Should I Sell My Rental Property To Pay Off Debt?

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Should I Sell My Rental Property To Pay Off Debt?
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When you’re deciding whether or not to sell a rental property to pay off debt there are lots of factors to bear in mind. The right way forward for you will depend on your specific situation, but there are several key things you should consider. Here we explore some of them. 

If you do decide to sell your rental home, we can buy it from you in just seven days. We’ll give you a guaranteed completion date so that you know exactly when the money you make from a sale will be in your bank account.  

Assess your situation

Everybody’s circumstances are different so it’s important to understand how selling your rental property will impact you. 

After all, not every rental home was bought intentionally as a buy-to-let investment. Many people are what’s known as accidental landlords, because they had no other option but to rent out their home. 

Perhaps you’ve moved towns for work and been unable to sell your property, or you’ve moved in with a partner and kept hold of a property you own. There are lots of reasons you may be renting a home to tenants, which can add further complexity to your decision. For example, if your rental property is the only home you own, how easy would it be to get back on the property ladder if you sold it?

If you own a home for purely investment purposes the decision might be a little less complicated, but you still need to work out if it is worth doing. 

Look at the numbers

Often, of course, the decision comes down to numbers. That’s why you need to carefully weigh up the financial costs and benefits of your rental property compared to your debt. 

That means working out how much you receive each month in rent after the costs of any mortgage you have on the property, estate agent fees if applicable and maintenance. You then need to compare that to your monthly debt repayments. 

If your debt repayments are a lot more than the money you make in rental income you may want to consider selling it. However, if your rental income covers your debt repayments, you may decide to hold on to your rental property if possible. 

You’ll then need to examine whether the value you’ll get from selling your rental property will be enough to pay off your debts or at least bring them down to a manageable level. If not, it may be better to keep the property until the market improves, if possible. This is particularly the case if your rental property is in negative equity when the mortgage on it is higher than its value. If it is, when you sell it you will have to pay the difference, which will only add to your debts.     

Addressing your debt

Whichever way you decide to go, reducing your debt should be a top priority. In fact, if you do it successfully it may sway you to hold on to your rental property.

There are several charities that can help you assess your situation and give you free support. They’ll suggest ways to reduce your spending and repayments and draw up a budget for you to follow. If necessary they can arrange a debt management plan between you and your creditors that will make your debt repayments more affordable.

In more severe cases a charity can help you set up an individual voluntary agreement (IVA). This is a form of insolvency that allows you to keep hold of some assets while paying creditors an agreed amount you can afford. Each IVA is assessed on its individual merits, but it’s likely creditors will insist you sell a rental property if it holds much value before agreeing to go ahead. 

The next step along is bankruptcy when you can no longer contribute to your debts – in this situation you will be forced to sell your rental property. It’s also worth bearing in mind that insolvencies will remain on your credit file for up to six years making it difficult to borrow money in that time.    

Working with us    

If you choose to sell, you’ll then need to work out the best way to do it. If you’re able to wait, putting your home on the open market with a traditional or online estate agent is likely to achieve the highest price. However you may want to move at a faster pace, which is why many people choose to work with us.  In addition, you may have to consider other people. Your rental property might be occupied and you may not be sure on how to proceed and what the legalities are. Selling a house with tenants is also something we can help with.

Our goal is to buy your home as quickly, and with as little fuss, as possible. We know how to move the process along swiftly, while taking on much of the admin and stress associated with a housing transaction. We’re also experienced at working with people in unsettling situations such as divorce and inheritance

Because we only ever buy homes using our own cash funds we are never part of an unpredictable chain of transactions. That means we can give you the certainty of when, and for how much, your home will sell. What’s more, we cover the costs of solicitors and there are no estate agent’s fees to pay. 

If you’d like to find out more, please get in touch for a chat.  

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