I came across a rather useful article recently. The reason this piece by Ben West caught my eye, is that it’s about a property situation that I struggled over many years ago when I was relocating to Spain, and one that I didn’t find a solution to at the time.
Relocation is just one of the situations that might force you to leave a property. If you’re working abroad for a set period of time, then it’s sensible to hold on to your more permanent base. Even if you anticipate that you won’t return to the UK, it may be wise to hold on to your home for a while, just in case living in a foreign country isn’t all you thought it might be.
Divorce may also force you to leave a property. So too may retirement or the need to downsize. However, even if you do move to a small bungalow from a large house, you may want to hang on to the house for your children and grandchildren’s sake. The option of taking on a long-term tenant fills some people with dread because of the known problems that tenants can bring. I’m sure the majority don’t cause any issues, but those that do are more talked about, and the ‘bad’ reputation has grown accordingly.
However, there are alternatives that allow you to keep the property, without a long-term tenant and make some money. Ben West points out that one of these solutions will help the over-55s to finance the purchase of a second home, especially now the April 2015 budget pension rules are in force and access to pension pots is opened.
Solution 1 – A let-to-buy mortgage
Yes, this is the ‘mirror image’ of the well-known ‘buy-to-let’ mortgage. A quick Google of the term shows me that this is a mortgage growing in popularity, because every journalist, financial expert and mortgage broker is talking about it. Neil Simpson for Financial Mail on Sunday explains that taking this option, rather than selling your property, is an excellent choice in the current rental market because demand is very high. Rents are also high, so you win both ways. Completing a let-to-buy transaction, which is essentially a remortgage that gives you a buy-to-let situation, is best done with the help of mortgage experts and you should be prepared to pay two mortgages on occasion, if, for example, you have no short let tenant for a month or two. You can remortgage for up to 75% of the property you want to let.
Solution 2 – Short lets with holiday companies
Putting your property on a travel site that specialises in providing holiday homes is another option. Market your home well and you could have bookings all year round. Indeed, you could certainly make a lot more money from letting your property in this way than from renting it to tenants. Explore what is on offer to homeowners at uGuest, which lists holiday homes worldwide. Plus, if you join its Member’s Club, you can do swaps with other owners. So, your home could help you to travel the world. That’s a bonus!
Taking this route will mean quite a considerable amount of work, but bear in mind the financial rewards. You may also discover that it’s a business you love and that you’re very good at it. It’s also worth knowing that the 1993 Rent Act protects you from finding a short let tenant has become a sitting tenant: payment in advance, plus specified arrival and leaving dates is your guarantee under law that no tenant can stay longer than agreed.
Solution 3 – Rent to a housing association
The advantage of letting your property to a housing association is that the association will handle all the management aspects of looking after the property. It will look after work that has to be done and liaise with the people they rent it to, so you don’t have to communicate with the tenant at all. Plus, you will avoid the commissions charged by commercial letting agents, but you will make a lower rent. As Ben West points out, to some extent, your location affects whether or not this option works for you. In large cities there is a constant demand for housing association rentals, but if your house is in rural Oxfordshire, it may be a different story.
If somebody had offered me one of these options when I had to relocate some 13 years ago, I would have probably been able to keep my property in London. As it was, I had to sell. If you don’t want to sell, then I hope one of these options helps you hold on to your home.
Considering a holiday home investment? Speak to our holiday home insurance specialists.