Home Improvement

What’s Right For You: Selling or Renting Out Your Home?

Should you sell or rent your home? It’s a major decision, and your choice will be influenced by your particular circumstances and future aspirations. To help you make your decision, we, the top letting agents in Cheltenham, go through the advantages and disadvantages of selling versus renting out your home. We will also analyse the factors to be accounted along with either choice. 

There are a slew of expenditures and obligations to consider before determining whether or not renting or selling your house is the right option for you.

When should you consider renting your home?

Renting out your property can be a smart financial move as you might profit from long-term asset growth and increase your private pension for later years.

 There are a number of circumstances in which renting your property instead of selling it is a better option for you:

  • You’re relocating temporarily.
  • You’re buying a new home and you’d like to keep one as an investment.
  • You have a property on the market that isn’t selling, so you need to take action immediately.
  • You’re hesitant about relocating so you would like to keep your current residence in case things don’t work out.
  • You want to start establishing a property portfolio by renting out your home for the first time.

Is renting out your property an option for you?

You may need authorization from your bank or lender to rent out your property if you carry a mortgage. If you want to rent out your home for a while before relocating, your bank or lender may agree to allow it under the terms of your current mortgage.

This is referred to as ‘consent to let,’ and it allows you to lease out your home for up to a year. If you intend to rent out your house on a more permanent basis, your lender will ask you to switch to a buy-to-let mortgage, either with them or with a different lender.

Renting out your home

Pros:

  1. It’s possible that you’ll be able to move faster.
  2. A good tenant will pay their rent on schedule and look after your house.
  3. You may be able to supplement your income while also benefiting from future asset growth.
  4. If you’re only going away for a short time or can’t sell your home, you might be able to get some financial support.
  5. Renting can be delegated to a reputable agent, such as one who is a participant of NALS, ARLA, or the UK ALA.

Cons:

  1. Unless you hire a managing agent to handle this for you, you’ll have to remain on top of ever-changing lettings legislation [YG1].
  2. You might discover that your home requires additional upkeep.
  3. Tenants may cause damage to your property, which may not be offset by your insurance.
  4. If prices decrease and you fail on both mortgages, taking on more debt could result in you losing both properties.
  5. If the tenant fails to pay the rent or the property does not let (‘void periods’), you may lose income and have to pay out of your own pocket.
  6. Taxes on ‘second houses,’ including buy-to-let, can be significantly higher than on other investments.

Is it time to sell your home?

Since the pandemic arrived in 2020, the housing market has had a difficult time. However, the market has rebounded admirably, and with property values rising in nearly all parts of the UK, now is a wonderful time to consider selling. Almost 22% of agents say the majority of the houses on their books sell within a week. As per the Office of National Statistics, the annual house price rise in the UK reached 8.9% in April.

Pros:

  1. You may be able to free up equity in order to purchase your next home.
  2. In a growing market, you might be able to find a great price for your property.
  3. If you spend more money on a new property, you won’t have to pay Capital Gains Tax on the profit when you sell.
  4. You can reinvest in less hazardous investments as a result.
  5. There are fewer headaches: no unexpected repair fees, tenant damage, or voids.
  6. You don’t rely on a single property to produce a return, thus reducing risks.

Cons:

  1. You may lose money if the market is declining.
  2. You could be getting rid of a valuable asset that might appreciate significantly in value.
  3. If the home is in negative equity, you may have to pay off the mortgage with extra cash.
  4. The property could provide a high profit and add to your retirement fund in the future.
  5. Selling your home may take time, delaying your ability to relocate to a new location.
  6. It might be emotionally difficult to let go of a family home.

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