Advice on costs re. renting out mum's house to help pay for care home fees

[AmericanPastoral]

Can I ask for some advice? I am trying to work out how much it will cost to renovate my mum’s house with a view to renting it. My mum moved into a care home and we would be looking at using the rent to contribute to her care home fees. She has enough savings for the house to be rented out for 2 years before it would need to be sold to pay for care home fees. It’s a 3 bed terraced house which is basically sound but has had very little work done on it for years. The costs I have so far are as follows:

Redecoration/mending the roof/damp proofing – quote of £10,000 for labour. This is a quote from a friend of a friend and, from what others have said, probably about half of what any other person would charge.
New kitchen – quote of £2,000 from B+Q,
New bathroom – new bath, shower, tiles, sink, toilet - £2-3,000
Materials - paint, laminate flooring, lead, lights etc - £5,000
Landlord’s licence £750
Gas certificate £150
Electrical certificate £150
Electrical rewiring – have had a quote for £1,500 to get it up to a safe standard if selling it, £4,000 for full rewiring if renting it.

Ongoing costs related to renting
Insurance – buildings, plumbing and heating
General maintenance

Agent’s fee – if we go through an agent

I'm wondering if it is worth paying £4,000 for a complete rewiring if we sell the house?

Does this list seem reasonable or have I forgotten anything?

Any views on whether we should go through an agent or not if we rent? I've heard lots of negative stories as to how useless agents are. Many thanks.

No help on the renovations side I am afraid. But I do know that any rental income may be taxed with the good news that some repairs may be used to off-set tax (including agents fees )so keep receipts and get advice
The general advice with agents is that they are a mixed bag. What service
will you require? find a tenant or full management? The latter would cost
c 10% of the monthly rent . If you live near enough to deal with issues yourself then the latter is not necessary.
I would get at least 3 agents around for market appraisals and their fees. Then I would put in on the market with 2/3 agents initially.
Of course you will have other costs gas certificate building insurance
and insurance for loss of income if the tenant defaults (some agents
cover this for you and so do some household buidings insurance )
insurance against tenant damage. In fact I would recommend getting
insurance from a co dealing with landlord insurance rather than a regular
domestic home insurer.

Thanks so much concertplayer. Very useful advice.

Can I ask why you would go to the expense and stress of renovating and renting it out when you will have to sell it in 2 years anyway? Just sell it now and add the money to her savings.

Jen because the savings rate is so low that the house will generate more money for her if rented out than if the proceeds from the sale would in a bank account.

Get some rental agents round and ask them about local rent levels, who is likely to rent (families, young profs etc), and what needs doing. Then only do what you have to.

I am letting my mums flat. It was a good decision in that it gave me a deadline to clear the place, and the property is worth more because I have been forced to do a couple of professional cleans and necessary maintenance. Plus nice tenants have nice furniture, and the property does not look so "old lady". I have recently painted a couple of rooms and changed the (80's flowery) curtains and (80's heavy) light fittings and small things like replace the bathroom carpet with tiles.

Do anything that is needed and which would show up on a survey and put buyers off, but other than that just get it looking light and bright.

So cut corners, paint kitchen cabinets rather than replace etc. I got 84" drop window panels from Homesence for £30.00 a pair and sewed two pairs together rather than splash out for huge curtains to cover patio doors. I only repainted walls/ceilings, that needed it not the whole thing.

And asking rental agents is a good way of sorting out who really knows the local market and who does not.

If the property needs a full renovation or there is not a solid rental market in the area (ie that you may be forced to take more risky tenants like students or benefits claimants) sell instead. There are too many novice landlards who rue the day they ever thought renting would be easy money. Also insist you meet the tenants and make sure your gut feeling is giood. Most tenants are fine, but a minority are awful.

Thanks very much Needsmoresleep. Have you got a tenant yet? If not good luck.

I would say that there is a very good chance that keeping the property to rent out will not be a better investment than selling now. I would even say that if you weren't needing to spend significant sums on refurbishment but seeing as that is the case I think it is a certainty. Also bearing in mind the situation with Brexit and likely timelines meaning that in 2 years time we may be just about to officially leave Europe then that may actually turn out to be a really bad time to sell.

because the savings rate is so low that the house will generate more money for her if rented out than if the proceeds from the sale would in a bank account.

Even having invested £25k to be able to rent it out??

But that money would help if we have to sell the house. The difference in price between similar properties which need work and those which are newly refurbished is about £50,000 so the net benefit would be £25,000.

I wouldn't do that much to it (ie I wouldn't require- houses very rarely need a full one)

What is a landlords license? I work for a large landlord and have been one myself and never heard of it.

