Renting the Family Home

What a dilemma – you are moving out of town or perhaps overseas for a while for work or a working holiday, and you need to decide what to do with the family home. Should you sell the house or keep it and put tenants in it? If you sell it, what should you do with the money? The answers to these questions will depend on your circumstances, and emotional factors can contradict what is the best thing to do from a strictly financial point of view.Ultimately, everybody needs a house to retire in and preferably one that is owned without a mortgage. Making mortgage or rent payments in retirement is difficult to do on a pension. The danger of selling your house and staying out of the property market for a period of time is that when you eventually come to buy a house again, prices have gone up so much that you have insufficient funds to buy a house of an adequate standard. The longer you are out of the property market, the greater your risk is of being left behind.Some people choose to stay in the property market by retaining the family home, putting tenants in to cover the outgoings and purchasing another property in the place they move to. Most family homes don’t make good investment properties because the amount of rent you can ask gives a low return on funds you have invested in the house. There is also a risk of damage and the tattiness that arises through tenants being careless and not attending to maintenance. If you take this approach you will need good accounting advice to ensure that as much as possible of the interest you pay on your mortgages is deductible for tax purposes against your rental income.An alternative option for staying in the property market, particularly if you are heading overseas, may be to sell your family home and instead buy one or two properties that are more suited to renting. Whether you should do this will depend on how long you will be away and how likely you are to want to return to the home you are leaving.Being a landlord isn’t for everybody. Employing the services of a property manager is one way around this, but if you decide that even that is too much trouble, then cashing up your property and investing elsewhere while you are away may be the best solution for you. That being the case, your money should be invested for safety and security rather than for high return which comes with high risk. Using your house proceeds to invest in risky business ventures would be unwise, as would investing in shares unless you have a ten year investment time frame. Your house is probably your most valuable asset, so think carefully before you decide what to do, try and set your emotions aside, and preferably get some good advice.