If you’re ready to move on from your current home, you might’ve considered renting it out instead of selling. The most important question to ask yourself is: does it make practical and financial sense?
In this guide, we’ll take a look at the differences between selling vs. letting, why one option might be more suited to you, and how you can plan your next move accordingly.
Looking for a trustworthy, reputable agent? Whether you’re buying, selling, or letting, get in touch with your local CJ Hole branch today.
Should you sell or rent out your property?
When planning a move, most people expect to sell their current home and release equity to buy their next property. However, there are certain scenarios where you might benefit more from renting out the home. If you’re in a similar predicament, here are some of the pros and cons of choosing to sell.
Why you should sell your property
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Selling means you will have an immediate sum of money to spend on your next home, allowing you to potentially upsize, put down a larger deposit, or relocate to a more convenient location.
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Once you’ve sold your home, you won’t have to worry about its upkeep anymore as there will be no tenants tying you to the property.
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If you sell your home as your main residence, you will not have to pay Capital Gains Tax.
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You could make a substantial profit on your property if you sell at the right time.
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You will not have to rely on tenants to cover mortgage repayments or worry about late rental payments.
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You also won’t have to worry about void periods where you may need to pay out of your own pocket to cover things like council tax.
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A good estate agent can help you navigate the sales market and achieve the best possible results for your home sale.
Let CJ Hole help with selling your home
Why you should rent out your property
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It could take time to sell your home, which might result in your property chain breaking.
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You could be missing out on a good secondary source of income -after all, rents are currently the highest they have ever been and demand for rental properties is still great.
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You will need to budget for expenses involved in preparing your home for sale, such as renovations and solicitor fees.
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You could sell just before an uptick in prices and miss out on long-term capital growth.
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Renting your property needn’t be difficult if your have the right letting agent on board.
Selling vs letting out your home: Things to consider
Deciding to sell or rent out your home is a deeply personal decision, but there are some other considerations to take on board while weighing up your options.
The current market
Selling is likely the easier option, but if your home’s valuation has fetched a lower figure than you hoped, you should consider renting it out instead.
While your home might not reach your desired value just yet, there is a good chance that the figure will increase if you’re able to give it some time.
Remember, your home could grow in value while you are renting it out, allowing you to earn a secondary stream of income while you wait to sell for a better price in the future.
Your financial situation
As mentioned previously, most people sell so that they can use the money to buy their next property. So, unless you’re in a good financial situation and you have enough money to finance two properties at once, selling might be your only option.
Tax
While renting out your home might be a great way to gain extra capital, it’s important to consider the tax implications that come with being a landlord. For example, if you start letting out your home, you will need to pay income tax on your rental income, but the amount owed will depend on other earnings and allowable expenses.
Additionally, if you eventually sell the home after renting it out, you will most likely be liable to pay Capital Gains Tax on the profit made from the sale. This is because the home will no longer be considered your primary residence. However, the rate of Capital Gains Tax will depend on your income and the amount you have gained from the property, which can vary widely.
Buy-to-let mortgages
If you are considering becoming a landlord, the first thing you should do is speak to your mortgage provider to find out if there are any limitations on your mortgage deal regarding renting out the home.
Many mortgage lenders will place restrictions on renting out the property to ensure that repayments are made without having to rely on a tenancy, so you will most likely need to switch to a buy-to-let mortgage (BTL).
Most BTLs typically charge a higher interest rate than an ordinary mortgage and often require 25% of the property’s value for a minimum deposit. BTLs are also interest-only, therefore you will pay interest each month, but not the capital amount.
At the end of the term, you will need to repay the original loan in full, which is why many landlords use rental income to cover the mortgage on a BTL.
Seek expert financial advice with Embrace Financial Services
Becoming a landlord
Taking on the role and responsibilities of a landlord requires a great deal of time and effort. It’s important to understand the weight of the task from the outset before committing to letting out your home, as property management is not a passive income.
Landlords have the hefty responsibility of running a rental property that is high-quality and legally compliant. Because of this, inexperienced landlords often enlist the help of a professional letting agent.
Save time and gain peace of mind by using our management service to protect your investment.
Related: Two-thirds of landlords are moving to a managed let
Looking to sell or become a landlord?
Whether you’re thinking about selling your current home or becoming a landlord, the first and most integral step in your moving journey is to find out how much your property is worth.
Request your free home valuation
As one of the largest networks of estate agents in the UK, we have the experience and expertise to help you let, sell, buy or rent your property in the right time frame for the best price, helping you every step of the way.
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