I would do the bare minimum to get it to an attractive standard so someone will take it and get the gas safety. Save the money

Whereabouts are you in the country? That require cost seems high, we paid 2k for ours including certificate for a 3 bed semi. We did do a lot of channeling out work ourselves. I don't know about labour as we are idiots like a challenge so do a lot ourselves.

how big is the kitchen? I'd cut that down to the most basic from IKEA or Howdens. Same with the the bathroom, that could be cut down too.

Don't spend too much money on a house that needs selling speaks from bitter experience

Would the rent cover care home fees? If so then do it. Otherwise you sell, the council take the savings until there is nothing left to pass on.
If rent won't cover the fees then this will happen anyway.

In regards to the labour I budget 150 per day for a labourer and include materials. They usually come in cheaper to be honest.

We did this after my poor mum suddenly had to be admitted to a nursing home following a stroke. We rewired, put in a new kitchen, new carpets, and decorated where necessary. My DH fitted the kitchen, so, besides the rewiring, the refurbishment was cheap. The house did rise in value after we'd done the work, so that's also something to think about.

We rented out the house, and had a deferred agreement with the council. The main benefit was that in our area, due to the deferred agreement, we paid the council rate for nursing home fees. This was something like half the amount she would have paid as a directly private resident. (Another downside was that the small income meant she didn't get pension credit, so had to pay for eg new false teeth lost by the care home.)

In addition, is she entitled to attendance allowance? We found that by the time we'd offset my DM's state pension, attendance allowance, rent etc, when she died last year, we only owed £25k on the capital, after a couple of years in a nursing home. We are still renting out the house, as income is more important to us than capital gain.

I would do a spreadsheet if I were you, working out all the costs. I had several sheets, showing her income/expenditure in different situations, refurbishment costs etc. Good luck, because it's a very stressful time. I know that looking back, a major cost was actually the loss of my freelance income as I didn't have time to work as much because I spent so much time looking after my DM and nagging the nursing home.

Oh, also re agents, we had an awful experience with a highly recommended one. We now deal directly with the tenants, and get on just fine.

American, my third set of tenants has just moved in. The rent does more or less pay my mother's current care costs, though these will go up when she needs to move from sheltered to a home. However it is really hard work.

It has been worth it, as the flat is valuable (direct beach access) and looks much better without the 1980's touches. However I was lucky as the kitchen, though over 20 years old is white gloss and has not dated, and the carpets are plain and of good quality and came up well when cleaned. (I prefer not to give tenants new carpets anyway!)

However it is not really in a rental area. Or rather it is a summer/second home area so easy to find six month tenants over the summer, but much harder to get people who want to stay all year round. Yields are low. I agree with others, that depending on area they may not be much scope for capital gain. I sort of knew that at the time, but it was not really my decision. It is a reason to visit the town my mother lives in, so that is a plus.

I considered this for my mum's house but sadly she passed away in the nursing home before I had progressed it. I too was surprised that her nursing home fees of £1050 per week were considerably offset by her state pension, a widow's pension from my late father, attendance allowance and nursing care.

Thanks very much to everyone for your replies.

We're in the greater London area. The kitchen is pretty big but I can't remember the exact dimensions.

The rent care wouldn't cover care home fees but would obviously contribute to them.

Mimsy and Marmite - sorry about your mums. She is getting the higher rate of attendance allowance - but only because someone from the Alzheimer's Society told us about it. Someone on another thread posted a very interesting video with advice on continuing health care which I am just about to watch. Thanks for your advice - I really do need to get on top of the detail and what will be involved.

m.youtube.com/watch?v=HrpFLLwGqhs

I'm a tenant OP...how bad is the kitchen and bathroom? Is it REALLY bad? I've rented some very dated homes in the past and haven't minded at all. As long as the place is sound and warm, I don't care.

My current kitchen looks like it's from a 1970s sitcom. I'm amused every time I use it.

If you decide to rent directly, rather than through an agent, be sure to get references for your tenants (can do this online via companies that do the checks), then follow up to check them out yourself, repeat with guarantors, and make sure your landlord insurance covers rent arrears. Otherwise, be prepared for no income and a decision about whether to throw your non-existent income at lawyers to get the non-paying tenants out - a lengthy and expensive business with no shortcuts and a high risk of failure.

I'd recommend using an agent!

I'd recommend looking into OpenRent instead of an agent if you're just advertising. They'll put it on Rightmove for you, and deal with credit checks etc. Being a landlord is a big responsibility though.

Also, please be honest with the people moving in, as to your timescales for selling. It would be awful for a family to move in with the expectation that they could live there for a few years, only to be turfed out after 2.