Accidental landlords come in two categories.
Those who have made a success from a needs must scenario and those for whom venturing into the world of being a landlord has not worked out well at all.
One thing all accidental landlords do have in common, however, is a 'need' to rent out their property, perhaps because they can't sell it but need to free themselves from the burden of regular mortgage payments.
Or perhaps because they need to move away but want to keep hold of their property as a capital growth investment.
You may simply want to move but can't decide whether renting out your home privately or selling it is the right step.
First, let's take a look at the pros and cons of selling a property...
Selling your house: The pros
Of course, selling your home is easier said than done sometimes and being unable to secure a sale could be the very reason you are considering renting out your home to a tenant.
But it's worth pondering the positive aspects of selling before making a decision...
1. Selling could release equity that you can use to buy your next home
2. As the property is your primary residence and not a buy-to-let property, you are not liable to pay capital gains tax on any money you've made
3. Selling is less long-term hassle - you sell, you move on
4. You only have to manage the property you are living in
Selling your house: The cons
While selling up can release money to push you up to the next step on the property ladder, if market conditions are seeing strong capital growth, selling your home could see you miss out on further equity.
1. Selling up now could mean you fail to take advantage of further growth - meaning you are technically selling a highly lucrative asset too soon
2. If your property is in negative equity, you may have to find even more cash to fully pay off your mortgage
3. If you struggle to sell your property quickly and the reason it's on the market is due to financial changes in your life, you may get into more difficulty
4. You may not be ready to part with your home - for instance, if there are deep rooted family ties or memories associated with the property, it can be tough to let go
Renting out your house: Things to consider
Renting out your home isn't as simple as turning up on the doorstep of a letting agent and asking them to find a tenant.
Being a landlord brings with it a host of responsibilities and obligations - most of them legal which, if not adhered to, can result in hefty fines, or worse.
So, consider the following before deciding to rent out your home, whatever your circumstances or reasons for doing so...
* Is the rental market right for your home? Do properties like it rent easily in the area and are they highly sought-after by good tenants?
Consider if you are ready for number of legal obligations that come with being a landlord, including...
* Gas and fire safety legislation
* Electrical safety
* Minimum Energy Efficiency Standards (MEES)
* Legionella risk assessment
* Maintenance and repairs under the Homes (Fitness for Human Habitation) Act 2018
* Tenant deposit protection
* Right to Rent checks
* Has your property enjoyed stable capital growth and is that likely to continue? The best rental properties make an income from rent and grow in value over the long term
* Factor in the costs associated with renting out your home, including any upgrades you may need to make to make the property suitable for tenants
* Think about your tax obligations - landlord income tax laws are changing and if the property is no longer your primary residence and you wish to sell, you could be liable for capital gains tax
* Will your mortgage lender allow you to rent out your home? If not, you may have to switch to a higher interest buy-to-let mortgage
* Consider how many months of the year you can realistically have tenants in situ. Void periods are hugely costly for landlords
The pros of renting out your house
While there are lots of things to carefully consider before deciding to rent out your property, there are many positives to being a landlord - as long as you realise it's harder work than it looks!
* Enjoy a steady income stream
* Benefit from long-term capital growth on your home
* Release yourself from the burden of paying a mortgage if your financial circumstances change
* Maintain a 'base' if you need to move away for work for a period of time but wish to return to your home in the future
If you're looking for further advice on whether to rent or sell your home, contact
your local Whitegates office who will be happy to help.