Dilemma regarding rent charge for friend

[Plantyshazfan]

Hello, we have a child with a disability that we bought a flat for (either to live in when he is old enough or to live off the rental income)

The flat is in a desirable area and is lovely. One of our friends has lived in it for nearly 10 years, they would struggle to pay the full rental value so we’ve never charged them that. We have just covered mortgage and management costs.

So, now we know that our son won’t ever live in the flat and our friend is loving living there. We are essentially down financially around £3,000 per year and feel unable to ask them to pay more…. They are a good tenant and friend. What do we do?

We don’t need the money ourselves but obviously we are working hard to ensure that we have enough money for our son to live for the rest of his life too as he won’t be able to work…

AIBU to ask for more rent?

If you are covering the mortgage and management costs why are there outstanding costs? There will be a limit on how much you can raise the rent for a tenant

I would tell them you need to sell and give them 6 months to move.

This is really awkward, I rented to a relative once before, same deal only charged enough to cover costs while I was moving around with work. When I returned to our hometown I need to either live there or rent it for enough to cover my rent elsewhere. In this time market rents had gone up massively and instead of appreciating her savings over the years she blamed me for the fact she could no longer afford to live where she loved. We are barely in contact now. I think you need to rip the band aid and let her know the situation, of course give her time and any deposit back to help her either find a new place or rebudget but ultimately your responsibility is to support your child and not her. You may lose the friendship.

When you say you are “down” £3k a year, presumably you just mean you could get more on the open market? It’s not a real actual loss?

Personally I’d leave it. Good tenants are not easy to find and you know she’s looking after the property and not trashing it. Discuss a rent increase at the point your son actually starts needing the money.

The flat recently needed a new fire alarm system and further building repairs. We paid for those obviously.
What I mean when I say we are down financially, is this that is what we could earn from someone paying the proper rental value

Thank you, yes it’s hard and I would not want to lose the friendship at all. I really value it.
I also feel it’s hard to get good tenants etc and appreciate that the flat is being well looked after…..

So you're not out of pocket down, you just want to profit now to sort a nest egg?

The nest egg is the sale of the property when you need it. It's been paid for by someone else, that's a nice earner.

But if you want to raise the rent then raise the rent. You might risk the friendship but you have a kids future to think of.

You’ve got an asset in a lovely area which is increasing in value without you doing anything and you have a tenant who is looking after it. Sounds like a gold dust situation to me.

Maybe you could get more money but you’d lose a friend and you might get a shitty tenants. Just because people can afford to pay more does not mean they will look after your building.

I would look at it that you are taking money from your son to give to your friend.
If you can get substantially more renting it out on the open market then I would give your friend notice.
Family comes first, she’s benefitted for the last 10 years so you’ve done her enough favours.

Does she know your financial position? I'd tell her the rent needs to be raised to meet your costs and give her the option of first refusal. If she unfriends you because she's not getting cheap rent any more then she's not really a friend to start with

A good tenant is worth their weight in gold.

What equates to you being down £250 a month might be well worth the loss in my view.

If you really wanted to up the rent, I wouldn’t go above £100per month, personally.

You’ve got to look at the bigger picture here, because a bad tenant can cost you a lot of money and time.

Thank you for your replies. My gut instinct is to carry on as we are and not attempt to increase the rent

Your friend has looked after your property and paid the mortgage for you for a decade in exchange for somewhere to live. You now want her to take responsibility for your child. Can you set up a savings account for your child and get your friend to pay the amount you need into it each month? Explain to your friend that she will have to work extra hours if she can’t afford it.

Or be an actual friend to her. She’s paid your bloody mortgage for you and looked after the place so it doesn’t get mould, damp, etc. You said you no longer need the property so sell it to your friend at a reduced cost considering all she’s paid so far.

@12345onceIcaughta
this is my partners point of view…I totally get it too.
with hindsight - we should never have rented it to them…

Better the devil you know….

In an ideal world with another brilliant tenant paying market rate you may currently be down £3k but what if the new tenant doesn’t pay up or damages the flat? I think I’d rather know my asset was being well taken care of. Perhaps suggest a slight increase but I would forego the full amount for a good tenant. In fact, I have done before when I was renting out my house when living overseas. We never increased the rent as we didn’t want to lose our brilliant tenants who loved the house as much as we did.

I would talk to her and be honest about the situation, does she know your original plans for the place?
If not start with that and explain that you thought she would only be renting from you for short - medium term so you were happy to only have cover cost rent.
But now you are trying to save up for your son in the long term .
Obviously you don't expect her to pay for his care via the rent but a small reasonable rise in rent each year to match inflation %.
ie if rent in your are goes up 0.5 % the so does hers , but not bringing it upto the same price as your nighbours.

Eudaimonia11
I don’t like your response which seems aggressive to me.
We have looked after this person too for years in terms of their health and well being. We do need the property as it is for our sons future financially
They would not be able to buy the flat at all as they have never saved any money for any kind of mortgage or deposit despite working full time and having holidays etc (as is their right)

You might feel you could profit more by £3k but that’s really not very much money in the grand scheme of things and most landlords would happily take a slight loss for the reassurance of someone looking after their property.

I’ve been a landlord before and over the years had a tenant who didn’t pay, a tenant that caused significant damage resulting in a new kitchen and new carpets (the deposit didn’t cover it all).

Tenants also come with costs when they move in (the landlord pays the admin costs for checking their suitability and for an agency to confirm their credit rating and references etc). This has to be paid for each new tenant and the landlord has to pay the mortgage and bills when the property is empty (and mortgage companies and insurancers usually won’t allow it to be empty for too long, so you will have to stay there yourself or find someone to do so).

I’d have happily paid someone £3k per year to have removed that stress and the expectation of additional costs. I wouldn’t underestimate how incredibly lucky you are to have a good friend who is trustworthy in the property. If you decide to profit off them, they have no reason to show you loyalty and treat you as a friend rather than a landlord or any reason to stay if somewhere else is better.

Can you not raise it just a little?

This would be a really bad error. You should start increasing the rent now in increments over the next few years because after 1st May you will be limited to one yearly rise. The other issue is you are clearly not even breaking even. Factor in new carpets, full decoration, new kitchen and bathroom every 15 years and you are very much not breaking even.

It's a common error by landlords who think they are doing tenants a favour. Keeping the rent 10% below market rent is fine for good tenants. But not any more than that for the aforesaid reasons.

House insurance costs, boiler insurance costs, gas and electric certificates, annual boiler service as well as general maintenance costs all have to be covered by the LL. This is on top of mortgage interest and management costs.

Yeah, I'd agree with this. Give her six months to move out.

£3000 a year is an increase of £250 a month.

BUT... if you ended up with a rubbish tenant, then it could cost you FAR more than the £3000 with damage and unpaid rent.

A reliable tenant who looks after the property on a lower rent is far better than a risky tenant who pays £250 more.

Perhaps increase it by a small amount of say £25 or £50 a month?

Can you give them some decent notice? Let them know that you need to raise the rent in 6/12 months time. This will give them time to save/make changes/ look for a more affordable property.

I can understand that you are down on the rental but being as the place is being looked after & you don’t need to worry about your tenant it actually works out at £57.69 per week, only you can decide if it’s worth to move tenant or ask for a small amount more.