothing stopping you renting it out for x amount of time and then selling should you need/wish to?

You can't sell now and then change your mind later to rent it out.
 
Quartz said:
Something to consider: the cost of selling and buying could easily eat up much of that £40k.
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Yeah if you plan to come back and buy again, you lose a fair bit in selling fees, stamp duty, solicitors fees etc (assuning you want to live in the same area)
 
FurryLemon said:
Sell.

Renting out a single house which you dont own outright is pointless.
Click to expand...

It's not pointless at all! You can turn a steady profit per month and also may benefit over the years if house prices rise. If you have a decent reliable management company it can be very minimal hassle. We have two properties that we let out and I do the management myself rather than pay extra fees, but generally they have been hassle free.

You would need to get consent to lease on the mortgage, or even better change to a proper B2L mortgage as most of the consent to lease periods are limited. We got consent to lease on one house and they gave us six months, our mortgage advisor told us to try and extend it as some lenders will, but ours wasn't willing to do so. We toyed with the idea of selling one but figured if we could it's always best to hold onto your assets as we didn't need the cash from the sale and if we sold we likely wouldn't be able to buy another one for a long time. Also, if you rent and it doesn't work out, you can sell in the future so you haven't lost anything by trying it! :)
 
If it were me I would rent it out.

Worst case you sell it in due course and if you do rent it you will suddenly be appealing to two kinds of buyer - home owner and also investor.

I would suggest you put some money aside for the unexpected such as boiler repairs etc as nobody will look after your home as well as you do. Do you have anyone living in the area that can check it for you?

A friend of mine rented his place out whilst travelling/working for 2 years and bought himself a shipping container and kept it locked on his land with his furniture and possessions – may be an option if you have the space. If not, is it worth putting the things you don’t necessarily want to sell now in storage and worst case, if you move out there permanently, sell it or ship it over.
 
Thanks for all the input everyone. Definitely given me lots to think over.

I'm still more inclined to let it out for a year or two. I have enough money in the bank to cover the "what if's" say the roof needs repairing, or there is a leak somewhere which if I was living there I'd have to fork out to pay for myself so i'm OK in that respect.

Obviously I can't account for tenant negligence anywhere but you never know if you're going to get a good tenant or a bad one. I guess you just have to take a leap with that and hope for the best. I have family who all live within a couple miles of the property so can pop by if need be and the lettings agencys i've spoke to all do quarterly inspections along with full inventory and condition checks prior to a tenant moving in. Luckily the only furniture in there which I bought was a coffee table and a dresser unit in dining room and the king size bed in the master bedroom. The dining table, chairs, sofas, freestanding wardrobes were all free or left by the previous owner which we just reused as we didn't see the point in buying new so i'm not precious over any of it really. If someone wants it unfurnished I'll likely just sell everything that doesnt need to be there rather than put it into storage.

I just can't see any benefit really to selling it atm. Like others have said I can't decide at a later date to rent it when its sold but I can decide to sell in a year or so time if its becoming a pain letting out. I'm not letting out the property to make a profit each month its solely just a means of paying the mortgage still whilst i'm abroad - if I do end up with a tidy bit of profit left at the end of 12 months then it'll just go down as an overpayment towards the mortgage, no drama. If it turns out that i'm going to be abroad a lot longer then of course i'll look at selling it, but at the moment letting it out seems the most sensible thing to do.

I guess the key to this is finding a good management company who really have your interests as priority rather than just getting any Tom, Dick or Harry in there as fast as possible.

In terms of legal disputes and anything relating to the tenants/tenancy, background checks, affordability, references, general due diligence, liasing with tenant around problems, general questions that will be what the letting agent are being paid for. If they need to serve any legal notices or anything of that kind then again, that is what they are being paid for. I'd be going for something fully managed so outside of major repairs or things like that I shouldn't need to be contacted. Plus its not a big deal getting hold of me with having WiFi everywhere and access to emails etc.

Luckily, the father of one of the friends who is coming abroad with me has his own management company and lets a few houses out himself and his own very small company. My friend has said his Dad would be able to manage it for me and I know he would do his due diligence and make sure i've got good tenants in and would better have my interests in mind as opposed to elsewhere. Plus it helps that i'm going away with his Son for potentially a couple of years!

Atm the pricing i've seen is as follows....

Purple Bricks - one off £450+VAT finders/setup fee + ~8% of rent p/m
Friends Dad - one off £200 finders/setup fee + 10% of rent p/m
Local Agency - one off £325 finders/setup fee + 7% of rent p/m

I might get one more agency round to see what they charge and then go from there. I'll look into a landlords insurance policy too as it would seem prudent to have this.
I'm assuming this would take the place of my regular buildings and contents policy? Just done a quick quote and with rental protection and accidental buildings cover and legal cover its coming in at the same price as what I pay now for buildings and contents so not too bad really.
 
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