SHOULD YOU SELL OR RENT OUT YOUR PROPERTY?

Owning a second home can bring some questions of whether it should be sold or rented out, let’s go through some pros and cons!

Selling the property would give you a large amount of equity banked, but it can be a costly and complex process, however letting the property out could bring a monthly income while still owning the property, but renting also has its cons.

BENEFITS AND DISADVANATGES OF SELLING

Pros

-          Large lump sum banked which could be used and invested in other ways.

-          UK Market is strong achieving good sale prices

-          No longer need to maintain the property

-          Property may not be suitable for rental in it’s location

Cons

-          Selling means you won’t benefit from future sale value increases

-          Selling is not always a quick process

-          Additional costs including solicitor fees, estate agent fees, clearing the property, getting it in good condition to sell and pass surveys bringing renovation costs.

-          May need to pay capital gains or inheritance tax

-          Risk of sale money not being reinvested or saved, one of the best investments is Real Estate, secure real asset unlike other investments where capital could be lost.

BENEFITS AND DISADVANTAGES OF LETTING THE PROPERTY

Pros

-          Monthly income which is passive if managed by a property management company, this could substitute a salary or pension.

-          Rent out indefinitely and pass on to children

-          Demand for rental properties remains high

-          Over time, the rent collected could exceed the value you would have got for selling the property

-          If the property has a mortgage, letting can take away the stress of covering monthly payments

-          Still own the property and can sell at anytime

-          May reduce tax implications involved with selling

Cons

-          If the property requires a mortgage it will need to become a buy to let one. There are different requirements for these compared to a standard mortgage and may have higher interest rates.

-          May need to invest to ensure it meets required letting standards

-          Bad tenants can impact your income by damage or missed payments.

-          Tenancy voids when property is empty between tenants can impact income

If you choose to rent out your property

If renting out a property and becoming a landlord is the right way forward for you, your next decision is whether to enlist the help of a property management company or to go it alone. Using a management company, however, can greatly reduce the number of negatives associated with renting out the property that were listed above.

In fact, by using the services of a property management company, a landlord gains many additional benefits including:

• Advice and valuation to ensure your property is listed at the correct rate.

• Help finding the right tenants and ability to advertise to a wide and ready audience to avoid tenancy voids.

• Appropriate financial checks on tenants to ensure suitability and ability to pay.

• Guidance on how to protect your tenant’s deposit.

• Support understanding your legal obligations and ensuring that the property adheres to the ever-changing complex laws and regulations for rental properties.

• Greater time to pursue your other interests or jobs whilst the management team organise checks and manage tenancy agreements.

Some would say that given the legal complexity around letting a property, a landlord can no longer afford not to use a letting agency!

Contact Right Home to assist with the rental of your property today!