Should I Sell My House or Rent It Out?

If you’re in the process of moving home, you’ll need to decide what to do with the one you’re living in. For most, this means selling the property to finance the new mortgage, but there may be compelling reasons to let your property out, instead.

In this guide, we’ll cover everything you need to know to make an informed decision about whether to sell or let out your property.

Consider the Property Market  

Firstly, it is important to check your local area and what recent sales have looked like. This will give you a clearer idea of how much your property is worth, especially if recently sold properties are of a similar size and condition.

You can also check out rental prices for similar properties, too. Doing so will help to inform your decision on whether to sell your property or let it out.   

Pros and Cons of Selling Your Property 

Let’s explore some of the reasons to sell or not sell your home.  

Pros of Selling Your Property 

• You’ll have money available for your next home deposit.   
• If the house you’re selling is your primary residence, there’ll be no CGT (Capital Gains Tax) to pay.    
• You could make a profit on the sale. 
• You can move on with your life quickly.   
• You can release equity to spend or reinvest. 
• There are no landlord stresses or demands from tenants. 
• It releases additional cash to spend on your new property. 

Cons of Selling Your Property 

• You might be missing out on a source of regular income.   
• Selling a house can be time-consuming and difficult. 
• It can be expensive to sell a property, and to prepare it for sale. 
• You could lose money if the housing market isn’t performing well. 

Pros and Cons of Letting Out Your Property   

Renting properties is becoming more and more popular as homeowners look to capitalise on high rent prices and generate an income whilst paying off their mortgage.    

Pros of Letting Out Your Property   

• You can create an additional income stream by renting it out.   
• You can make a substantial profit if you rent it out for a long period of time. 
• You can keep your property and move back there in the future.   
• Rent will cover your mortgage payments, and you usually leave some to spare. 
• You can provide housing to people who need it.   
• Tenants are generally responsible for household bills.   
• Finding a good tenant can be made easier with an estate agent.   
• A good tenant will pay on time and take care of your property.    
• Your asset will more than likely grow in value over time.    
• You might be able to move into your new house sooner if you find a tenant quickly. 

Cons of Letting Out Your Property   

• Money might need to be spent on getting your property up to rental standards.   
• Maintenance costs (boiler repairs, roof repairs, dampness etc) are your responsibility.   
• Over 400 regulations must be adhered to, and they can change frequently.   
• Tenants might not take care of your house. They may also refuse to leave if asked to.   
• Bills (utilities and council tax) must be paid by you if the house is empty, which it will be when you’re between tenants.   
• If you rent a house through an agent, there will be a commission to pay.   
• You’ll need to insure the property.    
• You’re liable for stamp duty surcharges if you own more than one property.   
• You might be liable for Capital Gains Tax when you do decide to sell. 

When is Selling Your House Better Than Renting?   

Selling your home might make sense if you’ve found yourself in debt and are unable to pay your mortgage. You could consider renting to cover these outgoings, but with renovation costs and the time it takes to get a house onto the rental market, you could end up in more debt rather than less.  

You also may not want to risk any of the cons we’ve listed above, from dodgy tenants to housing prices dropping and the costs of renting your home out. There’s also the fact that being a landlord isn’t always smooth-sailing and there are more than 400 rules and regulations to adhere to if you have a tenant in your home.   

Selling will also make sense if you’d like to cash out now and move on with your life. This can help you enjoy total peace of mind, rather than the ongoing stress and effort that can go into maintaining a rented property. 

When is Renting Out Your Property Better Than Selling?   

Renting out a property is attractive if you have enough money to not need a house sale to secure a new move. It’s also a steady stream of income that you’ll generate for potentially little work, and since properties have historically risen in value over time, it’s seen as a relatively solid investment. 

If you aren’t thinking long-term, then renting your property could be a great quick fix for certain situations, too. If you’re going to live abroad or need to be away for work for a long period, you could rent your property out and move back in when you return.   

On the flip side, if you’re moving abroad permanently, selling your home could provide you with a lump sum to start your new life.   

Considerations When Selling a Property

1. Housing Chains

A housing chain is when you’ve purchased a new property but can’t sell your old one, or if you can’t find a new property after selling yours.   

To avoid this, you could temporarily rent another home whilst selling your current property, which reduces time pressure and doesn’t put you in a position to sell your property for less to get the sale moving forward. It’ll also make you a more appealing buyer to sellers as they know you won’t be stuck in a housing chain.  

However, renting whilst selling can add to your overall expenses, so weigh up your financial situation before deciding.  

2. Choose Your Estate Agents Wisely

Your estate agent is one of the most important decisions to make when selling a house. Online estate agents may offer lower commissions, but local estate agents will likely have more knowledge of the area and homes in it.   

At Chancellors, we offer a range of services for those looking to sell their property.

3. Legal Paperwork

To sell a house, you’ll need to instruct a conveyancer who’ll handle the legal paperwork for selling a property. When you do this, you’ll be asked to pull together a wide array of paperwork to complete the seller’s checklist.  

This will include the certificates and paperwork you need to sell the house, such as leasehold documents, gas and electric check certificates, proof of identity, planning permission documents (if necessary), guarantees, and other warranties on appliances. 

