Any experts in house rentals around? Questions re letting a house

[knockitalldown]

We are planning to move abroad and considering option re our house in UK. Here is the situation -

• our house is a 1970s ex-LA house, recently completely renovated, with new windows/doors, kitchen, gas CH, bathrooms, oak flooring, doors, electrics etc

• my parents house is basically same house, with different layout, but not renovated, i.e. kitchen serviceable but 20 yrs old, windows double glazed but older. Fairly good decorative order, with newish bathroom and new downstairs loo.

We are considering having my parents move into our our house, which would give them benefit of the renovations, and us the benefit of not having to worry about renters trashing the place.

So we have two houses, and two sets of furnishings - we won't take much with us when we move, as it's mainly IKEA, so cheaper to buy new than pay for removal! We are considering letting one of the houses furnished.

Question 1 - will there much of a difference in the amount of rent we can charge, between the two houses?

Question 2 - what is the difference between letting a house furnished or unfurnished? Will we get more or less money for it?

Is there anything else that you can think of that we might have overlooked? It might be that we save money on potential damages to our house by having my parents in here, but will we lose more on rental costs?

I've namechanged for this, btw. If you recognise me, please don't out me ;)

becoming a landlord is not really something that can be set out for you in a social media post. The answers to your specific questions are easily available with some research, but there is LOTS more to consider.

so start with a reputable letting agent (not easy to find), landlordzone and some up to date books from the library. Get all the information on tax, gas safe, deposit protection, accounting, 'tenant-proofing', mortgage permission (if applicable), capital gains, insurance, property management, etc etc etc and then come back with specific questions.

We know that we will be letting the house, that isn't the question. And of course I will do more research on the other issues re tax etc.

All I'm looking for now is a bit of an overview / experience from others who've let houses - re the specific questions of whether we let OUR house or my parents' house, and if to let furnished or unfurnished.

i.e. the main question is whether there is a large difference in rental income when a house is renovated.

It depends on your area, what the prices are like for similar houses, what the demand is for rentals so if there will be competition from renovated houses at your price point. Although there's less for the tenants to damage or wear, things which go wrong or break will usually have to be replaced, so factor in the cost for new appliances, boiler etc. I think generally unfurnished houses are easier to rent as most people renting already have their own stuff, unless you're looking at a student market, and that would be an interesting choice...
By the way, are you shipping anything with you abroad? Sometimes it's easier just to bring the lot with you and use that rather than buy everything new when you arrive. Look at the costs of shipping an amount of boxes versus a small shipping container.

It's hard to answer that. You would be best off asking an agent to have a quick look. I think the difference for a renovated house would be fairly small to be honest - maybe 10% at a guess? However that actual amount could be worth quite a lot over several months / years. I would be tempted to rent out the renovated house because you will have happier tenants and everything will be in good order and not require so much maintenance. Your parents, presumably, can take responsibility for their own decor and maintenance.
As for furnished, you might get 5% or 10% more for furnished, but it's not worth the hassle. Because everything that's on the inventory will need replacing or repairing every time it breaks or gets damaged through wear and tear.

Remember to consider the forthcoming changes in taxation ie loss of 10% wear & tear allowance for furnished properties, mortgage interest offset. Make sure you factor these in, as it could mean the difference between making a profit & breaking even. There are also tax implications for non-UK residents landlords.

I think many landlords will change to unfurnished properties in years to come; I can see the tax changes having an impact on local rentals already.

I think the most important thing is to identify a good agent, above all else.

Do we have to go via an agent? My parents live very close, so was hoping they'd do it for us.

We aren't looking to make a profit really, just to keep the house here without paying extra. Breaking even for the next 10 years would do, and then we'll have paid off the mortgage.

Have both houses valued for sale and for rent - only local agents can answer your basic questions. They will also be able to tell you the difference in rent between furnished and unfurnished.

Do you own both houses? Do you even know whether your parents would want to move into yours? If your parents house is rented out and they are the legal owners then they have the landlord's responsibilities, not you. Would your parents prefer to take their own furniture to your house rather than live with your stuff? I think my parents would tell me to do one if I suggested that kind of arrangement, even with their best interests at heart!

