Should You Sell Your House or Rent It Out in Central London?

If you plan to move house, you probably expect to sell your current property first. However, that may not always be the best financial decision. So, is it better to sell or rent out your central London home, and how do you decide?

When people ask us whether they should sell their house or rent it out, we would love to give them an immediate answer that sends them away satisfied they are doing the right thing. Unfortunately, there is no one size fits all solution. Our response will depend on their circumstances.

There may be demand for your well-situated property in Lancaster Gate, Victoria, Kensington or Battersea, but equally, selling may be the right decision for you. To help you decide whether you should sell your house or rent it out, we set out some key considerations.

Should I sell my house or rent it out?

When buying a new home, most people expect to sell their existing residence because they need to release the equity tied up in their current home to buy their next property. In fact, deciding whether it’s better to sell a house or rent it out often depends on your circumstances at the time.

There are several situations when renting out your home, rather than selling it, would make good sense:

• If you are moving away temporarily and plan to return to the property.
• If you are buying a property with your partner, renting out one and selling the other could provide you with enough capital to buy your new home and earn rental income from the other property.
• Your house isn’t selling, but you need to move quickly.
• You can afford to buy your new home without selling your current property and want to become a landlord as a long-term investment and benefit from the rental income it generates.

What will happen to property prices?

Nobody can see into the future, but you can watch property prices and market trends to gain an understanding. Resources like the Zoopla House Price Index can give you insight into the property market and projections for the months ahead.

Timing is key. Successful investors increase their property portfolio at the right time and hold on to their existing investments in tougher times.

You should reflect on your personal circumstances and your plans for the future. For example, property prices typically rise in the long run. Landlords who plan on keeping their properties for many years often benefit from long-term capital growth despite a short-term dip.

What if there’s a recession?

What happens to your property commitments if the UK falls into a recession? It’s a serious consideration. The prospect of a recession has been discussed for 2025, with the Bank of England cutting its growth forecast to 0.75% for the year ahead.

Now is the time to take a hard look at your finances. Consider what would happen if you lost your job, for example. If you would struggle to pay multiple mortgages or cover unexpected costs, you may decide to sell your home.

Want to find out more? Sellers weighing this decision may also want to read the tax implications of selling a second home and what a sales progressor does.

Renting out your property

Things to consider when renting out your property

Renting out your property isn’t as simple as just approaching a letting agent and asking them to find a tenant. Before you decide to rent, ask yourself:

• Can you afford your new home without selling your existing one?
• Is the rental market right for your home? Do properties like yours rent easily and to good tenants?
• What rent could you achieve, and will this cover all your costs?
• Have property prices been growing steadily in your area, and are they likely to continue to do so? The best rental properties provide both a steady rental income and capital growth in the long term.
• Will your mortgage lender allow you to rent your property? You will probably have to switch to a buy-to-let mortgage.
• Is it tax efficient to rent out your property? You will have to pay income tax on the profit you make from renting out your home. A tax accountant or financial advisor will be able to inform you of the tax implications.

Pros and cons of renting out your property

What are the pros and cons of renting out your central London house? Only you can decide if it’s better to rent or sell your property, but consider every angle before you come to a decision.

The pros of renting out your property

• You can make a steady income from renting out property. Rents have risen to record highs, as confirmed by ONS figures.
• If you keep the property for an extended period, you stand to make a sizeable profit when you come to sell.
• While there are expenses, you will save on the upfront costs of selling your home.
• If you’re relocating and are unsure what the future holds, you can retain property in London,
• You can keep a property you have a personal attachment to, even if you can’t or don’t want to live in it yourself. For example, an inherited house.
• The rent will cover your mortgage costs, and hopefully more.
• You can provide a good home for tenants. A high proportion of Londoners live in private rented accommodation.
• In most cases, the tenants are responsible for paying utility bills and council tax themselves.
• A good letting agent can make the rental process easier with expertise in the rules and regulations and can often provide management services.

The cons of renting out your property

• You may need to invest money in the property to prepare it for tenants and ensure you meet legal obligations.
• You need to keep up with new regulations for rental properties, both national and local.
• You must pay ongoing maintenance costs if you rent your home. Check that a good income is possible so you don’t lose money in the process.
• You’re trusting the tenants to take care of your property. Vetting can help, but there’s always a degree of risk.
• Certain costs will come out of the monthly rent, such as letting agent fees or insurance.
• You must pay utility bills and council tax if the property is empty. This usually means earning enough to set aside an emergency fund.
• If you have a mortgage, you will have to change your residential deal for a buy-to-let mortgage.
• Your money will be tied up in the property, so you must be able to afford another home.
• You’ll pay a stamp duty surcharge if you own more than one property, so the costs of buying another home to live in can be higher.
• You may be liable for capital gains tax when you decide to sell. Find out more about capital gains tax in our blog.

Selling your property

Things to consider when selling your property

Selling your property is the simplest option, but it may be easier said than done. Failing to secure a sale at the right price could be why you are considering renting your home out.

Pros and cons of selling your property

Should you sell your house or rent it out? If you are unsure how to decide whether to sell or rent your house, understanding the best and worst of it can help. Here are some of the pros and cons of selling a property that you should consider.

