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?

I'd take a good tenant over £3000/year. Having said that, there's no harm in raising the rent by maybe £50/month.

Some of this will depend on the exact rental market near you and who your target tenant would be, but I'd weigh it up carefully before doing anything.

You're current Tenant is 3k under market rate per year, but (presumably) always pays on time and looks after the property well. She's also stable so you don't have months with no income while trying to get a new tenant. How many months rent is 3k in your area?

How likely are you to achieve the market rate? Is your flat of the same standard to what you're comparing to? Are you looking at guide price or what they actually rent for?

What's the plan if you get a bad tenant that goes behind on rent/doesn't look after the property well? How much would that cost (best, worst and average case scenarios). How much time do you have to deal with it? Will you need to do maintenance more often?

Are there any corners you've cut as landlords as you're renting to a friend? If there are then factor that in as you won't be able to do that with another tenant. If your friend is doing some decoration/maintenance herself at the moment would you need to take on extra responsibilities for the flat with a new tenant.

It may still be worth it but I don't think its likely to be as simple as you can get an extra 3k per year with no additional risk or effort on your side, so consider it carefully.

Theres always the in between option of raising the rent a bit but not the full market rate as well.

I'd also check what Labour is planning to bring in around renters rights/evictions/rent increases etc. I don't know the details but they'll all have an impact.

This.

start increasing the rent yearly, in line with inflation.

Also check on the % return you are actually getting, after all expenses and taxes. You may be better off selling and investing in a mix of equity funds, bonds and high interest accounts. Much less hassle than being a landlord.

"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?"

Work on becoming able.

You have to be having a laugh 🤣

Why not get a fair rent assessment and take it from there? "How to know if my rent is fair?" Gets a very detailed AI assessment on Google. Find out from estate agents etc and then discuss with your friend what kind of discount you're willing to accept. I do hope the rent has been increased over these last 10 years??? You're not in the charity business!

Talk it through with her like you have here. You will then find out how much of a friend she is. You could make a phased plan with her that works for you both. You must look after your son.
Although from a friends mothers similar experience , they proved to be unappreciative and not her friends after all the years of being looked after.

I think you need to be clear about the actual amount you're down.

Does the current rent cover associated costs from owning and renting out a property such as insurance, maintenance, service charges etc. If not, then you are tangibly losing money, and I think you should include these costs in any rent increase (with notice) as there is no reason for you to subsidise this person and actually lose money from renting to them.

If you had other tenants though you would have more uncertainty and may have to consider other costs like additional management fees (if its currently a one-off private arrangement), periods that it was empty for re-letting, periods where rent is paid late, additional costs of re-decorating between tenants, increased costs of wear and tear (eg if it was rented to a couple with a child instead of just one person) and potential increased costs of damage. Its financially worthwhile accepting a lower than market rate rent to retain a good tenant who takes care of the property and pays on time. So it isn't just a case of 'nearby properties are rented out for £x a year more so I'm down by £x'.

We charge €500 less than we could get in order to have 2 childless professionals living in our rental rather than a family who would cause far more wear and tear. We were actually advised to do this by the rental agents. Totally worth it IMO. The place is in perfect shape as a result.

If you want any chance of keeping the friendship, I'd advise you to evict and tell her it's so you can sell it empty.

Shes never going to be happy paying more and will resent you and by then Renters Rights will have come into force and it won't end well for any of you.

Keep a bit of distance and fudge that the sale unfortunately didn't go through in the end and leave it at that. Put it behind you.

But then it will be tenantless for a substantial amount of time which will cost them much more than £3000.

And what proportion of the total rent is 3K?

I mean if you're losing 3K of a circa 50K yearly rent then stick with the good tenant because it's a small proportion.
If you're losing 3k of a total rent of 10K then that's a different story.

Your allowed 10% per year! If mortgage and management costs are covered why do you need to make profit?

£3000 a year is that market rate

Consider the changes for landlords coming in next year and make sure you safeguard yourselves / sons future prior to this.
Your friend has had a generous gift of not paying market value for so long that she may feel short changed now but remember this is a business arrangement to support your son, when you are gone your friend won't be looking after him.

Have you increased the rent at all in 10 years OP? Because if you haven’t, I think your tenant has been very lucky and you might want to think about increasing it slightly (a small percentage) because you are setting a precedent that could be troublesome longer term.

C’mon, your friend is taking the piss by not paying you a fair rent for the property. This is money you need for your son’s future.

If she is going away on hoIidays and not saving towards buying her own place, she’s obviously expecting to sponge off your good will forever!

Either put the rent up to the market value or sell the property and invest your money elsewhere where it can work for you without any strings.

To be honest I question the point in the OP keeping the asset.

it doesn’t seem like the child is going to be able to manage the property should anything happen to the parents. For the parents it doesn’t seem that they need the rental income or the hassle that comes with this property.

if they did keep it, I think a 250 quid increase a month may be too hefty and threaten the friendship. Also the threat of losing a good tenant who has made their life simple is a risk.

id just sell up

We have a similar issue. I have a family member in our rental house who can't afford the market rates here. The house should be getting £1200-£1300 a month but they only pay £800. The house has a mortgage and we hardly get any change from what they're paying. There was a substantial repair needed this year that we couldn't afford to pay so now have a £100 a month finance deal on it too.
We feel stuck between a rock and a hard place knowing we need more money from it but it will make them unable to afford it and become homeless.

No she's paid below market rent for herself.

People seem to suggest that it’s either a good tenant OR £3k a year when of course that’s a false dichotomy. It is perfectly possible to have both. You are losing £3k that could be supporting your son, and your tenant is hugely benefiting from your generosity. You have lost somewhere in the region of £20-£30k so far - enough to recruit an almost full time carer. In your shoes I would tell your tenant you can no longer manage it yourself and are turning it over to an agent. They will ensure it’s up to currently legislative requirements and will set the market rate with inflationary increases. They will also properly vet future tenants. Ultimately, you’re not a charity and your priority is securing your son’s future. You never know - they may be able to afford it.

Have a discussion his with her if she’s £3000 under market value put her rent up to cover half of this cost any money that’s profit should go into isa for child you don’t need to mention this just say you need it for his costs offer her the opportunity to move out if she can’t afford it you are not meant to financially support your friends and flat was bought to create nest egg for son. That’s the most reasonable thing I can think of.

I’d increase the rent a little each year and invest what you can down your child. When will they have to move out for your son to move in? You could use that as a reminder that their time living there is limited and remind her she needs to look at what real rents / mortgages cost

I’d increase the rent a little each year and invest what you can down your child. When will they have to move out for your son to move in? You could use that as a reminder that their time living there is limited and remind her she needs to look at what real rents / mortgages cost

I’d increase the rent a little each year and invest what you can down your child. When will they have to move out for your son to move in? You could use that as a reminder that their time living there is limited and remind her she needs to look at what real rents / mortgages cost

I’d increase the rent a little each year and invest what you can down your child. When will they have to move out for your son to move in? You could use that as a reminder that their time living there is limited and remind her she needs to look at what real rents / mortgages cost