The UK property market effectively ‘shut up shop’ along with the rest of the country on March 23rd this year as the government implemented lockdown measures to combat Covid-19, effectively closing the door on the plans of many who were due to move home.
The property market re-opened its doors on 13 May in England, and for many whose plans had been put on hold due to the pandemic, lockdown has given them plenty of time to weigh up their options before making their next move.
If it is time to move into a new home, you may be wondering what to do with your current property – do you sell, or rent it out?
Many people sell their homes to purchase another, but if circumstances are right you may be faced with the choice of renting your property instead. But, is renting a viable option?
With the UK property market now back on the move, regulated property buyers, Good Move, look at the pros and cons of renting and selling your home to help you make that all-important decision.
Renting out a home is a source of additional income. You can secure capital growth by keeping your property and renting it out.
You can outsource landlord responsibilities to a trusted agent for a fee to free up your time. Please, make sure they are a member of the NALS, ARLA or UK ALA.
Tax deductions are available to landlords. You can expense things such as replacing furniture, painting, accounting processes, and professional cleaning services.
Outsourcing landlord responsibilities to an agent can be costly – consider how much this will take from your overall profit.
If you choose to do everything yourself instead, being a landlord can be time-consuming. There are over 400 rules and regulations to abide by as a landlord and fines can reach up to £30,000 for non-compliance.
You may need to invest money to bring the property up to renting standards before finding tenants. There is a risk of tenants causing damage or not paying rent. There is a risk of losing money on both homes if the market falls. There is a risk of being unable to rent out the home. Taxes on second homes can be high.
Only owning one property means you can spend more on your new home. Selling a home releases equity that can be spent elsewhere. Selling is less time-consuming as you only have one property to worry about! You will face fewer unexpected costs, e.g. damage caused by tenants.
You will be selling an asset that may grow substantially in value. If your home has negative equity, you might have to pay it off and redeem the mortgage. No extra income as you will not be letting your home out. Selling may take time if you use an estate agent or auction and can slow down the process of buying your new home.
Deciding whether to rent or sell your home should not be a decision made overnight as there are many important factors to take into consideration.
Nima Ghasri, Director at Good Move said, “Owning two properties and renting one of them out has many benefits. For example, it can be a good source of additional income and can also help you gain equity on the property. It’s also a great option if you need to move away from your home temporarily for work or leisure purposes, but do not wish to sell up.
“However, whilst the thought of renting your home may sound great, it’s very important to take some time analysing how much owning two homes will cost actually you. You may wish to consult a financial expert to help you with this as there’s a lot to consider, from whether you have enough equity to get a second mortgage to stamp duty, capital gains tax and income tax. There’s a lot to consider so it’s best to do it right.”