Talk to me about letting out our property...

[cazzabazza]

After several unsuccessful attempts to sell our London flat (sale fallen through twice), we're considering letting it out and renting a property in our desired location so that we can get our son into school for next year.

What do we need to know about letting??

• should we go through a letting agent or let privately?
• what sort of fees are we looking at if we use an agent?
• what checks do we need to have done on our property first?
• should we find something to rent first before letting our flat, how does it work with getting the timings of our move to coincide?
• anything else we need to think about?

Any comments, tips or advice is most welcome as this is totally new to me!

Go through an agent to find tenant, do checks and tenancy agreement (usually costs one months rent). Don't bother with a private let, unless you can do the checks yourself. People that want to avoid an agent are not the sort of tenants you want IMO.
Decide if you want to manage yourself if you are local or have an agent do it (about 10% of the rent). If you manage yourselves start getting together a directory of reliable trades people.
You will need a Gas Safety and Electrical Safety Certificate along with an EPC.
Can't advise on what to do first as I have never let out in this senario.

Make sure you have advised you mortgage company of what you are doing. Get the correct insurance for your property.
Make sure you have enough money to cover unexpected repairs/empty periods and all maintenance.
Make sure you protect the deposit in a Government approved scheme.

And my number one tip "DETACH YOURSELF" it will no longer be your home, tenants can live as they want (within reason), however frustrating you may find that you have to accept it.

listen to the above wise words! Also:

you must have an agent in your position.Find an ARLA registered one, no guarantee of service but some comeback if it goes wrong. You still need to get informed about all the details but a decent agent should guide you.

you don't actually have to have an electrical safety cert, but you must have gas safe if the place has gas.

you need mortgagee permission, landlord insurance including malicious damage, legal expenses cover (for non-payers/non-leavers) and rent guarantee insurance.

you need some arrangement for fixes to be done in a reasonable time - you can't expect tenants to wait until you get back from your holiday. You need to check it out every so often.

also it will be very difficult to sell while it is tenanted, unless to another landlord. Sale does not end a tenancy.

Definitely go through an agent. Make sure they do the financial check diligently. Decide if you want housing benefit tenants or not. The Agent will go through the gas/electrical checks and an inventory and condition check - carpets, floors, work surfaces, paintwork etc . Decide if you are letting with or without white goods. The agent can advise on what most tenants prefer. Ditto curtains, blinds etc.

I think this can be quite stressful as it was/is your home so I would go through everything with the agent so you are quite clear about expectations. Completely agree with HaveToWearHeels on everything, especially insurance and maintenance. Annoying things you put up with, a tenant will not, so you need to get everything fixed before you let it out. I also think if it looks in tip top condition you will let it and have fewer empty periods so it pays to spruce it up (if it is not superb already!).

Short term tenancies are 6 months. You canend it with 2 months notice if you want to sell. Be aware though, some tenants are difficult and costly to shift!

It isn't just a case of advising your mortgage company - you have to get their permission. They may charge you a fee or an increased interest rate for this. Also if your flat is leasehold you will also need to ensure you have the correct permissions there.

You will have to pay tax on the rental income. You can only deduct the cost of mortgage interest from the taxable income, not your actual mortgage payment. So don't kid yourself that the rent you receive will pay for your rent somewhere else - this is very unlikely to be the case unless you are massively downsizing and downgrading the area, which you probably aren't if you are moving for school purposes.

When you do eventually sell you will need to consider capital gains tax liability, as you will have been using the house as a business asset not a home. It's unlikely to be much if you don't let it out for long, especially if you don't buy another property, but it will all need to be assessed properly.

It really isn't something to go into as a short term fix - it will completely scupper your chances of selling in the short to medium term, as tenanted property is very difficult to sell, and the two months notice only applies after the first six months, and if you do it all properly, and if the tenants are co-operative.

...and if you can get tenants who only want to stay for six months.

You get a CGT allowance though.

One other bit of advice I was given re agents. If you are reluctant to pay for them take one on that can be cancelled out of. Most problems happen in the first few months (squirrels, plumbing etc) so you could have one for three months, then do the rest of the tenancy management yourself.

Having said that I chose to stick with the management company; less hassle.

I admire your optimism, flinging. Problems can occur at a house at any time.

We normally find problems through out a tenancy as you would your own home. When we purchase a property we refurb it (paint/carpets/new appliances and a handyman goes in and does repairs) even so until someone is actually living there some things are not discovered. Then of course things start to go wrong, this time of year boilers and central heating and guttering. Spring brings outside sockets and taps. It is a constant just as it is in your own home, only you can't let things slide as you can your own home.

Yes you will pay tax, but once you have deducted mortgage interest, agents fee's and repairs, mileage etc, there is normally little to pay tax on. If you are thinking long term rather than sort term I wouldn't worry about the capital gains yet.

Thanks everyone, your comments have been enormously helpful. Lots to think about!

Squirrels?!

Not to be alarmist but I have two friends who rented out their properties in London (both through very well known agents) and who ended up with nightmare tenants.
They were tenants who had (presumably) provided references and passed credit checks but who stopped paying their rent after a few months.
One set totally stripped the house before doing a flit: floorboards, light fittings...the lot. Agents were useless.

I would choose an agent who has a drill for these sort of issues

...and that is why you need all the right insurances. Any tenant can become a nightmare - although of course most aren't.

Nancy66 no disrespect but if I had a £1 for every bad tenant story I have heard I would be rich. For every 10,000 good tenants there is a bad one. After 10 years and 7 properties not encountered one yet !.

yes, I'm sure you're right.

We sometimes think about renting our place out but, have to say, our friends' experiences have put us off.

OP, also check your LA's school admissions policy before you go too far down this road. In Trafford now for example you need to demonstrate that you have a minimum of a 12 month tenancy agreement for the address you are using on the admissions application - too many people renting somewhere for 6 months and then moving back out.

Was about to say a similar thing to RCheshire.

How far are you moving? Some LAs can be really awkward about people renting when they also own a property (even if the owned home is let). If you are moving hundreds of miles, this is less likely to be a problem - they can't reasonably think you intend to move back to your old house and commute to the school. But if it's within an hour or so's travel, you might have a problem. I'd get confirmation in writing (email is OK) from the LA to which you will be applying that they will accept a rented address in your circumstances.