Working away? Should you keep your home or sell it?

If you're a homeowner who's just been offered an overseas posting or a lucrative but finite contract in another city, you may find it really difficult to decide whether to sell your property or rent it out until you come back to town.

Should you sell and be "free" to make whatever housing choice suits you in your new location, or become a landlord and ensure that you have a home to come back to in a year or two that will hopefully also have appreciated in value?

Well, tempting as the latter course may be, especially while property prices are still rising more slowly than inflation, it is probably better to sell, especially if you still have a large bond on the property.

The costs of operating a rental property, can shave the return really thin. And if there is a sudden downturn in the rental market, or your tenant defaults and absconds, the financial consequences could be very serious for you and make it very difficult to afford your rent or another home loan instalment elsewhere.

The costs you need to take into account as a prospective landlord are municipal rates (which have been rising rapidly in recent years), advertising costs, regular maintenance costs, comprehensive insurance, property management fees (usually around 10% of the monthly rent) and the "turn" costs such as cleaning, repairs and painting when the tenant changes. You should also build in a vacancy rate contingency of around 5% for safety.

All of this can absorb up to 40% or even 50% of the total rental you charge, and if you then also have to make a monthly bond repayment, there is unlikely to be very much profit in the arrangement. In fact, you may very well end up in the red every month.

But this situation could look completely different if your house is substantially paid-off, and you're more interested in continuing to achieve capital growth as it increases in value. Then the critical factor becomes the choice of managing agent - with the key being to appoint someone who:

• Knows the area well and can give you expert advice on a realistic rental level;
• Has a great track record for selecting creditworthy and reliable tenants; and
• Has a plan to ensure that the property is properly maintained in order to protect its value.