Ask Away...: Holding onto Your Home: Sell Up or Rent It Out?

Thursday, July 6, 2017

Holding onto Your Home: Sell Up or Rent It Out?

The time often comes when you've grown out of your home. It could have become too small for you or less practical, or perhaps you're relocating to somewhere else. When your home isn't right for you anymore, selling up and buying a new one is the usual process. But what if you're not ready to get rid of the property just yet? You might be considering keeping your old home and renting it out, plus buying a new property. This could seem a bit too complicated or like it might be too much hassle. However, it can also offer huge benefits. If you'd like the income from a second property, make sure you think of these issues first.




Dealing with Your Mortgage(s)


The biggest factor to take into account is whether you'll be able to own two properties at once. If you're still paying the mortgage on the first property, securing a second mortgage will be more difficult. Some lenders will want to see that you already have a history of managing rental properties or investing in property. However, there might be circumstances when they think that you are perfectly financially capable of managing two mortgages anyway. Another thing to take into account is whether you are allowed to rent out the first property. Of course, it's another story if you have paid off the first mortgage.


What Sort of Rent Can You Get?


Before you decide to rent out your previous home, you need to consider how much rent you can ask for. You should do some research about your area and perhaps get a property agent to come and have a look. If they know the area well, they can take a look at your home and quote a likely rental value. You'll need to think about this figure when you're making your decision. The rent you get from the property needs to pay for the mortgage if there still is one, plus cover maintenance costs, which you will be responsible for as the landlord.


Affordability


Whether you will be able to afford to keep both properties involves thinking about both mortgages and rent. While it's partly your mortgage provider that will decide this, you also have to think about it. As mentioned above, any rent you charge from tenants will need to help cover your costs. Ideally, it will mean that you're covering any costs and making a profit too. However, even if you're not making much profit, it can help you to hold onto a valuable asset. As well as the mortgage and property maintenance, you might also need to pay for insurance, a property manager, and other associated costs.




Can You Spare the Time to Manage the Property?


Being a landlord means having the responsibility to look after your property and your tenants. This means being able to spare the time to find tenants and deal with any issues they might have when living in your property. You should be able to keep the property in good condition and respond to emergencies quickly too. Even if you use a service to manage the property, you should still have time to communicate with them and to check up on everything once in a while. Consider the time you'll need to rent out your property before you put it on the rental market.


Getting Someone Else to Care for the Property


You don't have to personally look after the property if you think it would be too time-consuming. Property management companies provide a service that looks after your property and tenants for you. They can take care of any concerns the tenants have and act as your go-between. You can use a property agency to find tenants for you and to deal with moving them in and out. If you don't want to, you can avoid dealing directly with tenants. However, it is good to be involved with your rental property if you can, even if it's only fairly loosely.




How Long Would You Hold onto the Property?


One thing to think about is why you want to keep the property and how long you intend to hold onto it for. Are you keeping it because you can't bear to let go of it? Maybe it's because you want the rental income now, or because you want to have the property as an asset that will benefit you later. You should think about how long you might have the property for. Is it the start of a property portfolio for you? Will you keep it until you retire and then sell it to support your retirement? Or perhaps you'll keep it until your child moves out or goes to college and hand it over to them.


When the Property Is Vacant


Another thing to consider is that your property might not have tenants in it all the time. It could be vacant while you look for your first tenants or in between tenants. You should think about this in terms of security, as well as any income you might be losing during this time. When your property is empty, you might need to think about your insurance. Insurance providers might want to know that there is no one there because it can increase the risk of break-ins and other incidents. You also need to consider if an empty property could mean you're struggling to pay for it.




Letting Go of the Property As Your Home


Moving out of a home you have lived in for years can be tough. You've had fun there, and you've made a lot of memories. Eventually, though, you have to let go and move on to your new home. But if you keep your old home, it can be more difficult to let go. Even though you don't live there anymore, it's a struggle to come to terms with it not being your home any more. And that can cause problems both for you and your tenants. It's important to remember that although it might be your property, it's your tenants' home. So it's wise to work on letting go of any sentimentality and treating it like an investment instead. One thing that might help is redecorating to make everything neutral, so there's no trace of your personal preferences left.


Consider the Housing Market


Don't forget to think about the financial consequences of holding onto this property. Is now a good time to sell? Will you lose out if you want to sell later on? You might want to hold onto the property so you can cash in later, but renting it out could end up more hassle than you thought it would be. Maybe if it's even better to sell the property now and buy your new one, then consider buying another property as an investment rental property later. Consider whether it's the right time to become a landlord, and don't just do it because the option is available now.


Your Options Are Open


Remember, if you decide to keep your old home now, you don't have to keep it forever. You can decide to sell at any time, although you might have to wait if you have current tenants living there. If things aren't working out, you could sell the property. Just remember to take into account how long it might take to sell.


Holding onto your old home could be a good decision. However, it's not always the best choice, so think carefully about whether you should do it.















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