This process can take time if you aren’t prepared. It can also be expensive if you don’t shop around for the right conveyancer.  

4. Do you Really Want to Move?

Some people sell their house in order to secure a lump sum of cash quickly. Others want to move somewhere larger or to another area that better reflects their lifestyle.  

Make sure you’re certain about moving home because it can be a long and arduous process. 

Financial Considerations for Sellers   

Selling your home may sound like a way to make a large amount of money relatively quickly, but there are lots of costs to consider.    

• Estate agent fees – this is generally between 1% and 2% of your final sale price but can be more for rural or large properties.  
• Conveyance fees – this will be between £800 and £1200 for a standard freehold property. It may be more for a leasehold or large property.  
• Mortgage exit fees – these will be listed in your mortgage agreement.  
• EPC – an Energy Performance Certificate will cost between £50 and £120.  
• Cleaning and clearing – usually, a full house clear will be £300 or more.  
• Removals – moving your possessions will cost anywhere upward of £500 depending on the distance and number of items.  
• Home information packs – these are often at least £200 for all required searches.  

How to Bring Down Selling Costs  

Some of the above costs will be fixed, but you can negotiate with conveyancers in some cases.   

Cleaning and removals may also be manageable yourself, especially if you have access to a van. You can also carry out some sprucing up yourself such as painting and cleaning to reduce these costs.  

Considerations When Letting Out a Property   

Letting out your home can be financially prudent, but that doesn’t mean that the approach is risk-free. Here are some points to consider when renting out a property.  

1. Housing Chains

Rent is usually used to cover mortgage payments, but non-paying tenants and periods when the property is empty could mean you go months without rental income. If this is the case, you need to be sure you can afford the mortgage payments, so you aren’t forced into a sale or repossession.   

2. Can You Afford Property Maintenance?

We’ve covered some of the issues that can be costly for homeowners, and if your boiler breaks, the roof needs fixing, or another problem occurs, you need to be able to fix them out of your pocket.   

3. How Will You Find Tenants?

Using an agency to help find tenants is another cost to account for as a landlord. This is often the best way to get vetted, reliable tenants, but it does come with a fee. Find out what this is before you rent out your home.   

4. Have You Considered Landlord Insurance?

Insurance is crucial for landlords. In most cases, you’ll need to protect the building itself and the contents. When you’re establishing costs for renting out your property, factor in the insurance options you need and how much they’ll cost.   

5. The Reality of Being a Landlord

There is often an image of landlords gaining lots of money for little to no work, but this is often far from the case. Instead of kicking back on a beach somewhere counting your money, you’ll usually have to put in time and effort to keep your tenants happy and comfortable, especially if you are renting out your property yourself.  Still, a good lettings agent will be able to offset this work somewhat.

At Chancellors, we offer full property management support for landlords.

6. Can You Afford Property Maintenance?

You have a duty as a landlord to provide housing that is safe and legal to let. You need to make sure you treat your tenants well and promptly address their concerns if needed.    

7. Time and Money

Being a landlord is particularly time-consuming if you let out an older property that regularly needs maintenance or refurbishments to get it up to scratch. It can also get expensive if these kinds of problems persist.   

8. More Tenants, More Problems

If you own a larger property and decide to rent rooms out rather than the entire space as one rental, then you’re likely to be dealing with more concerns because of having more people living in the property.   

Tenants may have the best intentions, but requests to landlords can vary from reasonable to ridiculous, and you’ll be bearing the brunt of both regularly.     

9. Silence May Be Deadly

Of course, some landlords never hear from their tenants, which sounds ideal.  

However, you may find that problems are being swept under the carpet and ignored, which you’ll only realise once you carry out an inspection, or their tenancy ends, and they’ve already left.   

Certain “nightmare” tenants might also trash your home and leave unannounced, causing you a massive headache and financial burden in the process.   

Explore your responsibilities as a landlord.  

Five Key Regulations for Landlords   

There are hundreds of regulations to follow as a landlord and many legal requirements to rent out a property in the UK. These are mostly regarding health and safety and ensure that you’re providing a safe place to live for your tenants.  

Five of the most common considerations include:  

1. EICRs, which stands for Electrical Safety and Electrical Installation Condition Reports.

2. Annual gas safety checks.

3. Fire risk assessments and fire safety procedures.

4. MEES, which is the Minimum Energy Efficiency Standards.

5. Tenancy Deposit Protection.

Tax Considerations for Letting a Property 

As a landlord, you ought to be aware of your tax requirements. 

Income Tax 

Before April 2017, landlords were obligated to pay tax on the profit they earned from their rental income. Today, however, you must pay income tax on the total rental income, and you can only claim a 20% tax relief on mortgage interest.   

Higher tax band individuals will pay 40% or 45% tax on rental income but can only claim 20% tax relief. As with income as a sole trader, you can reduce your income tax bill with allowable expenses for landlords.    

Capital Gains Tax   

Capital Gains Tax isn’t based on the entire rental income, but instead, the profit earned from the house sale if it’s gone up in value.    

