Should I Sell My Old House When Moving or Rent It Out?
When you’re planning a move, deciding what to do with your current property is a significant choice. Should you sell it and cash in, or rent it out and build long-term wealth? Both options have pros and cons, and the best decision depends on your financial goals, lifestyle, and the UK’s housing market dynamics. Let’s explore these in detail.
Option 1: Selling Your Old House
Selling your property can be a straightforward option, especially if you need funds for your next home. Here are the pros and cons:
Pros of Selling:
- Instant Capital: Selling provides a lump sum that can be used as a deposit for your new home or invested elsewhere.
- No Landlord Responsibilities: Once sold, you’re free from the hassle of property maintenance and dealing with tenants.
- Market Timing: If the property market is strong, selling could secure a substantial return on your investment.
- Tax Simplicity: Selling eliminates future capital gains tax (CGT) concerns, as principal residences are exempt from CGT in the UK.
Cons of Selling
- Loss of Long-Term Appreciation: By selling, you miss out on potential property value increases over time.
- Costs of Selling: Estate agent fees, conveyancing costs, and potential repairs can add up to a significant expense.
- Short Market Windows: If the market isn’t favourable, you might not get the price you desire.
Option 2: Renting Out Your Old House
Becoming a landlord has its own set of advantages and challenges.
Pros of Renting:
- Steady Income: Rental income can cover mortgage payments and provide additional cash flow.
- Property Appreciation: Keeping the property allows you to benefit from long-term value increases.
- Portfolio Diversification: Renting out adds a layer of financial stability by diversifying your income streams.
- Flexibility: You retain the option to move back into the property in the future.
Cons of Renting:
- Landlord Responsibilities: Managing tenants, repairs, and maintenance can be time-consuming and stressful.
- Regulatory Requirements: In the UK, landlords must comply with strict regulations, such as obtaining an Energy Performance Certificate (EPC), conducting gas safety checks, and adhering to tenancy laws.
- Market Risks: If demand in the rental market falls or tenants default, your rental income could be disrupted.
Key Considerations in the UK
- Local Property Market Trends: Check whether house prices in your area are rising or stable. Selling in a high-demand market could be advantageous, while renting might make sense in slower markets.
- Mortgage Status: If your current property has a significant mortgage balance, selling might free you from debt. Conversely, you may need consent from your lender to let the property.
- Tax Planning: Understand the tax implications of both options. For rental properties, income tax on rent and CGT on eventual sale are key considerations.
- Rental Demand: Investigate rental demand in your area. If it’s high, you may easily find tenants, but in low-demand areas, renting could be more of a challenge.
Making the Decision
The choice between selling and renting depends on your financial goals and the current market.
- If you value liquidity, simplicity, and have no interest in being a landlord, selling might be your best option.
- If you’re aiming for long-term wealth, have a high-demand property, and are prepared to hire a letting agent, renting could be the way to go.
Final Thoughts
Both selling and renting have their merits and challenges. Consider your financial circumstances, future plans, and the state of the UK housing market carefully. If you are interested in renting out your property but don't necessarily want to deal with the management of tenants etc then why not get an award winning agent to help you!
Call us on the number below:
0121 681 6327