Renting parents property

Just to say, re renting to friends or neighbours, or to their family members, when based abroad for several years we rented our U.K. house out, through an agency that took a hefty percentage.

Several of our fellow expats told us we were mad to be paying that percentage. They had rented theirs to close friends or family members, with zero cut for an agency.

ALL of them without exception, eventually had no end of trouble with non payment of rent, or with finding when they eventually returned, that the house had not been looked after at all, or badly damaged, and/or that their tenants refused to leave.

I am truly sorry to hear all these painful tales.
I guess like dementia, every solution to paying fees and climbing the resultant financial hurdles is unique, too.
My SiLs had no appetite to rent out DMil’s house and that was entirely the right decision for them.
Band width, proximity to family, state of house, local rental market and sheer luck all play a part. (And inevitably a GoldenBalls sibling who won’t play a part.)

My siblings and I rented out my mums house when she went into a care home, she had dementia and so we used our POA to sort everything. With her pensions and rental income (£1300 per month less property management fees and tax) it meant we only needed to top up her fees by about £800 a month from her savings.

However, we had to spend quite a lot to sort out the house to put it up for rental unfurnished ( empty house, decorate, replace some ancient carpets and damaged blinds, pay for gas/electric checks, insurance etc) then also pay again at the end of the tenancy to repair some of the damage caused by the tenant - some just wear and tear but also some deliberate damage and theft.

We had received rent money for about 18 months ( delays in being able to rent it due to a major water leak causing extensive damage on the day the agent came to take photos!) when mum died but we then had to wait 11 months to sell the house as we had just renewed the lease. Paying income tax the following tax year was a logistical nightmare!

In retrospect, we all feel that the stress and costs involved were not worth it and we would not do it again, but then we did not know how long we would be paying care home fees.

I agree. Nursing home fees of just shy of £8k per month, which are obviously going to go increase year on year,
won’t be alleviated much by the profit left over from renting. Thank the gods DM has savings. I’m working on the basis that she might as well have the best quality of care, in the most pleasant surroundings possible, while she has the available funds - as we simply don’t know how long she has left.

I’m going to have sell DM’s house to pay towards nursing home fees. A neighbour, who I really like and who was a really good friend to mom, ideally wants me to rent it out to a her family member. I know they would be ideal tenants and make the whole thing as easy as possible - but having looked into the details and numbers it just isn’t feasible.

The nursing home is extremely expensive. The profit DM would end up from the approx £1k per month rental would be like a drop in the ocean - while I would have all of the additional admin and responsibility as an unwanted free bonus!

DM has incurable cancer and is doing well to still be around - we have no idea how long she’ll be here. At least if the house is sold then I know she has X number of years of fees in the bank. If she lasts for longer than that amount of time, then that’s a bridge to cross at that point - I don’t have the brain wavelength available to think about it now.

I’m dreading properly starting the process of emptying her house and getting it ready for sale. Each time I go to the house I feel heartbroken at what has been lost already (DF died suddenly in the house some years ago) and the loss that is still to finally come. In some ways selling the house will draw a line under it and I won’t have the difficulty of dealing with the clearance and sale after her death, when I expect to be in a right old state.

It’s all just sad and you have to negotiate your way through it the best you can.

I’m sorry this didn’t work for you.
That sounds very stressful.
Because the circumstances of the landlord has changed( (death) the Tenant can be evicted after 92 days.
Labour’s new amendments will likely mirror Scotland’s more stringent rental rules which were adopted at start of pandemic. The 92 days is v likely to apply.

Renting can provide additional funds and a better standard of care home.

That princely sum of £200 a month didn't help my mum remotely. It's laughable to think that the rent from a property is going to make a difference to the kind of care home you can choose (unless it brings in a monthly income of around £2,000 net)

I disagree@Soontobe60
Renting can provide additional funds and a better standard of care home. I was an accidental landlord for over eight years. Remember the annual rent can rise( but not so much in Scotland) and the property value will increase over time.
It’s also v likely that you’d have need to invest £10k anyway to update the property before selling to realise the best price which is the duty of the Guardian or POA
Your parent’s Council will take a charge on the property if your DM has minimal amount of savings but has a property. I had to liaise with the Council’s financial officer regularly but it was no hardship.
And when your DParent passes you clear the charge on the property with the Council, pay CGT but there can be some residual inheritance for the beneficiaries.

If it's not too much work to bring it up to standard, then yes, rent it out. You are preserving the asset. If you sold, you would probably need to pay for investment advice. It would be irresponsible to just leave that large a sum of money in a savings account being eroded by inflation.