The pros of selling your property

• You will have more to spend on your new home, allowing you to buy a more expensive property or put down a larger deposit and benefit from a better mortgage deal.
• If you sell your house and the property is your primary residence, you won’t have to pay capital gains tax or deal with the associated paperwork.
• You won’t have to consider the impact of additional income of your income tax band.
• Selling your home can be less hassle and will be less time-consuming, as you won’t have to deal with tenants and repairs.
• You don’t have to worry about repair bills adding expense at awkward times.
• You won’t be concerned about making your mortgage payments if your tenants are late with their rent or the property is empty.
• Selling up could give you a clean break.
• If you can afford the flexibility, you could make money if you sell your home at the right time.
• A good estate agent can help you with the process if you decide to sell your property in London.

The cons of selling your property

• You could be missing out on a potentially good source of income, particularly if your property is in an up-and-coming or sought-after area.
• The capital gains could contribute to your pension.
• It may take time to sell, a challenge if you need to relocate imminently, for example.
• You will need to cover estate agent fees and other expenses of selling.
• You may need to spend time and money preparing your home for sale.
• You could lose money by selling your home before house prices rise and potentially miss out on long-term capital growth.
• When you decide to sell a beloved family home, you may be reluctant to cut ties.
• If prices rise, it could become harder to buy your way back into the London property market.

Want to know more? It’s also worth knowing whether you can have more than one estate agent and weighing up selling your house for cash: pros and cons.

Frequently asked questions

These are some of the most frequently asked questions about renting out your London home. If you don’t find the answer you’re looking for, contact our experienced team to discuss your situation.

What kind of profit can you expect if you rent out your house in central London?

Use your estimated investment, running costs and monthly rental income to work out what profit you could make if you start renting out your London home. Find out how to calculate your net rental yield with the net rental yield formula here.

estimated monthly rental income x 12 = annual rental income

(annual rental income figure – business expenses) ÷ property value x 100 = net rental yield

As a hypothetical example, a flat in Chelsea worth £1,350,000 achieving £5,500 pcm, with £1,500 in business expenses, would generate a rental yield of 4.77%.

£5,500 x 12 = £66,000

(£66,000 – £1,500) ÷ £1,350,000 x 100 = 4.77%

Should you use an agent to rent out your house?

A good agent can guide you through the rental process and advise on current landlord regulations. They understand legally required documentation and requirements such as the Energy Performance Certificate, Gas Safety Certificate and Right to Rent checks.

Letting agents can also offer management services to take day-to-day concerns off your mind. Not to mention, services such as tenant screening, rent collection and property inspections can help to safeguard your property and your income.

What are the tax implications of renting out your house?

There are tax implications while you’re renting out your house and eventually sell up. Paying income tax on your rental income as well as other earnings may take you into a higher income tax bracket, though there are tax deductions such as property allowance, and for business costs.

Rental properties are classed as assets, so you could be liable for capital gains tax if you sell further down the line. However, you may be able to claim Private Residence Relief for any periods where the property was your primary home. You may also be able to maximise your annual allowance of £3,000, for example, spouses or civil partners can combine theirs.

But there can be further tax implications when you start renting out your home. For example, the additional income may affect your entitlement to Universal Credit or Child Tax Credit. Seek expert advice to discuss your situation in detail.

How can I finance two properties?

Think carefully about your finances and how you will finance two properties simultaneously. Buy-to-let and let-to-buy mortgages are two options you may consider if you decide to rent your home. You may get consent to let out your property on a normal residential mortgage if you relocate temporarily, intending to return, but you must speak to your lender.

Remember, you must cover repayments when the property is empty. Seek specialist mortgage advice to determine what you can afford and discuss the pros and cons in detail.

Buy-to-let mortgages

Taking out a mortgage for a property you intend to rent out is known as a buy-to-let mortgage. They usually require a higher deposit and you may need to prove you can cover 125% to 145% of the monthly mortgage payments. Expect higher interest rates and typically interest-only agreements.

Let-to-buy mortgages

Another way to finance two properties is by taking out a let-to-buy mortgage. If you’re planning to rent out your house, let-to-buy mortgages allow you access to the equity you hold in the property you already own.

You can use that equity to remortgage and put down a deposit on a new home, while your original property is being rented out. There are often stringent affordability checks and a borrowing limit of around 80% of your original property’s value.

How do I rent out my home?

Once you’ve made arrangements with your mortgage lender, you will need landlord insurance and a letting agent. Landlords must follow strict guidelines for rental properties in England, so you may need to take on some preparatory work before you seek prospective tenants. Your house may require upgrades to meet current standards for a rental property, and you will need to arrange gas and electrical checks.

Once you find tenants, you must follow the rules on Right to Rent checks, government-approved tenancy deposit schemes and accessing the property. You will need to carry out an inventory and be prepared for maintenance requests during the tenancy. These are services that your letting agent may be able to provide support for.

Need more help?

If you are unsure whether to sell or rent your property in Marble Arch, Marylebone, Little Venice or Chelsea, contact us here at Plaza Estates. We have years of experience in the central London property market and will be able to advise you on the best course to take regarding your property.

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