Should you sell or let your house when relocating?

In a tight economy employees must go where the work is – but that raises questions about what to do with your property when you are offered a contract in another city or country.

The options need careful consideration. The benefit of selling is that you make a clean break, while renting out your property means that you will have a home to come back to when the contract period is up – and that hopefully that home will have appreciated in value in the interim.

For homeowners with a large bond outstanding on the property, however, selling is arguably a better option. The costs associated with a rental property can swallow a large portion of the rental income, leaving the owner to make up the difference between real rental income and the costs of servicing the bond. And that can be onerous if he still has to pay his own rent – or service a bond on another property – in his new location.

Costs that landlords have to pay include municipal rates, advertising costs to find a suitable tenant, regular maintenance costs, comprehensive insurance and management fees of about 10% of the monthly rental if an agency is appointed to manage the property on their behalf. It is also prudent to take into account unplanned vacancy contingencies and to set aside enough money to cover all costs while finding a new tenant.

However, in instances where the outstanding bond on the property is small, the picture looks very different. “In such cases, owners can confidently expect that rental income will cover the costs and contribute to their own living costs. And they may benefit from capital growth during their absence.

But owners who do decide to rent out their properties are advised to choose managing agents with care. Agents should have a solid track record in property management, and should be able to ensure the home is properly maintained in order to protect its value. They should also be able to advise on realistic rental levels and be able to vet prospective tenants properly for creditworthiness and reliability.

*Martin Schultheiss is CEO of the Harcourts Africa property group
Source: RealEstateWeb