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Sell or let?
steve hawken
Posted: 10 December 2010 08:40:40(UTC)
#1

Joined: 12/08/2010(UTC)
Posts: 2

Hi,

Next year I'll be moving abroad for a while (2-5yrs) and I had thought that I'd just rent out my flat. But then I thought maybe just sell the flat!?

I was gonna sell the flat when I got back anyway - my growing family will need a bigger house.

If I rent the mortgage would be covered with about £400-£600 left over. Cool! But I'll be paying:
- mortgage interest
- probably some kind of letting insurance?
- letting management fees
- other fees that crop up with owning/letting a flat like general maintenance.

Also I'll have the stress of covering the mortgage if the flat is not let for any period.

If I just sell the flat I'll pay off the mortgage and have roughly £200,000 to invest (something low risk as this is cash to buy a house with when back in blighty!). Probably something like a portfolio of gilts/bonds.

So really it's down to whether £200,000 just accumulating interest would be a better investment than keeping the cash tied up in a property which is then let out.

Will (London) property prices rise at a healthy rate? I kinda think it'll be slow and steady for a few years.

I wonder if anyone has any thoughts?
Steve P
Posted: 10 December 2010 10:26:38(UTC)
#2

Joined: 02/05/2007(UTC)
Posts: 44

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Nobody can say for sure what will happen to property prices and/or what would happen if you invested £200,000 in something like a mutual fund. But whatever the potential returns of either option, personally I'd sell the property to avoid the hassles of renting it out whilst abroad.
Andrew Gill
Posted: 10 December 2010 13:33:03(UTC)
#3

Joined: 25/04/2006(UTC)
Posts: 1

If you're going to sell when you get back anyway - then I would sell now.
mikeran
Posted: 10 December 2010 13:53:05(UTC)
#4

Joined: 25/06/2010(UTC)
Posts: 10

Thanks: 2 times
It depends also on what country you are moving to and how their tax system works. That is if you are deemed while away to be liable to tax in your temporary country of residence, and whatever country you are in for capital gains tax or second home sale or income.Also for converting UK income if required to currency of the country you are working in. Exchange rates can fluctuate widely over relative short periods of time. And if you do sell in the UK as your main residence you will not be subject to CGT but where and how you invest that capital may be a tax consideration. Either in the UK or in your country of temporary work. I am not a Financial expert or advisor so these are just my thoughts.
KENNETH WEBB
Posted: 10 December 2010 13:56:18(UTC)
#5

Joined: 06/09/2010(UTC)
Posts: 8

The UK is full of FORMER EX-PATRIATES who sold up & went abroad in some cases Spain,France,Cyprus(like my ex-Army mate) & had to for one reason or another LIMP BACK TO THEIR COUNTRY of DOMICILE having either failed abroad,ran out of money,currency exchange rates,low private/state pension or separation/divorce.

My good friend now has no property in UK,no wife (although he has a significant other )is 55 years of age & gives his ex-spouse 40% of £10k per annum pension. He limped back in January 2008 without a job then had two lost that one & was UNEMPLOYED IN LONDON FOR NEARLY SIX MONTHS. He then took a job @ £7 an hour & worked 72 hours a week for 20 months.. His pension increased to £10k in October but prior to then was £5k minus 40% & he was reduced to getting housing benefit but no dole money because of his pension..

Fortunately he now has a residential live in porters position which he will have to of course give up upon reaching retirement age. His missus/significant other lived in Cyprus for 17 years has no private pension(s), & possibly not even fully funded state pension so will be dependent predominantly to him... He & her had to do INDIVIDUAL VOLUNTARY ARRANGEMENT to rid themselves of £23,000 debt over 60 months..NOT EXACTLY A SUCCESS STORY BUT HEY THEIR HAPPY...So be warned get your place let to a Housing Association or direct to a council & mitigate your risk.
William Dickinson
Posted: 10 December 2010 14:01:48(UTC)
#6

Joined: 10/12/2009(UTC)
Posts: 7

I would sell - You will need a Letting Agent who will charge fees and specialist Landlord Insurance to cover the risks. Be advised that your normal household policy will (most likely) be VOID if you let your property. AVIVA offer very comprehensive insurance cover for landlords. One of the additional risks you face when letting is ending up with a tennant in arrears and having to evict him through the courts. Your agent will not deal with this ... it is down to you to go through the legal process of eviction which will be hard to do if you are not in the country. You will not only lose rental income when this happens but also have to incur the legal costs of eviction which you are unlikely to recover.

Bite the bullet and SELL !
tim reynolds
Posted: 10 December 2010 15:27:36(UTC)
#7

Joined: 02/05/2010(UTC)
Posts: 4

Given you are hoping to buy a property when you return to put yourself in the same position in 5 years I would recommend keeping your flat. If there is significant house price inflation your flat will go up proportionally to your intended purchase and vice versa.However you have not indicated what proportion of your current equity is as a percentage - if its only a small amount it may be worth considering selling . For example if your flat is worth a million and your equity 200k and the property market falls 20 % then you are potless! Its more likely your flat is worth say 400k a 20 % fall would still leave you with 120 k but your house purchase would also cost you 20 % less in this scenario.

My personal view is that there may be some falls in house prices next year but its likely there will be significant rises due to high inflation in the latter part of the next 5 years - the government are going to inflate their way out of debt and the banks wont stop lending forever - bonds etc are no protection against inflation you need assets and you have one already keep it !!!
Philip Thomas
Posted: 10 December 2010 16:21:34(UTC)
#8

Joined: 16/01/2008(UTC)
Posts: 7

I would sell now, paticularly as the market may well drop while you are away, and there may be Capital Gains issues if you rent for 5 years.

