Renting out the house ?

[Violety]

Hello, has anyone been in this scenario? Dad's in care paying his (eye watering) fees . We're thinking of renting out his house to help pay for the care instead of selling. The trouble is it's old fashioned and in dire need of decoration and a new kitchen. If we were to do the work using his money and rent it out , would the council say doing work on his house was deliberate deprivation of funds? It's all very confusing.

Thank you

I can't answer your question but I would suggest getting one or two local letting agents to see the house and tell you what rent they would achieve for it as it is and also if it was renovated. That would give you an idea of what is worth doing.

We did exactly this with my mother’s house. We did it up using her money and then rented it out to pay toward her care home. With the rent and her savings she didn’t run out of money before the died, so no issue about deprivation of assets, but I can’t see how there would be anyway. The money spent makes the house more valuable if it comes to a stage where you still have to sell it to cover fees

We decided against it because the money we would have needed to put into it far outweighed any income that would have been made. I think we worked out DGM would have needed to live for around 4/5 years to justify the cost. She died within a few months of being admitted to a care home.

DH did something similar. His Mum was self funding so he bought a flat and it ran as an Air BnB to generate some income. Didn't cover the full fees but went towards it. Used her money.

You might not need to spend much on it. Some people will be grateful of somewhere to rent. As long as it’s all in working order and at least decent. Doesn’t have to look brand new.

I suggest lots of maths:

• value of the house as is (less sale fees)
• cost of renovations
• rentable value of renovated house (less ongoing costs)
• your dad's expected lifespan (as far as you can guess... and i realise this is uncomfortable to do)

Do you have power of attorney? If you can document your decision making and show this was a sensible investment that will help your dad pay his fees, then I can’t see how that would come under deprivation of assets.

I'd agree with considering just how much you would need to renovate if you are thinking of renting. More important would be making sure the things that legally have to be up to scratch are done first - EPC (which could mean spending money on things like insulation and windows) electricity, and such like.
Personally I would recommend going with a reputable agent as they make it a lot easier. They can probably give you a steer on what to spend money on and what wouldn't be necessary.

My brother has a letting agency and he said it wouldn't be worth letting mum's bungalow out because it would take a lot to get to the required standard (very old prrson decor!) and even when would barely cover a week a month for potentially a lot of hassle.

Do look into it very carefully. Whilst tenants don’t necessarily expect up-to-the-minute decor eg a brand new kitchen and bathroom, there are expectations that it’ll have a minimum EPC which means double glazing, insulation, efficient boiler etc. Being a landlord comes with a lot of responsibilities and it’s sensible to use an agent to handle a lot of the admin side, but that comes at a cost. I was paying 15% in agency fees.

You’ll need to keep some money back as a sink fund to cover repairs, maintenance, any void periods without tenants. And do a tax return each year on behalf of the owner.
Does the maths add up? Would it be simpler to sell it instead?

Plus the comment above re how much it would cover. We’d get about £1500 a month for renting a 3 bed semi. Minus agency fees, some to the repair fund etc. Meanwhile care home costs £4000-6000 a month). The maths doesn’t really add up unless the elderly person also has a lot in savings.

Also there will be capital gains tax to pay when the house is eventually sold, if it has been rented out.

And also, all rental income will be taxed, so depending on how much existing income / pension there is, it may bump your parent into the higher tax bracket, so they may end up having to pay 20per cent to 40 percent tax of the rental income, which may make it much less worthwhile. Especially if you are paying agents to manage it as well.

Thanks everyone, overwhelmed by the whole situation. My gut feeling after reading all the replies is to sell it. Thank you all so much

Rented out DM’s home for nine years. When we started we thought it would be for six months. Council took a charge over the property title and let us use cash to have it repainted and necessary alarms and electrical check.
DM had less than £23k in savings from the start. Every so often we had to send Council her financial updates so they could forecast the ‘charge’.

We did this to fund our parent’s care home fees but didn’t do it up - we replaced a very groovy carpet and painted over a couple of walls but the bathrooms which were 1960’s but white and the 1980’s kitchen we left as they were - had no shortage of viewers and went to the first family as the price which reflected the condition was a good one for the area and size of the property.

Do watch out for the income tax and capital gains tax though.
DParents had left their home to eight people so eight allowances were involved in our calculation.
Another thing to factor is the valuation on date of death. By the time tenant left and property was sold there was a period of 18 months. Depends if you are in a rising market but do the maths on this in particular.
There are some case studies on .Gov that are helpful.

We could have got maybe £1800 per month if we'd rented out our mother's house (and it didn't need much in the way of updating) whereas her care was £1500 per week. It simply didn't add up. You'd have to have a luxury mansion or central London flat to rent to achieve £6000 per month.

I don’t think anybody is expecting to raise the whole cost of care home fees with a rental.

If you got a substantial pension then rent after costs and tax might just top it up. But if you've got that substantial a pension you will probably be paying 40% taxonomy the rental income so would need tp be a smallish gap that needed filling or a luxury property to rent. And if it's a luxury property renters will expect top notch decor etc not a swirly carpet and 20 year old kitchen and bathroom fittings.

If you can lock away part of the money after a sale, for a year or so, the interest on the proceeds of a house should be decent enough. Have the house valued, subtract cost of dad's fees for a year plus a bit extra, see what would you be left with? Unless your dad's house is in a very high demand area, I don't think renting would be worth it. If you asked £800 - £1K a month rent, so much would be swallowed in agency fees, bills, repairs etc.

I wonder if Serco will start targeting the families of owners of houses who are in care homes, offering rental contracts. Five years rent upfront would cover a lot in fees.

We did it when my mum had to go into a residential home. She was self funding and it worked out well. However being a landlord is more complicated now

My Dad's house is modernised but we were warned against rental as the new rules might make access to funds required for care more difficult.

I think they said it would be harder and longer to get rid of a tenant if they didn't pay or if you needed to sell.

With Dad's we could possibly holiday let it. But I don't live close by and all the work will fall on me. I think we may look at potentially selling.

Without me and my husband my Dad needs full time care now so there is no question that he will need to fund fees one day, when we cannot cope.

Sell

I speak as an experienced landlord, as someone who has supported parents and PIL through similar, as someone who has cosseted and supported dearly loved tenants through their end days.

Sell

We looked at renting: not enough income to make it worth it.

And then we looked for holiday rental... This was a massive improvement in income potentially. This was from 4 different holiday lettings places.

It obvs depends where the house is... Dad's is in popular holiday location

Problem with holiday letting is the work. The cost of meeting regulation, furnishings, repairs, cleaners and utilities.

I've friends who this is their family business and off season winter weeks with high utility costs, and lower income, she often only breaks even.

If you don't live locally getting cleaners isn't easy either.