Should I Sell My House or Rent it Out?

The choice between selling or renting your house is often a difficult one. Things can even get a little emotional – particularly if you’ve lived in it for some years.

As fast house sale specialists that regularly have this conversation with clients, we’ve put together 4 lists with pros + cons that will help you make the right decision…

Selling Your House – Pros and Cons

Selling a house is a great way to release equity to buy a new property or use for whatever reason you may need.

As well as such advantages, it’s worth looking at why it may you may not decide to go ahead…

Pros of Selling Your House

• Selling your home will give you the opportunity to move on from your current property and start fresh somewhere new;
• Provided you’re selling at the right time of the market, or you’ve owned the house for many years, you can pull out the built-up equity (i.e. the “locked in” value growth ) from the property as a lump sum. What’s more, if you’ve lived in the property as your main residence, there will be no Capital Gains Tax (CGT) due;
• You’ll have a “clean slate” and can move on with your life. This often means down or upsizing to a property that’s more suited to your needs. Other sellers we speak to decide to rent, emigrate abroad, travel, invest in a business venture, move in with a partner, amongst a range of other reasons;
• If you’re going through a divorce or separation, it makes sense to sell up and move on with both of your lives;
• Some people experience home buyer’s remorse, disputes with neighbours or have grown to dislike certain aspects of the property.  Selling up can be a great way to get a change of scenery;
• If the fixed rate of your mortgage is due to expire and you do not have much equity, selling up means you can avoid harsher monthly repayment / interest costs;
• You may be able to sell into a strong (bullish) market and avoid taking a hit in a downturn;
• Assuming you’re not planning to buy with the proceeds of sale, you are no longer responsible for the property and all the expenses that come with.  It’s often forgotten that not being a homeowner gives you more freedom to do as you please!

Cons of Selling Your House

• The most obvious downside (for some people anyway) is that you’ll need to find somewhere else to live.
• With open market sales taking 6 months or more, the house sale process can often be stressful.  It’s an unfortunate fact that 1 in 3 property sales collapses midway;
• Much also depends on market conditions – but there’s a possibility that you may not be able to sell at the price you want or need. Some property owners therefore choose to “stay put” or find an alternative way to sell;
• You will have estate agents / auction fees, conveyancing, removal and a range of other house sale costs to pay. Then, if you’re buying another property, there will be further legal fees and stamp duty charges. Other outlays to bear in mind include moving and storage;
• If you’re not buying another property and plan to spend the money elsewhere, remember that it can be hard to get back onto the ladder (unless you plan to move somewhere cheaper);
• Inflation erodes the level of debt. The longer you own a property, the more equity you build. With every mortgage repayment, you’re slowly but surely building even more equity. Even if you have an interest-only mortgage, this equity share goes up with time (albeit at a slower rate);
• Keeping money in property will earn you more interest than any savings account. There’s also a strong argument that, over the long term, property performs better than the stock market.

Renting Your House – Pros and Cons

Letting a property is a great way to keep hold of your property if you’re reluctant to sell or have difficulty getting the price you want.

Let’s explore the various advantages and disadvantages of going down this route.

Pros of Renting Your House

• Renting out your home can provide a consistent income stream, especially if you live in an area where there’s solid demand. As long as what you receive covers your mortgage and running costs, you should be able to run the property profitably;
• Most tenants are honest and will pay on time. Undertaking the correct checks prior to letting the property should mean you’ll have no issues with not receiving rent;
• The hassles of renting out the property can be outsourced to a professional lettings agent (registered at NALS, ARLA or UK ALA);
• Despite ongoing fluctuations, you’ll get the benefits of capital growth and rental income growth over the long term. It may even be possible to sell and rent back your property to the council or privately (and get the best of both worlds);
• Although there will be tax to pay on the rental income, many of the costs are deductible;
• Having a rental property is a great way to save for your retirement;
• If circumstances change, you still own a property you could move back into.

Cons of Renting Your House

• Being a landlord comes with its own set of responsibilities and challenges.  Although they are tax-deductible, maintenance costs can build up eat into your rental income.  Tenants, generally  speaking, will not treat the property in the same way as you would;
• Compliance and regulation costs continue to rise, especially if the property has not been modernised in some time.  For example, you will need to produce a gas safety certificate (CP12) and undertake professional electrical safety checks every 5 years.
• As it’s likely that you own the property in your own name, it’s important to be wary of the heavy tax burden resulting from Section 24  of the Finance Act 2015.  This is especially painful if you are already in the higher income tax bracket;
• Somewhat related to the above, it would seem that the UK government is firmly set on punishing landlords in various forms – with no real end in sight;
• If a tenant moves out there will be a void period where you will need to update or refurbish the property in order to attract new tenants.  Although insurance policies can protect against loss of rent – the provider will often have strict underwriting processes with premiums attached to account for risk;
• Although lettings agents will help, many have their own agendas and like to keep their involvement to a minimum (even if you’re paying for full management). For example, it’s fairly common to repair and maintenance costs coming with a premium as agents use their own contractor contacts;
• In the event that the tenant stops paying rent, eviction processes have never been more challenging. The law arguably favours the tenant and it can take a long time to legally resolve things.  Meanwhile, you’ll be getting no income;
• You will have to obtain “change of use” authorisation from the lender as a standard residential mortgage is unnacceptable when letting property. However, you may be able to swap to an interest-only mortgage and save money every month (without your overall debt level reducing);
• You will lose your principal private residence benefit.  If you sell, there will be an extra layer of tax to pay;
• If you do eventually sell, you may well have to refurbish the property to achieve the optimum price.

How Can Property Solvers Help?

The choice between selling and renting property is something that only you can decide.

To help things along, it’s worth writing up a “pros and cons” list of your own to help things along.

Remember, it’s easy to make snap decisions that you’ll regret down the line. Take your time and perhaps speak to trusted family and friends for an extra point of view.

If you do decide to sell, we’d love to have a chat about your plans!  Contact us 24/7.