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Rent It Out Or Sell It?


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Hi All, :)

As my title puts it, that is the dilemma I have at the moment. I have lived in my current house for approximately 2 years and a bit, and it was always a starter home for me. The house is in an ex-council estate in the southeast (some of the houses are still owned by the HA), not in the best area I have to admit but I have had many mail drops with buyers buying in numbers for renting. And there are many new flats and houses within a 2 miles radius, and a new residential development within 2 minutes walk.

I am quite keen to move on and to a better area now that my circumstance has changed but I am not sure if I should sell or rent this place out.

Arguments for renting: There have been quite a few mail drops about potential investors wanting to buy number of houses for renting (indication that there is a demand), the area recently secured a lump sum from the council to improve the area, one plot proposed is directly in front of my house. My house is within minutes of the local shop but not next to it as to hear any noise. Another egg in another basket (given the current pension crisis we have)

Arguments against renting: There are too many new developments around, and that means competition, my place may depreciate when I come to sell it. Given that it is a council estate, there are some minor ASB problems but nothing serious. My monthly yield from renting will give me approximately 5% profit, too low for the recommended 15% but my monthly budget/income more than cover that missing 10%, but is it worth it? I could realise some of the cash if I sell and invest in other areas or in the new house. It might be stressful.

Thanks for reading this, if anyone could give any advice I will greatly appreciate it, or if you need more info, please feel free to ask.

Yobout

PS: Is there a site where you can find out the upcoming development plans for your area?

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This completely depends upon your personal circumstances and also your belief in what the market will do. I would say it is a fairly universal belief(even amongst HPCers) that long term, the market will grow. With this in mind, I would always say if you can afford it, do not sell.

To address a couple of the concerns about renting:

- Too many new developments - new developments usually means the area is growing and improving, and as such would nearly always have a positive impact upon the rental market in the area, not the negative you think. Better area = increased demand for property.

- Percentage increase etc - not sure where you have got your figures from, but any yield above around 7% is very good at the moment, and 5% is certainly sustainable. If you find anywhere that gives a 15% yield please tell me!! :) Think about it this way, 5% is probably around the maximum you would get(long term) from a decent savings account, so you should get around the same returns just of renting, then capital gain on top.

- It can be stressful, but can also be quite fulfilling. The stress can be minimsed by researching WELL rental/letting law(would strongly recommend a perusal of the forums and articles at www.landlordzone.co.uk for this). If you still feel unsure you can always retain the services of a letting agent. As an example, our two longest owned properties now both have tenants who have been present for 7 years, we barely ever even hear from them. Rent paid on time, the places are in good condition when we do have reason to go round etc. The most important thing for renting IMO is the thorough vetting/checking of any potential tenants.

I guess my main thought would be, are the new developments/redevelopments still under way, or are they mainly complete? In other words, has the market growth in that area perhaps peaked, or is there more to come with more development?

Hope that gives you some things to think about - as I say it is impossible to give a definitive answer.

Edited by MrShed
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Hi,

Thank you very much for taking your time out in replying, guess being new I am not 100% sure what would be my best course of action.

- Too many new developments - new developments usually means the area is growing and improving, and as such would nearly always have a positive impact upon the rental market in the area, not the negative you think. Better area = increased demand for property.

That was my initial thought, but my main worry is where are the tenants coming from? This town seems to have gone into overdrive with development, and the strange thing is, the companies that used to be here are closing down their offices, and these offices are being converted to flats. Recently, a landmark company that has been in this town for years has annouced the closing of its factory, and one of the proposals for the building is to convert it into 500 units of flat!!

- Percentage increase etc - not sure where you have got your figures from, but any yield above around 7% is very good at the moment, and 5% is certainly sustainable. If you find anywhere that gives a 15% yield please tell me!! :) Think about it this way, 5% is probably around the maximum you would get(long term) from a decent savings account, so you should get around the same returns just of renting, then capital gain on top.

I am a complete novice in this so I might get my calculation wrong :P. What I meant by profit is a crude calculation of (monthly rent - monthly mortgage), and I was told that should be 15% of your monthly mortgage, I haven't factored in the tax, insurance etc. Are there other factors I should look into?

I guess my main thought would be, are the new developments/redevelopments still under way, or are they mainly complete? In other words, has the market growth in that area perhaps peaked, or is there more to come with more development?

The development near my place is definitely underway, a small block of 6 flats has just been built about 6 months ago, an old office block proposal to convert it into flat has already been approved :o

Just did a quick search on the net and found that the proposed plan of approx. 8000 new homes from 2002 to 2011 in this county with majority concenrated in this town :o

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