If your parents move into your house then you are adding layers of complication to things and you really need to look at documenting everything legally because otherwise it's a sure fire way to fallings out, angst and problems.

If your move doesn't work out for whatever reason, what would happen then? You really need to consider that. Do you plan to come back? If so, when?

My gut feeling is that it's bonkers to embroil your parents in this purely because you want to protect your house from being 'trashed by renters' (I really don't like that view of tenants). If that's your main issue then sell it and get a return on your investment in the shorter term. Use the money to really make a go of your new life abroad.

We only own this house. My parents own their house.

Wouldn't be an issue re us coming back, as this isn't planned.

They like the idea, because they'd live out their lives in a smarter house, without the hassle and costs of renovating themselves. We've agreed that we'd need to look into tax implications etc and put everything in writing before going ahead.

They'd bring their own furniture, and would be free to redecorate or change colours.

Oh, and thanks for the answers so far - that's helped on the decision re furnished / unfurnished. Regardless which house we let, we'll let it unfurnished.

Having self-managed for 10 years, I would not consider it now & recently appointed an agent.

Why? Firstly, the deposit schemes, ie inventories, check-in check-out, can be so onerous to deal with. For example, inventories with embedded & date-stamped photos (about 60 for a. 1 bed flat!!) at check-in/out. Will your parents really be able to manage that?

Will they do open viewings, credit & reference check applicants? Are they aware of recent legislation eg Legionella assessment? Do they know how/when to serve a section 21 notice? Do they have legal knowledge? Will they ensure that tenants sign, date & time tenancy agreements? These are just some of the technicalities which make letting your property very complex.

Many will say that letting a property is "money for nothing" but complying with the legislation & providing a quality service is best left to those who really know what they're doing.

I think it could be a real source of stress & a burden for your parents.

do they know how to deal with tenancy deposits? Do they know about all the insurances required? Are they happy to manage evictions if you get unlucky? Are they happy to be on 24/7 call for help?

if you REALLY aren't coming back (and that's another question - what happens when you get old/ill?) then sell whichever house you don't need.

for furnished; everything you provide, you maintain/repair/fix. Most tenants don't want the landlord's stuff anyway.

without knowing your precise area, no-one here can give any idea on which property will rent for more, or indeed attract tenants at all. You probably don't want to post that so get an agent involved.

Being a landlord isnt a simple as you seem to think - it would be hard for you and Id suggest even harder for elderly parents. There is a reason its a profession and if you do it wrong you could literally lose your house. It seems a huge risk and unless youre in London prices in 10 years arent going up that much so you may as well cash in now.

Apart from that, swapping houses could be a nightmare re tax and inheritance, money they may need for potential nursing homes. How about selling your parents house and them gifting you cash as per IHT rules.

Some good points above. It is also worth considering tenant quality. Good tenants like nice properties. You may not get a lot more rent but you could have more choice who to let to. This really matters both in terms of day to day aggrevation and also wear and tear.

I've only ever been a tenant, and where we lived, it was uncommon to use agencies, which is why I've not considered it. My husband is pretty well clued up on credit checks etc, and it would be us handling that side of it. My parents will be on hand to manage any issues, but not be involved in the actual contracts, legal side of things.

Sunnyshores
the issues re tax/inheritance etc are one of the big stumbling blocks, even unlikely scenario of us at some point in the future needing to sell our house, e.g. if we want to buy a house abroad. It's not planned, but we have to talk through all options.

If my parents were to go into a nursing home, we'd let both houses to cover costs. Or they'd sell their house. I have a brother, so that makes it slightly more complicated.

I do see the advantage for us having tenants here, in that we are flexible on what we do with our house, with the possibility of using as a holiday home if/when we don't need regular rent payment to pay the mortgage.

Thanks for all the advice, it's really helpful.

good stuff. But don't rely on the tenants not being there when you fancy the house being empty. You need to go for a minimum six month AST, and many tenants will want longer than that. Also most people want the place unfurnished so when they've gone it won't be much use as a holiday home.

if that's the plan, just use the rent to pay for holiday accommodation when you need it.

