Selling is vital if you need money to finance a new purchase. However, in certain circumstances it may wise to keep the old property and lease it out.
If you are considering doing this, make sure you ask yourself these important questions:
When will renting make sense?
If you feel that the move is temporary and will later want the option of going back to your old offices, then you should keep it and lease it out as a revenue stream to keep up with the mortgage repayments.
Can you finance two properties at once?
You should only consider leasing if you can manage paying two sets of mortgages. Renting out will generate income, but you never know when your office may become unoccupied for some time.
A suitable income and equity in your existing property is needed to maintain it, but if you are financially insecure and feel like you cannot keep up with the monthly repayments on the old mortgage, it may be worth selling. Other factors to consider when leasing to tenants include:
Will you be able to rent out the property all 12 months of the year?
If you cannot rent it out, can you still cover mortgage payments? If this pushes you into a forced sale, will you lose out?
Can you afford the extra maintenance and repairs for the old property? As landlord of the site, you will be financially responsible for such tasks.
Who will manage the property if you need to focus on your new site? If you are paying somebody to manage the property, how much will this cost you?
Will you rent through an agent, and how much commission will they take?
Will you be able to afford insurance for both properties?
Do I need to consider property prices in my decision?
This is a very important question. If property prices are rising in the market, then it may be worth building your portfolio and holding onto your old office as a long-term investment.
Alternatively, if prices are falling, you may end up in negative equity (where the property is worth less than what you originally bought it for), so selling might be advisable.
Generally, it is wise to keep an eye on market trends, but do not be fooled by short-term dips in prices if values are generally rising over a long period of time. If in doubt, seek professional advice.