I think renting the property out is false economy. Imagine the house is worth £150k and the owner has £50k in savings. It could take £10k to bring the house up to a rentable condition leaving £40K in savings. When rented it might bring in, say, £1.5K a month which will be taxable. So say £1200 net profit.
Care home fees are around £1k a week. Assume an income from pensions of £2k a month.
So initially, the owner would have to pay out £4K a month - £1k from rent, £2k from pensions and £1k from remaining savings. That’s sustainable for 16 months at which point the house would certainly need to be sold. (£150 + 24K)

Selling the house immediately and adding the savings would give total savings of £200k. This can be invested and would raise a great deal of interest - maybe as much as £500 a month after tax. Combined with their pension, they would need to supplement their income + interest with £500 a month from savings to pay care fees. Over 16 months, thats a reduction of £8k from their savings so their total savings would only have reduced to £192k. This, combined with not having the headache of becoming an accidental landlord, makes much more sense!

Just to say use an agency if you are renting it out

I'm currently selling DM rental flat which supported her old age and used an agency . Yes they take a percentage of the rent but sort absolutely everything and it's money well spent !

I just got the details if the income and expenditure of the rental over the last tax year. More than two thirds of the income ended up being spent on a new boiler and assessing some issues with damp. So £200 a month went towards my mum's £6,000 a month care bill. And now I have a mountain of stress regarding it.

I can't even begin to tell you what a nightmare situation I'm in regarding a house that was being rented to help pay for my late mum's care.

I'm not going into detail as it might be outing, but it's been making my life a misery since her death. It would have been far better for it to have been sold. At this point I'm almost ready to give it away.

And of course, if Labour's new rules come in, you'll find it very difficult to sell it when she dies. It'll be hard to get the tenant out to sell it with vacant possession, and it will be hard to sell it with the tenant in place, because no-one is going to want to invest in rentals any more.

Honestly, I’d sell. By the time you’ve paid tax and all the associated expenses of being a landlord - e.g. gas and elec. checks, any repairs/replacements, management fees (if you don’t do it all yourself) the income may be a good deal less than expected - and that’s without any possible hassle from difficult tenants, tenants who don’t look after the place, fail to pay the rent, etc.

As a family we’ve been in this position twice, my mother and an aunt having moved to care homes, and after a lot of deliberation the first time, for the aunt, we did just sell. The estate agent had advised that although the place was clean and perfectly liveable, the fact that it appeared very dated would mean we were unlikely to attract the more desirable tenants. . But organising all the renovations would have been just far too much hassle, especially since none of us lived near.

Rents, not tents 😁

Adding, I am sorry to hear about both of your parents.

I am glad that you have POA in place

Tents in our area are very high, 1500 pcm for a bog standard 3 bed semi. Could be a good idea, depending where you are.

I am going to add that some councils charge full council tax for empty properties. So beware of this.

If you are in UK

You will need

Landlord insurance

Gas & electrical safety certificates

A pool of emergency money for repairs

Someone will need to complete a yearly self assessment tax return on the income earned on behalf of your parents.

A contract for tenants, however you can do this via a property letting agency, but they will charge for this. ( Get some estate agents round & find out how much the property would rent out for & their costs)

It is not an easy option to decide to be a landlord.

The easier option would be to sell the property.

Good luck

If my parents have to go into a home this is what I will be doing.

A good friend of mine owns an agency so knows all the ever changing rules but it may enable your mum to be in somewhere nicer for longer which would be my plan.

The list of people needing rentals is huge so landlords get the pick now.

And with a good agency that can manage it at least it means you still have the house if after say a year it isn't going to plan you can always sell it then.

My parents and aunts/uncles didn't do that with my grandparents house and it sat empty for four years before they both passed away.

It deteriorated a fair amount in that time so it sold for a lot less. Just seemed a shame.

It is unlikely that you could use your parent’s money for the renovations. The accounting and legal fees alone to access the money are horrendous. What accounting and legal fees are these? OP has PoA.

@Moreveganice what did you decide to do in the end? I have a friend with identical dilemma.

I think you are being very wise giving it every consideration, as, you have no idea how long both DParents will be in residential care. It is fairly unusual to have both together at the same time in the same place.

I think it is a no-brainer to press green for go to rental, especially with experienced siblings and a good progressive letting agency.

Residential care fees can go up much faster than inflation. Their home is an asset that you can use to prolong their available funds. Yes, it would be easier to sell and sit back, but the letting agent will do the hard graft. It might be the difference between keeping them where they are now for five years or with renting, six years. My DM was in care for over 8 years having entered care at 5.5 stones. At the three year point we had to switch her from a very expensive care home that was burning through her funds, to a slightly less expensive one that had less facility but still lovely staff. Renting might give you a few headaches along the way but it will help them get the best of care for the longest time...

Look into CGT and Inheritance Tax so you have them both on your radar,

I'd sell it, why 'delay the time to sell it' . If they can afford the fees now and have the security of the money from the sale as ongoing then all good . So many variables re renting.

So many landlords are getting out right now so do your research and be very very sure you want to do this.
If so do it on a professional basis with all the correct insurances etc or you may find it bites you on the bum