Remember, however, that if you sell your main home at a profit, there will be no Capital Gains Tax to pay. Similarly, if you don’t make a profit or fail to sell your second home, there’ll be nothing to pay in terms of Capital Gains Tax. 

Quickfire Capital Gains Tax Facts  

• It only kicks in 18 months after you leave the property. If you sell it before then, there’ll be nothing to pay.    
• It only applies for the period you haven’t lived there, minus the initial 18 months. This is established against the profit made whilst you’ve owned it.   
• The longer you own a property before selling, the less tax you’ll pay. There are also allowances to help you reduce your Capital Gains Tax bill.  

As you can see, it’s a complex topic, which is why it’s best to seek the help of an expert. You can do this by contacting or finding a tax expert who specialises in this area. 

How to Finance Two Properties   

Generally, the answer to this question will depend on whether you can afford to own two properties. As such, it’s best to speak to your mortgage lender, who should be able to offer a financial assessment.  

In this assessment, they’ll help you understand your mortgage payments and rates for the two homes, as well as the benefits and drawbacks of having a fixed mortgage on one or both properties. They’ll also help you work out the deposit each property needs to access the best rates and keep regular costs down.  

Buy-to-let Mortgages 

If you intend on returning to your original home, you may be able to rent it out on your current mortgage or you may need permission to rent out your home instead.   

A popular option for owners of more than one home is a buy-to-let mortgage, which is taken out for a property you intend on letting out. However, these are often more expensive than regular mortgages with higher interest rates.  

Let-to-buy Mortgages  

Another option is a let-to-buy mortgage which allows you to access equity you hold in your house, which you can use to re-mortgage and lay down the deposit on a new property.  

Buy-to-let and let-to-buy mortgages are considerably more complex than a standard mortgage, which is why it’s best to seek advice from a mortgage expert before committing to either.

Contact Us to Reach the Right Decision on Selling or Letting

Being a landlord isn’t as simple as many make out, but it can be a smart move in an uncertain housing market where rent is going up and house prices are going down.

However, whether you sell a house or rent it out will depend on your circumstances and what you can afford to do both financially and with your time.

At Chancellors, we can help you make the right decision for you and your loved ones. With a wealth of experience and housing market knowledge, our team can help you reach the right decision on whether to sell or let out your property based on your individual circumstances, and support you with the full process of selling or letting.

Contact us for more information, or get in touch directly with one of our branches.

Frequently Asked Questions

Will Your Mortgage Company Let You Rent Out Your House?

Some mortgage companies will allow you to rent your house out if you intend on returning or are renting it short-term. However, they might also charge an additional rate on top of your existing interest rate.

If you’re looking to rent out your home on a long-term basis, most mortgage providers will require you to switch to a buy-to-let mortgage. Again, this will probably come with higher rates than your original agreement.

Is a Buy-to-let Mortgage More Expensive?

Buy-to-let mortgages are usually more expensive than normal residential mortgages. Not only will you likely require a larger deposit, but the interest rates are usually higher, too, which means your monthly outgoings are higher as well as the initial up-front cost.

Is it Legal to Rent a House Without a Buy-to-let Mortgage?

It is against the terms of your mortgage agreement if you rent out a property intended for residential purposes, which means you will be committing mortgage fraud. This could lead to repossession of the property or a demand from your lender to repay the mortgage immediately. This is the case even if you’re in the process of switching to a buy-to-let mortgage.

Will I Pay Tax on My Rental Income?

Yes, as of April 2017, landlords pay income tax on their entire rental income rather than the profit it generates.

The threshold you fall into will depend on your total income. For example, if you earn less than £12,750 a year, you’ll pay 0% tax. If you earn above this, but below the higher rate threshold (£50,270), you’ll pay 20% tax. Anything over £50,270 and below £150,000, which is the additional rate threshold, would mean you would pay 40% in tax on your rental income.

You can offset some of these costs against allowable expenses, but this doesn’t include the costs of getting a loan or finance to buy a property.

How Much Deposit Do You Need for a Buy-to-let Mortgage?

Some deposits can be as low as 15%, although the concept of a buy-to-let only really works financially if you deliver a profit. This is easier if you commit to a higher deposit of 50% or above.

When taking out a deposit on any home, but particularly for a buy-to-let, you’ll need to make sure you can afford maintenance, the mortgage, and upgrades while still making a profit.

How Do I Rent Out My Home?

First, you’ll need to make sure your lender allows this, and then you’ll need landlord insurance and probably, a letting agent. You’ll also probably want to carry out some prep work for the guidelines you need to adhere to as a landlord. You may need certification for electricity and gas, and repairs and refurbishments may be necessary to ensure that your property meets all relevant standards.

Then, you’ll need to find tenants and a deposit scheme that’s approved by the

government and take stock of all the inventory within the home, from the boiler to the appliances, furniture, and more. Once all of this is in place and your tenant is in the property, you’ll need to schedule regular inspections and carry out maintenance and upgrades if your tenant(s) need them.

All of this can be handled by a letting agent, instead of doing it yourself.

Are You Looking to Sell Your Property?