AIBU to worry my parents are undercharging rent on their flat?

You can't compare 5 x roomshare rents (which usually include all or most bills) to the rent of a single flat.

At £1650 a month, nearly £20k a year, even after tax and costs, if there's no mortgage, how many repairs are you expecting for them to potentially make no profit?

And the tenant would have less rights
Jeez

Do they have to rent out the whole house? Could they keep a room and stay occasionally? Then the family would be lodgers.

We rented our house out to a good friends son,his girlfriend and her mother. For the first 2 years everything was fine, then they started refusing entrance for gas & electric checks, it wasn't convenient for us to do the checks on the property The the rent started being late, excuses every time. I told them I would start eviction notice and then it started coming in regular.
I saw a neighbour in the supermarket and she told me the horror story of 'those next door' 3 more people were living there, they had 2 noisy dogs and noisy parties most weekends in the garden. She lived next door and both sides were fed up with it all.
Anyway we got them out eventually and the whole house was ruined! Filthy, furniture broken dog sh*t all over and the carpets and doors were ruined by dogs scratching at them cupboard doors hanging off in the kitchen, I could go on. I just sat and cried, I loved that house and they had ruined it.
We got a team of cleaners in and decorators a joiner for the doors,but it still felt abused. We put it on the market and it sold in 4 hours.
OP I hope your parents make sure all checks can be carried out and the rent is paid, it's difficult to get them out these days, and I would hate for them to go through what we did.

Universal Credit.

True

I have a relative who rents out her childhood home as she didn't want to sell

She ensured she had all the right certificates and went through an agency

Despite agency pressure she won't raise the rent to market as the tenant is no trouble and she isn't greedy

This

Grabby and wanting inheritance

The student flats will be able to charge more as they can put 5x adults each paying rent in a 5 bed flat vs a couple (or in the case of your tenants, just one income).

Thats why HMOs are so popular with landlords…!

But it glaringly obvious that neither the OP nor her parents have a clue about the Renters Rights Act or any of the other myriad of rules and regulations involved in being a landlord - nor the substantial penalties they might incur if they get things things wrong.

It sounds like an absolute disaster in the making OP. 5 children are going to make a lot of noise (are the neighbours aware?) and also there's going to be a lot of heavy wear and tear on everything. I hope your parents are up for the ongoing maintenance alone. I would hope they've got a contract drawn up through a solicitor and aren't just relying on good will - the family could take years to evict if they don't pay rent and your parents will essentially be financing this family plus the cost of any legal fees could run into hundreds of thousands.

Rule no1 is never let to family or friends. For good reason.

They really need to get clued up on landlord responsibilities and quickly. You can get in big trouble for missing things. Probably would not be able to get rent guarantee insurance unless there is a home owning guarantor. Would prepare for any eviction to take >1year via court with no rental income during that period so bear that in mind if situation with your parents if they ever needed to release capital quickly for any manner of reasons.

and never rent to friends or family.

Some people are just kind, my mum and dad rent a flat out well below market rate because they feel sorry for their tenant who lost her husband. It’s nice to hear about people being generous for a change!

The market rent of a family home and a hmo can be really different. My cousin rented a place for nine months as owner planned to turn into hmo and double the rent.

Renting a place out to 5-10 working adults ( assuming some doubles) comes with its own issues. Parking, rubbish, keeping odd hours, the things that annoy neighbours. Also getting a house ready fire doors, getting a licence can be prohibitively expensive.

No no no. It’s taken us almost 4 years and more than £10,400 to get our tenants out. The stress has been unbelievable. The main complaint was they couldn’t find somewhere at the same rental price as we were charging under the market price. We are also full of praise for the housing officer who did her best to help them and us.
This has been a nightmare - the flat wasn’t being heated or aired. We are left with a huge mess to clean up before we can put it on the market to sell.

You father has said they are not interested in profit. That is their choice so they aren’t being exploited. They know the people who will be living there and want to help them. I assume they know them well enough to trust them to take care of the property which is beneficial to your parents, as is the flat being occupied rather than left empty.

They seem to know what they are doing so there is no need for you to worry.

The OP says they’re claiming UC and the reason for the lower rent is to keep it within LHA rates…

The two aren’t mutually exclusive. Higher rent to a good tenant is even better.

That's an assumption. And even if they are claiming UC why object to them renting this specific property? They would be claiming the same wherever they live

Lower rent to a good tenant is worth far more the market rent to a bad tenant

None of that is what the OP is worried about? She wants her parents to charge higher rent.

I would bet they’re not very clued up on their responsibilities as landlords to be. They need to look into the legal aspects of being a landlord; is the property compliant with new safety regulations, deposit protection etc. They’ll need insurance s to protect rent payments which may not be offered if the tenants are on UC. They will need to pay tax on the income and capital gains tax when they sell.

What if there are disputes? Will this affect the friendship. What if the property is damaged? 5 kids is a lot of wear and tear on a property.

I wouldn’t do this under these circumstances as there will be a lot of personal costs, particularly as they won’t be charging a market rent. If your parents are receptive then set out the pro’s and cons for them to consider.

Also they need safety checks for gas and electric. Also landlord's insurance. And a contract drawn up with a solicitor. And how will they ever get rid of them. They need to look into this carefully.

Trying to be considerate to a friend is absolutely reasonable. However, I’d be concerned that they are not fully aware of their obligations as a landlord. it is a minefield. It really is.

They would be wise to engage a reputable letting agent to take care of all this. Right to Rent, safeguarding the deposit, safety certifications - it’s a lot for an ‘accidental landlord’ to get to grips with. Forget to give your tenants the new leaflet about their rights, or the DPS terms and conditions, et cetera, and risk incurring a huge fine.

There is no way I’d become a landlord now.

The tenants aren’t taking advantage of your parents - presumably your parents are of sound mind? Think that’s a judgemental take, tbh.

Do they have a buffer for maintenance and possible court costs if things go wrong in the future? Is there a good agency nearby they can hand over the reigns to? Or are they up for travelling to the city to sort out problems and keep ontop of legislation? It’s not a good time to be a landlord and it’s unusual now to decide not to sell up and enter the landlord profession for the first time. I wonder what the backstory here is.

I agree with PP - it’s not so much about the rent being charged by your parents, it’s that when your parents want them out they’re not going to be able to find a similar property that’s suitable for their needs within the LHA, so they’re not going to want to leave.