Take the cash, and inflation proof it by putting 25% in gold and silver (bullion, miners and ETF's) BlackRock Gold and General is also a fund to consider.

Put 25% into blue chip, high dividend paying shares and reinvest the dividends back into shares.

Put 25% into commodity producing companiesin the Emerging Markets and keep 25% in cash for when interest rates start to climb.

Watch you gold investments like a hawk, and start to sell as interest rates rise
James Burn
Posted: 10 December 2010 17:10:35(UTC)
#9

Joined: 13/03/2010(UTC)
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You really need advice from a professional tax advisor. The rules on CGT and income tax change depend on UK residency status, and this is in turn affected by what you continue to do in the UK when you are abroad.
PhilB
Posted: 10 December 2010 18:55:06(UTC)
#10

Joined: 24/06/2010(UTC)
Posts: 19

Was thanked: 5 time(s) in 4 post(s)
I have experience of renting out my family house when expat for a couple of years. I would advise that there are two very distinct issues to consider:

1) you have a home; if you love it remember that tenants will be less careful of your property (we had to replace a bath and replaster a wall because of idiot tenants, and our house is high-end renting! Also, it takes serious organisation (and a lot of luck) to get out your tenants to coincide with your return - short lets are for 6 months, eg.

2) your flat has "business" implications (capital and income) - when you rent out, yes you do have to pay people to manage and maintain your property; but you also get a heck of a lot of cash to cover your costs AND the taxman allows your mortgage interest (not repayment of capital) and other expenditures as costs before trying to tax you on the net. However the downside is you will be absent and leaving a huge capital asset in the hands of your agent; if you have no family members or trusted friends to 'keep an eye' on the property in your absence, you have to bear in mind the risk inherent in finding a good agent.

As other respondents have noted, there are plenty of other things to consider, too. But fundamentally if you think in terms of home vs business it may help you to come to terms with it all. Good luck, enjoy your time abroad!
tim reynolds
Posted: 10 December 2010 19:44:39(UTC)
#11

Joined: 02/05/2010(UTC)
Posts: 4

if you do decide to rent it out when you leave you have to fill in a form p85 or something . this discloses to hmrc any rental income you receive and as a non resident you have to have deducted 20 % tax at source from your rent. If you have an agent they have to deduct it -if you dont have an agent your tenant has to pay it! You still are entitled to you personal allowance and mortgage interest rates but you have to claim back the tax at a later date.I have three luxury flats in surrey rented out and dont use an agent. I havent had any problems perhaps I have been lucky but at the upper end you tend to get better tenants in fact all of my tenants keep the flats cleaner than I did - they are all female. I have used gumtree and always let my flats quickly. Dont forget agents will charge c 10% minimum plus 20 % vat plus all the extras. eg I recent got a gas safety check done on another house I have rented I paid £50 - a friend of mine who uses an agent got charged £89 plus vat for this. Letting agents are out to make money and they will load up on other services or be on commissions etc for cleaning plumbing you name it.
ArianAdar
Posted: 11 December 2010 19:31:18(UTC)
#12

Joined: 25/01/2010(UTC)
Posts: 7

If you will need a mortgage to buy another property when you get back in 2-5 years time, bear in mind that the FSA is already tightening lending rules and it is unlikely that you would get another loan easily in 5 years time with no UK income to show. Your exisiting loan can probably be ported to a new property in future, avoiding the hassle of finding a new lender when you are unfamiliar with new rules.
I suggest that you rent. Make sure that your lender agrees to this first.
Another thought. If you can arrange a fixed rate loan on a buy to let mortgage for the next 5 years you will know your outgoings and should have enough cash spare to cover voids.
Ref tax, yes an agent has to deduct 20% from your rental income, but if the property has been your main residence in UK and you later let it out, you can disregard the last 3 years profit when you sell, plus £40k residency exemtion. If you own it jointly the £40k doubles as you each have the allowance. (This is how the MPs have legitimately got away with CGT on their flats etc.)
Even if the tax rules change while you are away you will still have a property in UK which is one of the most valuable things you can own. I dont know how old you are but the ability to transfer the mortgage to another property; the option to draw off more capital by remortgaging later; and the eventual option of equity release when you are much older all combine to make selling a foolish choice, particularly in today's markets.
Ask around for an agent, get references, make sure they are a member of a national professional body.
KEEP IT.
steve hawken
Posted: 13 December 2010 11:43:40(UTC)
#13

Joined: 12/08/2010(UTC)
Posts: 2

Thanks everyone for your thoughts. I think there's good arguments either way for us to mull over. A visit to a couple of financial advisers I think will be the next step.
Thanks again
:)
Amelia Brown
Posted: 06 February 2013 11:52:47(UTC)
#14

Joined: 14/12/2012(UTC)
Posts: 14

I think you should sell now keeping the present London property market condition in mind. It might drop while you are away and there could be some more issues if you rent for 5 years. Think like a professional or consult your problem with a professional tax advisor. The rules on tax change depend on UK rights, and this is in turn affected by what you continue to do in the UK when you are abroad.
Alan Anderson
Posted: 06 February 2013 13:41:54(UTC)
#15

Joined: 02/04/2012(UTC)
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Amelia is a spammer across several forums at the same time.
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