Renting parents house out - in best interests?

[Thingamebobwotsit]

Has anyone ever rented their parents property out instead of selling it for care fees?

We are in the position that (currently) it would be in the family member's best interests to get an income from the property, rather than sell up front. But with the new renters bill I am unsure if I can face the hassle.

What things should I consider before making the final decision? We may need to sell at some point in the future.

Sorry should have said - I have all the legal bits in place to make the decision on their behalf. This is about whether I want the extra work (or can outsource it) even though it makes sense financially!

Thanks everyone for further thoughts. So the house is ready to market one way or another. The relative refurbished it completely about 2 years ago and barring the relevant costs of safety checks etc, it could be sold or rented in a month or so. It doesn't even need a coat of paint.

I have all the relevant legal frameworks in place (LPA) to make the decision. And care costs covered for 3 years. So it really is up to me.

A couple of queries though, what happens to the property if there is a tenant in it at the time of it needing to go through probate? I assume the tennant can stay on? And if they leave, can we rent it out again? Or is it "frozen" until probate is finished?

And how does the CGT work? Is it calculated from the time they bought the property (10 years ago) or from the point of their admission to the care home (3 months ago)? Ie would they have to pay CGT on it now, as it is no longer their main residence?

In our case the tenants stayed until they gave notice. As we didn't then have probate, we let it out again on a year long tenancy.

Please consider that if you rent it out, Capital gains tax will become due upon the later sale.

Ive rented a property - never again!

HMRC has a pretty involved calculation for working out the CGT.

See here Tax when you sell property: Work out your gain - GOV.UK

Off the top of my head the period when the property was lived in by the owner would qualify for private residence relief - so the way the formula works that bit shouldn't be taxed. The time while the owner was in a care home and the property was unoccupied - I don't know the rules for that. If it wasn't a long period maybe it won't matter too much?

You also get an automatic period of 9 months (check this?) which is automatically discounted.

If your relative dies while in care - then surely that resets the CGT liability? So CGT would only be from when the inheritor took ownership.

As to whether it's worth the hassle of renting - up to you. If the property is in an area with high demand for rentals and is the kind of thing that gets let out easily - I'd say it's worth considering. It could work well if you can pick and choose your tenants, or even go through word-of-mouth, and if you are local enough to be hands on and keep an eye on things.

If you will need to rely on an agent to manage the property for you then forget it. I've seen them rip-off tenants and landlords alike - mostly at the same time. No.

We just didn’t tell my DM that she’d never be going home - it was out of the question anyway. (Dementia). I told her a lot of fibs, which she’d forget within a minute anyway.

She’d always been an inveterate ‘mover’ and had often spoken of a ‘little flat, so I used to tell her I was looking for a nice little flat for her, just down the road from me, and as soon as I found a really nice one, we’d go and have a look together.

Always kept her happy for the moment.

Yes I have been through both scenarios in the past 2 years. My elderly parents had divorced many years ago and both re married but needed to go into residential care homes (not together).

I sold my dad’s flat, invested the money for him so there’s plenty of capital to last him for the rest of his days.

We were unable to sell my mum’s property as it was held in Trust for her late husband’s family until her death. So we had to rent it out, she receives the net rental income, we decided to let it unfurnished. We used a ‘fully managed’ service with the rental agents but there are still reasons for them to contact us to approve maintenance works etc. The net rental income only pays about 17% of the care home fees, it may be less for you if you have two parents in care. So far we have had good tenants but I still feel nervous about the pitfalls of renting, void periods, bad tenants etc. There’s also the fact that house sale prices aren’t rising as much as they have in the past, so holding onto to it doesn’t gain you much eventually.

On balance I would recommend selling your parents’ property, investing the money into longer term savings and easy access savings to help with care fees. When you rent, the monthly rent gets whittled away by agents fees, statutory landlord costs, maintenance bills, tax etc. you might lose a third to a quarter of the gross rental amount depending on circumstances.

Someone else alluded to the fact that the rental period wouldn’t necessarily be that long. The average life expectancy of someone going into care is 18 months, this would of course depend on your parents’ ages and medical situations.

I rent out a house - I use a letting agency, in terms of work… it’s not that much, responding to emails or the odd phone call to ok stuff. I’m self employed anyway so I’m already filing income tax, but you’d need to do that too.

But, unless you’re really lucky with tenants, it works out that we generally only get about half the rental income a year. Routine maintenance, repairing and replacing damage caused by tenants, certificates and insurance, non paying tenants (happens even when checks are done before renting) remarketing and the letting agent fees take up the rest.

you need to be up on all the aspects of renting. EPC’s, renters rights, awwabs law, electrical and gas certificates, warm homes, mees. If it’s old with no cavity. Costs a lot to heat an epc of c that you will likely need in 2030 maybe hard to achieve.

id be out of it if i could. Private landlords need to be up on everything, having an agent isn’t good enough anymore.

This is a thread from 9 months ago, the OP has probably moved on since then