Yes, that might be easier. We definitely want long term renters for the first few years. Holiday let would be much later, when our mortgage repayments are less, so we won't mind too much if it's not let out for a couple of weeks of the month.

in the UK you are doing well if a holiday let in a popular tourist area is occupied for 20 weeks of the year. They also need very high standard furnishing, deep cleaning, 24 hour on call etc etc etc, plus all the regulatory stuff. Heavily taxed too.

Im still concerned you dont really understand what can go wrong - your parents could have a really difficult time, need to spend hours and have enormous stress. If you are the legal owners and theres a court case YOU would have to attend. If this is a 10 year plan, at some point things will go wrong.

Saying you can do credit checks is maybe 2% of the work and knowledge needed. For 10% of your rent a good agent should be employed and leave your parents worry-free.

Theres a recent thread from an accidental (ie untrained) landlord whose tenant has been arrested for theft. When it goes wrong, you would be amazed at how wrong it can go!

We used an agency to find our tenants. They do all the financial checks, etc and the inventory, deposit protection and so on. None of this is particularly difficult or time consuming, but factor in emigrating/moving abroad and you'll have enough to do with that.

I would appoint an agent to at least find a tenant. I would also make damn sure the contract signed with the agent put the responsibility for all necessary compliance on your behalf with them so that, in the event they fail to collect and protect the tenant's deposit (surprisingly common) you have legal recourse to sue them.

Honestly - I think you are saddling your parents with a load of work and potentially worry. In your position I would just sell the house and invest the money elsewhere.

I'm not sure such a clause with an agency would work, and as some failings can actually send a landlord to prison (extreme case) there's no defence against that.

you can use an agency to do all the work but the buck stops with you, so you need (for example) to get the paperwork showing deposit protection and a copy of the PI sent to the tenant. Not a difficult job but you still need to do it. There is no washing your hans of YOUR business.

and keep up with the EPC and the 'how to rent' document that must also now be given to all new tenants.

We did the same as you, and rented out our UK house when we moved abroad.

I would strongly advise you to use a proper lettings agency.

Ours is great. They take 14 percent (it would be 12 if we were resident in the UK ourselves, so it is slightly more expensive) but I think they earn it.

They sort everything out promptly, and keep us in the loop, and they know all about the legalities of everything, which gives us peace of mind.
I absolutely wouldn't want to put the responsibility for all that on my parents.

If you are happy not to be making a profit but just to retain the house as an asset, then even more reason to spend a bit of money on doing things properly with an agent.

I would let out your own house. If it is nicely decorated etc, you may find that, even if you can't charge more, it will be easier and quicker to attract tenants.

And I think it is too complicated to rent out a house that isn't actually yours. You may find it is complicated enough having to do a UK tax return as a non-resident - not to mention the possibility of perhaps having to declare it on a tax return in the country you are going to - without the added complication of receiving rent for a house that doesn't belong to you.

If you want to rent out the other house, can you have each house valued and then legally exchange contracts with your parents? Would your parents be able to afford to give you the difference (if there was one)? Or could you have a legal agreement drawn up saying you are owed the difference/a percentage of the value of the house if/when it comes to it being sold?

We have rented out our house whilst we were abroad. We used an agent and it's invaluable really. Especially when you can't deal with anything at all yourselves.

Yes, you are paying them a percentage but they get tenants in quicker than you could for a start and people are ,ore likely to stay if things run smoothly. Tenants don't want to be ringing their landlords parents about boilers or curtain rails.

That's a good point, Savoy. Many tenants do not like dealing directly with a landlord; and an agency can be a useful buffer between a tenant & LL who are not in agreement.

Also, there are tenants who target private landlords, hoping they won't be savvy enough & can therefore take advantage. My last tenant was one such type & left the place filthy, didn't pay any utilities or council tax & I'm currently embroiled in dispute through the deposit scheme.

In these situations, agencies are worth their weight in gold. For 10% of the rent, it's well worth the money.

At the very least, I'd be using an agency for tenant finding & check-in/out services under OP's circumstances - if not a fully managed service.

Many agencies will offer a range of services, between tenant finding & full management.