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When it’s time to move on, deciding whether to rent out your home or sell up is a big decision to make and it will depend on your own personal circumstances. This guide from Open Property Group looks at the pros and cons of selling up versus renting out.

Selling up v. renting out

Selling your property is the best way to free up equity to invest elsewhere, whether that’s in another property to live in or in a business venture, for example. An accurate valuation will tell you if your property has increased in value since it was bought and therefore how much equity there is.

Although in the current market it’s quite rare, you’ll need to establish whether your property is in negative equity – when the property is worth less than the remaining mortgage balance – which may make it impossible to sell.

Costs attached to selling a property

There can be costs when you sell a property, so these are worth calculating before you make a decision. Factor in estate agency fees, conveyancing fees, survey costs should you require more than the basic version, VAT and the price of an EPC. If you are selling a buy-to-let or a second home, you may also need to pay Capital Gains Tax, based on the increase in value of the property from when you bought it to when you sold it.

Can I rent out my house?

You may, however, find it difficult to part with your family home or you may have an inkling that your property may rise in value in the future. If these thoughts are on your mind, retaining ownership and renting the property out may be a better option.

If you are thinking of renting out your property, it’s crucial to ask your mortgage lender for approval. Whilst some will happily switch your owner-occupier mortgage to a buy-to-let one, others may decide that your property or financial situation doesn’t meet their criteria.

Regulations & responsibilities

When you become a landlord, there are hundreds of pieces of legislation that you have to comply with in order to legally let a property, known as landlord obligations. These include things like electrical and gas safety checks, minimum energy efficiency standards and the tenancy deposit protection scheme. Many landlords are leaving the sector because the number of regulations make it too complex and costly to run a profitable property investment.

Financial implications

Renting a property can bring short-term profits from the monthly rent and long-term capital appreciation, with returns currently above the interest rates paid on some conventional investments, such as ISAs. To see if your property would make money as a buy-to-let, you’ll need to work out the yield – Open Property Group can help with this aspect if it’s a new concept to you.

It’s important to remember that your yield is dependent on the tenant paying their rent. If they stop paying, you would still have to pay the mortgage. There are a number of other costs for landlords, such as an agent’s property management fees, service charges and ground rent if the property is in a block, maintenance costs and landlord insurance. The taxman will also want his share of your earnings in income tax as well – a rate that’s at an all-time high since mortgage interest tax relief was scrapped.

Sell with zero fees

If renting out a property you own feels too complicated and you decide to sell, then we can help. Open Property Group buys any property with no agent fees, no EPC fees and no legal fees to pay. We can provide an almost-instant free cash offer with completion in 7 days, if required. Get in touch with our team to find out more.

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