Should I sell my flat or rent it out?

Q I have a one bedroom flat in London worth about £215,000 with an offset mortgage of £95,000 remaining. My fianc?e and I planned to sell both our flats to purchase a property together, taking out a joint mortgage for the remainder.

We have since come into some money that would mean we would only need a small mortgage of about £50,000 to add to the funds from the sale of his flat to allow us to buy a joint property outright.

This means we would not need to sell my flat in order to buy anything else and so we could look at renting it out instead. This looks like it would bring in £800 to £900 a month gross.

Should we keep my flat to rent? If so, would we be better remortgaging my flat in joint names for the extra £50,000 out of the equity, or should we have a separate £50,000 mortgage to pay for the new property?
JC

A In case you missed the recent edition of Location Location Location about buy-to-let hotspots, London is in a league of its own where property investment is concerned. If you can afford to - and assuming that property prices in the capital continue to rise and you are comfortable becoming a landlord - keeping your flat to rent out would seem to be a good idea.

From a tax point of view, it would be a good idea to remortgage the flat you intend to let in joint names. It would also be wise to convert the mortgage on the flat to a buy-to-let mortgage and increase it to £145,000 - the £50,000 you need to buy your own home plus the £95,000 owed.

Putting the property in joint names means that when you come to sell it, any capital gain will be split so you can each make use of your own capital gains tax exemption worth £8,800 this tax year.

Borrowing against the flat you intend to let, rather than the home you intend to live in, means you can deduct mortgage interest from the rent you receive. This makes less of the rental income taxable, which in turn reduces your potential income tax bill.