Every year, many people need to move to a different part of the country for work. One of the big questions facing you when relocating is what to do with your existing home.
Many people opt to sell their existing home and buy or rent a property in the new area. However, there is another option. Renting out your current home rather than opting to sell could make sense both financially and practically.
Given the current housing market and the continuing upward trend in house prices, renting out your current home could make financial sense. If you decide to sell and you know that you may want to move back to your original location eventually, you may find yourself priced out of the market if and when you do decide to come back. By renting out your property instead, it is much easier for you to return in a few years if you so wish.
Furthermore, if house prices do continue to rise, you could be left with a valuable asset – one that has the potential to generate a regular income.
If you do decide to rent out your home rather than selling it, there are two options open to you. Firstly you could let out your existing home and rent another property in the new area. This could help you save on moving costs, particularly if you move into a furnished property, and it also saves you from having to make any long term commitment.
If, however, you would prefer to buy in the new location rather than rent, then ‘let-to-buy’ could be an option for you. This is an option that is growing in popularity and it entails renting out your current home, taking out a new mortgage against it, and using this to buy a property in the area you’re moving to. This is a good option for you if have enough money or equity to buy a new home without selling your current one.
If you are thinking about going down this route, there are a few things you need to keep in mind.
The first thing you need to do is research the rental market in your area. You need to be confident that you can rent out your property and that it can generate enough rental income to cover the mortgage payments. Get an idea of how many months a year you will be able to rent out the house – and be sure that you will be able to cover the costs during any empty periods.
It’s also important that you are in a financial position to cover any additional costs, such as maintenance or repairs on your existing property, insurance payments, or any commission you need to pay to letting agents or property managers.
In financial terms, it’s also essential that you’re aware of your tax obligations. If you rent out your home, you may have to pay income tax on any profit you make (although you will be entitled to a tax allowance for maintenance work, wear and tear, and professional fees), and, if you do eventually sell your original home, you may be liable for capital gains tax. So make sure you take this into account before making a decision.
You also need to consider if you’re comfortable renting out your home to strangers. There are of course risks associated with this and you have to be prepared for the fact that you may not get your home back in the exactly the same condition as you left it. However, putting your home in the hands of a good property management company can help to mitigate these risks.
Renting out your home while you relocate can be a scary prospect and is not without risks. However, with plenty of forethought and if managed properly it can be a sensible decision which reaps dividends well into the future.
Martin Gibbon is the Director of Balgores Property Management, the leading Essex Estate Agents. Martin has been working in the industry since the mid 80’s. When he is not selling properties, Martin enjoys spending time with his wife and children, fishing and supporting West Ham.