Three ways to let your home and keep your investment

keys with house

There are many reasons why you may need to up sticks for a while or consider selling up completely: job relocation, divorce, retirement, outgrowing the property, unaffordability of the mortgage, a desire to travel extensively or a career sabbatical.

However, leaving your property doesn't necessarily mean you need to sell it or commit yourself to the inflexibility and possible problems of a long-term tenant, such as the lengthy eviction process should things go awry. There are a number of alternatives that may serve you far better.

They also may be suitable for helping to finance a second home, an option that is expected to increase among over-55s once April's pension changes come into effect. From that time, a requirement to buy an annuity will be abolished, with savers aged 55-plus free to do whatever they like with their pension pots.

1. A let-to-buy mortgage

With property values continuing to rocket in many areas, not to mention the emotional bonds formed with a home, few people are keen to give up their house easily if circumstances change, such as mortgage payments becoming a struggle.

An alternative option to selling is to do the reverse of buying to let: letting to buy. A let-to-buy mortgage allows you to re-mortgage to a buy-to-let deal. In the process the re-mortgage can release equity for a second purchase, a situation boosted currently by the historically low mortgage rates available.

With let-to-buy you simply move out of your property and let it out. The rent received covers the new mortgage and upkeep, while you continue to sit on what is hopefully a rapidly appreciating asset and gain another.

Let-to-buy is good for cash poor yet equity rich clients, particularly if they have a good salary but a limited amount of funds to put towards the move.

It is good for homeowners in hotspots who can cash in on the demand for rentals, and for those finding it difficult to sell or keep up financially, who can side-step the problem with this option. It allows you to benefit from two properties potentially rising in value.

To go down the let-to-buy route, it is important to first ascertain whether there is a demand for your property from renters. Is it in acceptable enough condition and near good transport links? Particularly rentable are city centre flats suited to young professionals or houses near a good school that will attract families.

With let-to-buy mortgages you can typically borrow 75 per cent of the value of the property you intend to let. Rental income earned from it must cover the mortgage repayments by at least 125 per cent. The number of companies willing to lend on a let-to-buy basis is limited and it is often advisable to use a mortgage broker to find the best deals.

Bear in mind you will have to pay the mortgage during void periods, when there's no tenant, and you will need to have funds available for ongoing maintenance and the unexpected large costs that may crop up such as replacing the boiler.

2. Short lets through Airbnb

Letting your property for a few days at a time to holiday and business travellers can generate substantially more income from your property than a long let, with one tenant for months on end. However, it means rather more legwork and maintenance costs.

The Airbnb revolution has seen huge numbers of travellers abandon costlier, less homely hotels to stay in more individual private accommodation. Websites such as Holiday Lettings, as well as Airbnb, have allowed many homeowners to rent out their properties or parts of their properties for as little as a day at a time.

These holiday letting sites typically charge fees that are modest compared to using a lettings agency.

Short lets have come into their own since the Rent Act was changed in 1993, protecting landlords from sitting tenants. The tenant has no security of tenure if they pay in advance and have arrival and departure dates, as with one of these lets.

You get paid the full rent in advance and don't have the threat of being landed with a sitting tenant.

Check the terms and conditions of your mortgage conditions before sub-letting like this, as it can be a breach of the mortgage and can also invalidate your insurance.

However, many mortgage companies and insurance companies are flexible and understanding over this, so it could be worth talking to them about it.

3. Rental to a housing association

The advantage of renting this way is that it could be a lot less bother in terms of management, avoids having to deal with tenants at all, and avoids the commissions you'd pay to a letting agent. It can also provide an assured rent.

But it's not a suitable option for all locations. In London there is so much demand from housing associations for properties that you are unlikely to worry about voids, but that may not be the case in other areas of the country.

And although renting your property this way can mean less hassle, you may not achieve the rental levels available on the open private market.

As with short lets, check the terms and conditions of your mortgage conditions before sub-letting, as it can be a breach of them and can also invalidate your insurance.

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Three ways to let your home and keep your investment

In Scotland, Edinburgh is seen as a city with huge growth potential. In 2014, prices in Edinburgh were up 10% in a post referendum boom that shows little sign of slowing down.

Local agents are not expecting quite such stellar growth for the next 12 months, but they think price rises will be well above the average predicted for the whole country.

Rightmove named this as the area where it expects house prices to grow the most over the next five years. It says that over this period there will be a huge number of people moving out of London in order to afford to get onto the property ladder. They want a reasonable commute combined with plenty of attractions in the local area, and Southampton offers all this. With relatively affordable housing stock, it's a prime candidate for growth.

Luton was Rightmove's candidate for the second biggest house price rises over the next five years. It emphasised that this isn't a mater of opinion, it is the result of crunching the data.

Luton is another major beneficiary of the move out of London, and while it is arguably not as attractive a place to live as Southampton, it's only 23 minutes into central London - which rivals some of inner London's commuter times. With average prices of £179,368, it's clearly a far more affordable option, and the area has already started to show signs of a boom.

This was the third area suggested by Rightmove. As with Southampton, it is well positioned for London commuters, and also has huge local attractions.

A survey last year asked young professionals to name the place they would most like to live, and Brighton and Hove were the only areas that appeared on the list outside London.

One of the reasons it's not higher up the list is that houses are already on the pricey side, with an average cost of £338,956 - up 13% in the past year alone.

There may be few people who grow up with the dream of living in Swindon, but the electrification of the rail line to London will bring travel times down across the West Country, so Swindon becomes part of the outer commuter area.

Given that the average property costs £168, 968, it's easy to see why Swindon will be a popular option for commuters on a tight budget.

Bath is also going to benefit from electrification of the line, because the commute to London will fall to a manageable 70 minutes. The beauty of the city - along with a vibrant social and cultural life - makes it a clear choice for more long-distance commuters.

Of course, with an average asking price of £374,617, it's not a tremendously cheap place to buy, but the geography of the city restricts development, so these prices are expected to rise still further.

Property Frontiers says that the booming house prices in Oxford are set to get even higher. At the moment, travel to London takes 60 minutes, but this will reduce even further in 2016 when the line is electrified. Prices in the most desirable parts of the centre aren't much cheaper than London.

However, further out there are pockets of affordability, and when the Water Eaton station opens in 2015 it will open up areas to the north of the city too.

Manchester has seen enormous property price rises over the last couple of years, and Property Frontiers expects this to continue into 2015.

Other commentators are expecting the growth to slow over the next few years, especially given the gains made since 2012. However, demand for properties remains buoyant, and with the growth of the local economy, price rises seem inevitable.

Rising prices in London have pushed buyers further and further out of the centre, so estate agents are now claiming zone three as 'the new zone 2'.

Savills believes that the biggest gains over the next five years will be the less glamorous districts - putting the South and East in the frame. Gritty areas that could benefit include Ladywell, Streatham and Catford in the south, and Leytonstone, Forest Gate and Walthamstow in the east.

Cambridge could also perform well. It has already had house prices lifted by the growth of tech companies to the north of the city, and the arrival of pharmaceutical headquarters will help push prices up further.

In 2016 a new rail service from the city to the science park will keep prices rising, and beyond the opportunities presented by the local economy, Cambridge is also part of the 'outer commute' area of London, which Savills expects to shoot up in value over the next five years.


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