Renting parents property

[Moreveganice]

Due to a recent decline in my Dparents health they have moved into residential care. Prior to this they were living alone. It is extremely unlikely that the they would be able to live independently in future and certainly not in their house as it is.

Parent has significant savings and will be paying for care out of this but in the long term it is likely they will need to see their house to pay for care. Parent is not currently able to manage their own affairs and my sister and I have POA.

We were planning on selling the house straightaway as it is empty and will deteriorate if it is left empty much longer, however it has been suggested that it might be better to rent it out in the medium term? The income from the house could offset some of the care costs and delay the time we need to sell.

As POA I believe we are expected to do our bests in parents interests and this seems to be a solution? However the house would need lots of work doing to make it rentable. Is it permitted for us as POA to use parents funds to pay for the work?

I would sell it. Being a landlord is very difficult when you are experienced. There are so many traps, legal requirements, nightmare tenants and Agents.

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.

If you genuinely think it’s in their best interests to invest some money into bringing the property up to scratch for renting out; and you consult with them/consider prior wishes and everyone close to them and take professional advice - then I don’t see why not.

remember they’ll have to pay income tax on the rent even if it’s going directly to pay their care home fees

I think do the sums, get some quotes and get professional advice and consider if you want the extra admin managing the property for them.

What condition is it in?
Things like windows, central heating etc What EPC does it have?
Look up the minimum standards for landlords

It can be a good idea to rent if it is a modern property but harder if not

Remember that income rental is taxable and so you need to look at the tax position of your parents

You can use the money to update it. This may help when it comes for sale and it not seen as a deprivation of assets if reasonable

My DSIL didnt do up her parents and deeply regret its
£650k on care fees and a house that is in poor condition
With hindsight she would have done up the house as a priority (she had home care until the end)

Sell it. Huge hassle to rent it out, you have to get it into rentable condition, it can take time to get it back again from the tenant and then you have to get it into sellable condition again and will want it to be without a tenant in when you sell it. You will probably get a better return from selling it and investing the proceeds.

My siblings were keen to do this when my Mum went into care. They did the sums and it just didn't add up.

You may be in a different situation, but even then I would be wary and more inclined to keep life simple.

Thank you some good suggestions and advice here. DBIL and DSis have experience with rentals and the house (80’s) has been well looked after until the last couple of years. It has a decent boiler / windows and heating - bathrooms just need decorating. The big outlays would be a new kitchen and flooring. DBIL would likely do a lot himself. I will look into the rentals and do some sums too.

Next door is rented to pay care fees. We’ve had 3 lots of lovely neighbours.

It’s now up for sale. The tenant doesn’t want to leave - but assume he will have to.

I can see the new buyer wanting to extend and we’ll have months of building dust to contend with.

I would rent my parents rather than sell

It would need a furniture upgrade but then would rent for £2000 a month- maybe re tiling of bathrooms- it was a BTL before they bought to 15 years ago

They have £500k in bank and so not an issue paying for care

Yes, absolutely rent it. We rented DM’s for nine years. Indeed, it was the finance officer at DM’s Council who added it to our list of option and suggested it was a route to explore. It does mean you have to clear the house when she is still alive which we found a lot easier

I’d sell, no question. You could be lucky, but being a landlord can be a colossal PITA - and a nightmare if you are unlucky with tenants.

And the doing-up of the house could take a huge amount of time and cause a lot of hassle too, even if you don’t actually do any of the work yourself - speaking from experience here! Finding/organising tradesmen, choosing everything from paint colours to kitchen units to carpets - just not worth it in your circs IMO,

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

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.

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,

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

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.

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.

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

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

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.

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

I am glad that you have POA in place

Rents, not tents 😁

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.

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.

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.