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Rent it or sell it?

We’ve all heard the saying; the only thing that is constant is in this world is change… and it is no different when it comes to property.

Perhaps it is time for a bigger place or there has been a change in your family circumstances; when life throws changes at us, you may find yourself with more questions than answers. Sell it and move on, or choose to become a landlord? Whatever your situation, there are a number of factors to consider when deciding whether to rent or sell your property.

The current market conditions will undoubtedly influence your decision to a great extent. Depending on how long you intend to keep the property, you should assess whether prices are rising or falling and whether your plans could withstand potential short-term dips in value.

If you are thinking about selling, it is wise o arm yourself with some knowledge on how well, and how quickly properties are shifting in the area. Alternatively, have a look at how likely the property would be to rent if you select that option. A scan of the local market should reveal local levels of demand and occupancy, and what levels of rent you may expect to attract from potential tenants.

The next thing that you must consider of course is your current financial situation, age and plans for the future. Have a close look at your lifestyle, dependents and outgoings to assess what you need for living expenses. A second property can provide a valuable source of income but you will also need to make sure that you can sustain and finance two properties. Depending on the terms of your mortgage you may also need to change your current agreement to a buy-to-let product and this brings implications for having two mortgages depending on where you plan to live.

Do remember, if you decide to sell the property, you may pay capital gains tax on the amount you have made if the property has gone up in value. Buy to let is also a different ballgame when it comes to tax; becoming a landlord brings a number of HMRC requirements. The Chancellor has dealt a number of blows to the sector recently, and it is essential to keep up to date with the changes. Any rental income is added to your other income so must be declared on your Self Assessment tax return. That said, some expenses can also be offsett against your rental income and it is here that advice from professionals can also be invaluable.

If you are leaning towards becoming a landlord, how are you for spare time? Got much on your hands? Property management can be time-consuming and depending on your other commitments, this needs to be taken into consideration. You may need to be on –hand if there are problems and depending on the distance that you live from the property, using a property management agency can be a very sensible option to deal with any issues on your behalf.

Along with these implications we have discussed for your income and taxation, it is essential to have a reserve of cash to see you through those maintenance requirements and inevitable repair jobs that will arise. Expect the unexpected and remember to factor in the cost of that all important landlords insurance and property management costs who will usually offer a choice of a finders-only or fully managed service.

It may seem that there is a lot to think about, and it is fairly easy to see that there is no right or wrong answer. However, taking the time to gather this information can make your position clearer. A reputable property management agency can help. It is also always a good idea to consult an Independent Financial Advisor (IFA), Mortgage Advisor (if you need another agreement) and an accountant if you run your own business.

Posted by
Jessica Bird
on 17th August 2016