Renting out to rent? What do I need to think about

[Howcoldmytoes]

We are struggling with distances to work and school. But, we are keen to keep our current house (don’t want to pay more stamp duty, are near my husband’s family and various other things)

So, we are thinking about renting our place out and renting another.

I know that we will have to rent somewhere tiny, as the tax man will take such a chunk of the rent paid to us. Bastard. I have posted on here about this before, but there really seems no way around it.

So, aside from the tax man treating us like greedy landlords rather than normal people who have a massive mortgage on a family home (bit bitter), what else do I need to think about?

Landlord tax?
Inventory?
Safety certificates for things?

Sorry to waffle, any insight would be great, thank you.

Consent from bank if mortgaged
Who will deal with repairs when things go wrong
Are you going to find a tenant yourself or use an agent (beware letting to people you know, this could be trouble further down the line)
Landlord insurance
Gas safety checks
If furnished - are soft furnishings fire retardant with tags
Who’s name should rental income be in - be tax efficient!

Ditto to not renting on an informal basis to friends/family.

Without exception, everyone we knew who did this (all expats in the Middle East) had major problems, from refusing to pay rent, to trashing the place, to refusing to,leave when they needed the house back. And without exception they had never believed their friends/relatives would do this to them.

There is plenty of info online for landlords - safety certs., the need to register the deposit, tax, etc.

Be aware that the bank will likely bump up your interest rate as part of your consent to let.

Yes to LL insurance, and if the property is ever empty for thirty days or more then you will need specialist insurance.

Decide if you’re letting furnished or unfurnished, and if you will provide appliances.

Decide if you will manage the property yourselves. Possibly consider taking out LL boiler cover etc.

You need an EPC rating E or above to grant a new tenancy now.
and be aware of the
www.gov.uk/tenancy-agreements-a-guide-for-landlords/tenancy-types

www.gov.uk/government/publications/homes-fitness-for-human-habitation-act-2018

and S11 of the Landlord and Tenant Act
www.legislation.gov.uk/ukpga/1985/70/section/11
for starters...

What is you ownership position? The only reasonable way to own rental properties is through a company. Owning a second property as an individual leaves you open to all kinds of risks-personal liability if your tenant has a accident in your property, potential to increase your tax rate, catpial gains tax, inability to deduct interest and so on. If you can’t move it into a company I would suggest just selling it.

even optimistically I would suggest you work on 10 months of rent is your income but if anything goes wrong … landlord insurance is higher & covers less your garden is extremely unlikely to be looked after. Even than, sadly, tenants will get into debt, for whatever reason, & some will treat your property inconsiderately or carelessly, or downright wreck the place & it can cost enormous sums to fix

Gas safety certificate
How to rent booklet
EPC
Above docs must be given to tenants or any s21 will be invalid.
Would also suggest an electrical safety cert as this will be law next year
Find a good agent from whom you can also buy landlord insurance then if the rent isnt paid or property gets trashed your income doesnt take a hit.
Permission from mortgage co
Agent should deal with inventory and put deposit in a scheme and serve prescribed information.
Read up on the law and your obligations. ARLA do an online clurse i believe.
Let unfurnished and go into storage. You will get a much better class of tenant. Dont letto HB or UC as it will invalidate ll ins. Ditto sharers and i always avoid people with children as they are too heavy on the decoration and too much wear and tear.

An agency will charge about 8-10% plus VAT to find you a tenant. 5-8% plus VAT to manage it. You can download a lease for small fee or agency can do it for a charge. You can deal with deposit (it must be held in a special account) as agent will charge you monthly for that (it doesn’t actually cost anything to do it yourself). Be sure to add in any extra instructions/liability warnings about certain things (like if you have a pool, boiling water tap, trampoline) to cover yourself. EPC, inventory, gas safety certificate all extra costs. I don’t pay more for landlord insurance. Everything must be in working order. It must be super clean. You will probably have to paint it before letting it once you move your own stuff out. I would not form a company for just one property - I let four and it still isn’t tax efficient for me to do it as a company. It really is a bummer you can’t deduct mortgage payments, and you can’t deduct work for getting it ready to rent but can if replacing like for like if something breaks down while rented out. Most house renters want it empty. Some tenants are great some will be so nit picky it will drive you mad (benefit of having someone else manage it). You may find you are just covering your own rental costs with the income but it might be worth it in the short term to hold on to your house.
Up side is they pay council tax!

Carbon monoxide detector if you have a wood burner plus hard wired smoke detectors on every floor.

Your bank will only allow you to let for a limited time (mine was 3 years) after that they'll require you to switch to a buy to let mortgage.

You need landlords insurance.

Electricity and gas safety certificates.

Carbon monoxide and smoke alarms.

Do regular inspections. Think carefully about how you plan this situation to end. I let my flat to rent elsewhere and got caught out by an awful tenant who trashed the place, and a letting agent who'd kept it from me. When the tenant left I had to move back as I couldn't afford to have 2 places. It cost me a fortune to get back up to scratch. So have a plan and keep a reserve of cash for repairs and redecoration.

Do an inventory and photograph everything.

Use an escrow service for the deposit.

Only go ahead if you are sure that you can disconnect emotionally from the property and stop regarding it as your home while it is let. It can be hard, especially if you intend to move back in one day.

The agent i use charges a flat fee of 600 for a tenant find, 100 for an inventory check in plus VAT, and please, if you have never done this before, find a good agent, as the capacity for getting it wrong, when you are ignorant of the law and your responsibilities, are huge. Managing it yourself is easy. You need a plumber, and an electrician you trust who will be happy to go into the property, remedy the issue, and send before and after photos. You must do a settling in visit, 6 and 12 monthly checks. The purpose is to check there isnt a cannabis farm, or people in the property who aren't the tenant. Plus a good check around for maintenance issues. If you aren't a confident professional person with full and complete knowledge of the law and your obligations, and can't bring yourself up to speed very quickly, don't do it.

Oh and dont download a tenancy agreement from the internet if you don't know what you are doing.

I’ve been doing this for 4 years.
First consent to let, when that deal expires it will go onto a buy to let mortgage if you choose you remortgage (might be forced to do when current deal expires- check with bank).
Tax not so bad as long as you declare it, can claim for agent fees, management fee, gas safe, smoke alarms, decorating etc.
Potential issues are if you decide to sell it without moving back in then will be subject to capital gains tax, you will get private residence relief but the government is abolishing the private renting relief next year.

Watching

Do you need to let HRMC know from the day you start to let property? Or just at the end of the financial year?

No, sometime during the financial year ask them to register you for self assessment.

Many thanks all of you. We sneaked away to Valencia for the Bank Holiday, so sorry for the delay.
Will read all of your comments thoroughly.
We have rented a property out before, but were living abroad, so the tax rules were different. We do have a couple of interested tenants already and would have a formal tenancy agreement in place. Time to weigh things up.
Thanks again.

Rent it out through a good letting agent, they will know all the laws, checks needed and hold the deposit. They will also check the property to make sure it is being maintained correctly, no cannabis farm for example. In the event of problems they will be first in line to resolve the situation. Agents have electricians, etc to sort any incidents. You will have to pay them.

As said above you will have to get permission from the mortgage holder.

Just another quick one, does anyone know if it's still possible to roll over losses to the next tax year? The rules seem to change so often! Thanks