What do I need to know about renting out my house?

[readywithwellies]

I have a three bedroom, detached house that I have a mortgage on. I am currently paying this and it is up to date.

I no longer live in it, it is nearly empty, it has been for sale since the summer and I can't see it selling. House is habitable. Decorated reasonably, laminate floors all downstairs. No major issues.

I am considering renting it out to cover some of the mortgage. I have checked out similar properties for rent and they are going for around £600 pm.

I am completely green. I have never even rented a property myself. I am aware of a property management scheme whereby you pay 12.5% of the rent to the company and they guarantee payment.

I am concerned about how much hassle it will be, the tax implications, insurance etc, squatters.

I don't mind dogs or children (within reason)

Any advice? Thanks

I have rented out properties from time to time.

The big decision is whether or not you want to use an estate agent.

If you use an estate agent they will advertise the property, carry out viewings, find the tenants, do the credit checks, provide the tenancy agreement, arrange for an inventory and hand over the keys. The fee for finding the tenant is usually about 10% of the rental income which would be payable as soon as the tenant moves in. So in your case £720. You would also pay for the inventory/tenancy agreement etc. Costs vary hugely but you are usually committed to using the Estate Agents people.

For an extra 2.5% they will also manage the collection of the rent. This doesn't mean that they will guarantee the rent (you usually need extra insurance for this) but it does mean that they keep on top of the payments and it has the added advantage that your % payments to the agent are then simply deducted out of the rent by them. Meaning your costs are spread.

For around the 15-17% mark the Estate agents will manage all the repairs etc as well. The upside is you can basically forget about the property, if there is a problem with the heating the agents will send there people round to fix it. The downside is their people will be expensive (as they take a cut) and you will of course have to pay the repair fees on top of the additional percentage.

Or you can do the whole thing yourself by advertising in the paper.

Other things you need to know is that the law requires you to have a gas safety certifcate annually; many estate agents will require an electrical safety certificate (not a legal requirement) which needs to be reknewed every 5 years; deposits must be held in a "tenants deposit scheme" account. If you have an Estate Agent they will arrange this for you otherwise I believe the cost is about £150.

Renting is hugely hit and miss. You have no idea what your tenants are going to be like. Good ones are worth their weight in gold, bad ones your worst nightmare.

agree with what nancy says.

we ask for references from prospective tennants employers and ideally a previous landlord. i call the people giving these. do not believe any sob story you are given from a prospective tennant. if you have carpets i would think about what pets you will allow - dogs make a mess - we have one.

check your mortgage company will allow you to rent property out.

we've always used contracts from newsagents - though not sure they are the best. get tennants to sign something that lists any damage - otherwise you will have no comback in future. if all esle fails you can take people through the small claims court - but only do this if there's some form of income - eg job/other property - best to think about this at outset.

we've had some great and some awful tennants in last 6 years

Don't use an EA; try to find a specialist lettings agency (word of mouth from other let properties perhaps).

I let our house out, and my agent does a fully managed service including rent collection. It costs me 15% of the rent, but I am abroad, and the service I get is superb and I cannot fault it. Anything that goes wrong gets fixed. The property is inspected every three months, for potential trouble shooting as much as anything else. She sorts out tenants and does both the personal and financial references; all the annual checks are organised by her as well.

I thought that it would be hassle, but this lady and her team makes it all so easy.

The first thing I'd do is go round and fix all the things that you "just live with" - like cracked panes of glass or wiggly bathroom locks, or lightswitches that don't work. Also put in energy efficient lightbulbs throughout.

The biggest annoyance for me when I was renting a property was the little phonecalls about things like that - even down to expecting me to come and change a lightbulb, idiots. I got very impatient about schlepping off to the other side of town to maintain a property I didn't live in.

Put some of the rent money into a fund to pay for things like new boiler also carpets, flooring etc between tenancies. Things can and do get trashed and sometimes you just have to re-do them.

specialmagiclady I agree and this is why you need to concentrate on good tenants rather than a good agent (I use the term estate agent to encompasse both lettings and sales)

A good tenant will undertake minor repairs, not worry about waiting in if the boiler needs fixing and generally be wonderful (I have had several - they have repainted during the course of their tenancy, oiled creaking hinges, trunked telephone wires to top of skirting and left the property spotless to name but a few) equally I have known of horrendous tenants who demand light bulbs are changed complain that the (excellent) washing machine doesnt clean to their standards, change the locks and don't pay the rent - and when they don't agents can only do what you can which is chase them until such time as you can serve an eviction notice.

Thanks everyone. I ideally want to sell. I will wait until after Christmas and decide what I want to do as the equity in the house would be quite useful, but on the other hand, keeping it would be a good pension.