Should we rent out elderly DM’s house?

[Chipolatasandstuffing]

DM with dementia has just moved into care home. DC (me and DBs) have LPA. Plan is to put a charge against her house to pay for care, as well as using her pension and (modest) savings. Should we rent out her house (rather than sell) to help boost her income? What are the pitfalls?
TIA!

Do you have any experience of being a landlord? There are (rightly!) onerous requirements to meet in terms of energy efficiency ratings, gas safety, paperwork for tenants etc. You need to keep a sink fund to cover void periods without a tenant, or if the tenant doesn’t pay rent for months, or to cover maintenance and decorating costs.

And do the sums add up? In my experience the average monthly rent for a house would cover about a week of CH fees!

Being landlord is a significant job, and the regulations are increasing all the time. Personally, I'd sell and use the interest.

When you say ‘put a charge against her house’ do you know that you can do that and what the outcome will be? Do you mean a mortgage or equity release?

@PermanentTemporary it will be LA putting charge against house so when it is sold they will have a right to proceeds covering care costs. Won’t LA want it selling asap @Chipolatasandstuffing

We did this with my Dmum.

She was fully aware when she went into a care home and selling her house would have destroyed her.
We let it out through an agent and it worked pretty well, the rental income & pensions covered 75% of the care home fees with the rest being made up from savings.
Later on I lived there myself for a while.

I agree that it is more complex now.
Do you (or anyone else in the family) have an emotional attachment to the house?

It is stressful enough having a relative in a care home. Being an inexperienced landlord is not great. There are so many regulations you have to follow. Your tenants might damage the property or default on the rent. There are lots of unseen costs too, like management fees, agent fees, maintenance and redecoration.

It is not so bad if you are doing it alone, but 3 people to please might be difficult.

I understand where you are coming from, as the care home fees might eat into the capital, leaving less of an inheritance for you all.

I’m a landlord of many years and I’m getting out of the business. You need to have sufficient savings to cover void periods, maintenance and insurances. Tenants have far more rights (correctly) so it’s no longer appropriate for a potentially short/medium term solution. The standard of the property must meet regulations eg main wired fire alarms which could be costly. Finally, if you use an agent to manage the property you will be paying 12-15% at least in fees. You will need to pay tax on profit, which has just gone up in the recent budget. I’d say it’s not worth it in your situation. You really need to run rentals as a business these days.

It could be a sound financial arrangement, but you need to be aware there will be significant work to do. It's not a question of sitting back and watching the money come in.

Also, if she's lived there without much modernisation for a long time, you'll probably find a lot needs doing to bring it up to the required safety standards for letting.

Are you aware that you are entitled to fully funded care if you have dementia diagnosis
Continuing care, specifically NHS Continuing Healthcare (CHC), is a fully-funded package of support from the NHS for adults (18+) with complex, long-term health needs that aren't met by standard social care. It covers the full cost of care (including nursing and accommodation) in a home or care home, as long as a "primary health need" is established through assessment, making it free and not means-tested.

My aunt insisted we did this with my grandfather's house and it was rented for a few years before it was sold. It was an expensive nightmare. It was a lot of work to ensure everything was up to code (we knew it was important, it was just a major process to arrange everything), and the first tenants were fine. The second lot failed to pay rent a few times, and caused a huge amount of damage, including removing and breaking doors. It was a huge relief when my aunt agreed to sell. I have friends who rented their house and it was fine, and lots of friends who rent and are wonderful, but we had such bad luck that I'd never risk it myself.

We did it. A management company does the day to day stuff. They take 10% but it left enough to make a significant contribution to care fees which along with state and teacher pension covered the fees for a decade.

They oversee the legal requirements.
We're lucky that it's a 4 bed house in an area where corporate lets are a big thing. It's rarely been empty, tenants have maintained it reasonably and generally been well behaved.

I'm not sure my own house would attract that kind of tenant so wouldn't expect the same return but would assume more decoration and maintenance requirements so may not be cost effective. I think a lot depends on house and location.

It’s horses for courses.

Probably best to take a deep dive into both options and check out the financial and amount of work/admin/legislation required - you may find that answers your question.

I think in the past, the continual rising price of housing made the renting the most lucrative- but a lot has changed.

I work in ASC finance and so know of a number of people who this. The increase in income will mean a reduction in debt accruing against the property and therefore less interest to pay. It also means funds will last longer. It is definately something I would do in if I was in this position.

Erm, this isn’t true. Continuing Care is incredibly hard to get, you have to meet high thresholds for medical need, and a dementia diagnosis on its own won’t cut it

Not true at all.

Have you looked into care annuities? I know they exist but that’s all. You could sell the house and use the money from that to buy a care annuity but I don’t know if that has to be bought in advance if needing care or not!

Thank you all for the responses. We’d use an agent and be guided by them re paperwork/certificates. As @EmotionalBlackmailsaid, the income would only cover 1 week per month of care home fees, if that. But I thought it would be better than nothing and would mean at least the utilities would be paid for. Am I right in thinking that if we sell and mum becomes a self funded, the fees are higher than if the LA was paying them (via the delayed charge)? I really need financial advice but don’t know where to get it!

Contact AGEUK they are brilliant.Write down all of your questions before you phone. They only give factual advice. As you have probably noticed, advice on here is not always up-to-date or accurate.

Have a look at the Renters reform Bill before you make any decision. It's going to get a lot harder to remove tenants.

We did this for my grandma when she moved in with me near the end, it covered a night carer so I could sleep. We used a management company.

If your LA have a charge against the house please check their fees! The LA where my father is charge £985 to value the property and then add 4% interest to the care home fees so you rack up a much, much bigger bill at the end. To rent out the property we have been advised that it will need tens of thousands of pounds of work (new kitchen, bathrooms, redecoration throughout) the house needs to be clear and there's no way the money will ever be recouped unless my father lives to be about 130. So we are selling. The money will fund his care and the LA don't get to add 4% the every months fees...

@Chipolatasandstuffing - the fees are the same in my father's nursing home (very nice one). If the payment is deferred it works out more expensive than if you fully fund at the time. Hence why we are selling his house (as I said in my previous post.)

This is absolutely not the case. Some people with dementia might meet the criteria for CHC but most won't.

Please consult a financial advisor for proper advice re renting va selling the house.

We've just done this. We had to get house rewired at £5k and proper gas certs etc. Beforehand. We used an agent who is ok not fab but we do this because we live 40 odd miles away and they sorted references etc and advised us on a few things. We have LadLord insurance ..therebis a huge range of extras you can opt to cover for. Unless the house is mortgaged then non payment of rent is more of an inconvenience than financially crippling but not something we'd want to happen but our policy covers that as standard.
The rent covers 40% of FIL care home fees so its just slowing the ££££ coming out of his savings in care home fees. The house is keeping its value, May go up between now and when we need to sell it.

Difficult to say OP. It can be disastrous if something goes wrong but for most people it doesn't.
Just one point to correct that was made by a pp, you only need hard wired alarms in rental properties in Scotland. And you need them in owner-occupier properties there too. Not sure about Wales but in England battery operated alarms are ok.