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

The other aspect of holiday lets is that it can be really depressing - you try your best to make things perfect, then get crushing / bad reviews because ‘the tv isn’t big enough’ or ‘there is no toast rack’ or ‘there was dust behind the sofa’… or, like a previous thread on here a week or so ago, because ‘the mattress was too firm’… And if the cleaner lets you down, (and you are at a distance) that is really stressful. So holiday lets are not something to rush into quickly. (Not to mention the fact that lots of policies are changing with regard to second homes / holiday lets, think it varies from council to council, but planning permission may be required to convert a ‘house’ into a ‘holiday let’, and I think there may be much higher rates?? I’m not sure about this, you would need to check).

Yes, this is a good point. Residential rental yields can vary hugely - but around 4-5 per cent is possible (ie for each £100k that the property is worth, you can earn £4k-£5k per year in income after all costs etc). It would be worth working out what the yield of your parent’s house would be to rent out (factoring in all costs, if using agent (15per cent), allowing for maintenance / repairs (£1-£2k each year), set-up costs / fees (it can all add up), also allowing for maybe a month each year as a potential void period (between tenancies), then looking at what tax your parent would have to pay (and tax is due on most of the rental income, apart from some allowable expenses, see HMRC website). And you could also do a ‘back of an envelope’ calculation to project what capital gains tax would be due (after 1 year of renting, 2 years, 3 years etc. And then consider the net yearly earnings from the house in terms of yield.

Personally, I think using an agent to manage it (while it may be the only practical option for you) would decimate the potential yield (I would only consider using openrent (£60 approx one-off payment), instead of an estate agent (15 per cent, ongoing), but that is essentially self-management, but enables a more sustainable return).

Given all the above, I suspect it would be a relatively low yield, so in this regard, finding a high-interest savings account (probably limited access / fixed term) would be much less hassle, and for greater return. Eg locking away a big chunk of it for a year could earn 4.6 per cent. And I there is a tax free allowance for savings (especially if you can utilise your parent’s ISA allowance), so do check the figures.

I’m not a financial adviser, so please do your own due diligence, and take independent advice to make sure you are doing the right thing.