If you are thinking of moving house, you probably expect to sell your current property first. However, that may not always be the best financial decision. So is it better to sell or rent out your central London home, and how do you decide?
When people ask us whether they should sell their house or rent it out, we would love to give them an immediate answer that sends them away satisfied they are doing the right thing. Unfortunately, there is no one size fits all solution, the response we end up giving them will depend on their circumstances.
Should I sell my house or rent it out?
Most people expect to sell their current property before buying a new one. But another option is to hold onto the existing property and let it out. For some people, renting out their property could boost income and bring increased security in retirement.
Some people have no choice but to rent out their property. For instance, people who are temporarily working away but want to return to their property, or those who have been unable to sell but had to relocate for work.
Others have a choice whether to sell their property or keep it and rent it out. We look at each option's pros and cons and some things to consider when you are making the decision.
Renting out your property
Things to consider
Renting out your property isn’t as simple as just approaching a letting agent and asking them to find a tenant. Before you decide to rent, ask yourself:
- Is the rental market right for your home? Do properties like yours rent easily and to good tenants?
- Can you afford your new home and cover the costs of your rental property?
- Have property prices been growing steadily in your area, and are they likely to continue to do so? The best rental properties provide a profit from rental income and capital growth in the long term.
- Will your mortgage lender allow you to rent your property? You will probably have to switch to a buy-to-let mortgage.
- You can make a profit from renting out your home and secure capital growth from being able to retain your property
- You can outsource the day-to-day work of letting your property to a lettings and management company
- Most tenants pay their rent on time and will look after your property
- If you are only moving away temporarily, renting out your home will cover your mortgage costs
- Being a landlord is time-consuming, you will need to keep abreast of all the legislation and be available if your tenants have issues
- You will probably need to spend money to ensure your property meets the legal requirements for renting residential property
- You may not be able to charge enough rent to cover all your costs
- Your tenants may not pay their rent, or your property may be empty for periods, you will have to cover your mortgage payments without any rent
- Tenants can cause damage to your property or not make their rent payments
- You will have to pay capital gains tax when you sell
- You will have to complete a self-assessment each year and pay tax on your rental income
Selling your property
Things to consider
Selling your property is the easiest option, but it may be easier said than done, being able to secure a sale at the right price could be why you are considering renting your home out.
- You will have more to spend on your new home so you could afford a bigger place or put down a larger deposit and benefit from a better mortgage deal.
- As the property is your primary residence, you won’t have to pay capital gains tax
- Less hassle, you won’t have to deal with tenants, repair bills or worry about making your mortgage payments if your tenants are late with their rent or the property is empty.
- You are missing out on a potentially good source of income, and the capital gains could contribute to your pension.
Need more help?
If you are still not sure whether to sell or rent your property, contact us here at Plaza Estates. We have years of experience of the central London property market. We will be able to advise you on the best course to take regarding your property.