Becoming a landlord

[The2Ateam]

My lovely mum passed away recently so my dad is going to come and live with us.

We will be decorating their house and offering it for long-term rent.

Has anyone done this? And can you give me some top tips as to the things I need to prioritise?

Thank you.

Have you looked into the tax implications of doing this and obtained advice?

You also need to realise that even if you appoint an agent to find tenants and manage for you, the buck stops with the landlord and the legal responsibility is the lamdlord's.

There is a good pinned post on the MSE property forum which you should read.

Join the NLA National Landlords Association to make sure you are aware of all the legal implications and your legal responsibilities.

Get a good letting agent.

Get landlords insurance.

Hi, thank you - really helpful advice.

I haven’t looked into the tax implications but selling the house is not an option as my mum explicitly told me that it was to be kept until my my children were old enough to own it.

I will defo join the NLA.

Find a good letting agent and get them to find the tenants, they will also check the property to make sure it is in good repair and not being turned into a cannabis farm.

They will be able to help you make sure all the rules are carried out. Boiler serviced, carbon monoxide alarm, smoke alarms etc. The property should be professionally cleaned an anything electrical checked by an electrician.

You will need to declare all rental income to HMRC but you can claim back many of the expenses you incur.

Your children will be 18 before they can legally own the house in their names in England and Wales. If your mother didn't have a will then assuming your parents were married, your father is the legal owner and can decide what to do with the house. Is he moving because he can't cope on his own? If he lives with you you could find it a lot more difficult to get him the help he may need as he ages.

What happens when he dies? Who looks after the house? Shared ownership can be the cause of serious rifts and problems. It may be far kinder to your children to sell the house, which you will probably inherit once your father dies, and invest the money somewhere for them.

I really strongly feel that although these kinds of things are usually said with the best of intentions, shackling the living to maintaining a house in these circumstances is not on, nor is imposing joint ownership.

wowfudge thank you. Children not far off 18 and we all have wills, so no worries there. Just want to make sure we do everything we need to before renting. Thanks.

Sorry to hear about your mum but this situation sounds like a minefield. You should really take legal advice on the implications for you and your dad, short and long term.

Becoming a landlord is not a responsibility to be taken lightly as I'm sure you know. Even with a good letting Agent, your dad (as the legal owner will be the landlord), needs to be clear about his legal commitment right from the start. Fire and electrical safety and information (Gas safety certificates annually, EPC), latest copies of the How to rent guide, vetting and credit checking of tenants, protecting deposits, money to cover any potential rent arrears, maintenance, wear and tear, tax declarations etc.

There are companies as pp have said that can issue guidance but I'm not sure I'd want to foist the responsibility of this on a newly bereaved, elderly (?) parent. It might be easier all round to take advice on selling the property?

Thanks. My dad andI own the property jointly and won’t be selling it. I will be dealing with everything not my dad.

People are making out it’s a minefield, it’s not armed with the right information.

NLA will advise you on what you want to know.

I have a full time demanding job and have managed (myself) 8 BTL properties for over 15 years. You have to be organised and keep on top of the ever changing law and regs.

It’s not difficult and a good investment.

There are landlord forums that might give you better information and advice than mumsnet, as you are set on the idea.

Perhaps a place to start is to get a letting agent round... they can tell you how much rent you should be able to get, and you can ask advice about what works you should get done, the local market in terms of tenant type etc. This would be useful before you start decorating and furnishing the property as different tenants will want different furniture.

It is important to have money in the bank to do any repairs as they are needed. And make sure you check potential tenants references, credit check and affordability before letting the property, as tenants getting into rent arrears creates a nightmare for the tenants and yourself. The most important thing is to remember it will no longer be your family home- it will be the home of the people who rent it and you need to respect that, in terms of how often you access it, how you act when you are there etc.

NLA and a good letting agent. However:

it was to be kept until my children are old enough to own it. Children not far off 18

I’d be more concerned about transferring ownership, if that’s what you intend to do. Some kind of estate planning advisor needs to be consulted. Will the main residence allowance be lost for IHT purposes, for example?

You need to have a real think about plans to put it into your children’s names when they turn 18. They’ll no longer qualify as a first time buyer and if they later want to buy property they’ll have to pay additional stamp duty. It has the potential to turn into a financial burden for your children.

I'd second what the previous poster said. If it's given to your children it will also prevent them for qualifying for the 25% top up the govt give in a Help to Buy ISA, which could be worth quite a lot of money.

Do you live locally? Could you manage it yourself to save agency fees and choose your own tenants?
In my experience it's hard to find a 'lovely' agency who will manage it well on your behalf. At the end of the day they are commercial outfits who will take the first interested tenant who comes along and will do the bare minimum of work on your behalf .

There are lots of good self-management options these days. Have a look at Upad and OpenRent.
SimpleLandlords is good for insurance.

I let out five properties and manage the two that are close to me. I always use an agent to get tenants as they do the checking and make sure the right paperwork, deposit and lease gets done. An inventory is a must (this doesn’t just itemise what’s there but the condition, crucial for when the tenants leave). But after that it’s pretty straightforward.
Most people renting a house want it unfurnished, and if furnished has to comply with fire retardant regulations. You’ll need an EPC, gas certificate, hard wired smoke detectors on each floor and carbon monoxide detector if you have a fuel burner. You can self certify for fire and electrics, but make sure wiring etc is up to date. You can add to the lease specifics like garden maintenance, restrictions of use (like no businesses) and other stuff (like no caravans parked on drive for example).
I’d set up a separate bank account for the rent to go into, with your and your Dads name. Pay expenses from that account too. It will help when doing your taxes. There’s no mortgage relief. You can deduct items you replace but not stuff you buy for initial letting or preparing it for rent (like redecorating). You can deduct agent fees.
If it gets sold in the future the owners (may be your children by then) will have to pay capital gains unless it becomes their main residence first. If you give it to them (jointly or to one) that person(s) will no longer qualify as first time buyer for another property and will have to pay the extra 3% stamp duty. You can not sign over property to anyone for inheritance tax purposes if you are still getting benefit from it (in this case rent). Tax laws are subject to change however.
The house will get used hard and it is quite likely new laws will mean minimum three year leases.

Actually I would say this is a minefield, but perhaps not for the reasons it appears at first.

Thank you everyone, some really helpful replies which are appreciated.

I am only looking for tips and advice about what I need to do before I rent and not whether I shouldn’t sell the property, give to my children etc. Thank you all so much.

Quite see you don't need advice on the actual idea of letting the house, but might just add that letting is not for a worrying or nervous disposition, and the many (rightly) legalities, and even the limited legal protection for tenants, can make the process more trouble than it would seem worth.

Long term it might be worth it, short term could turn out not so.

You really do need to read up on your legal obligations as a ll. These are becoming increasingly onerous, and it may vary by council whether you need a specific licence for example. As a basic you will need a boiler inspection annually, energy certificate, check of tenants eligibilty to reside in UK, any soft furnishing to meet safety standards, deposit protection scheme, register with hmrc for self assessment, insurance, smoke alarms ... Above all you and your df need to detach emotionally from the property and be honest, redecorate and update any areas which have dated, are worn or in need of repair. A tired looking property will not attract interest or highest potential rent and may put many good tenants off.

As PPs noted you should get at least a couple of agents round to give you a rental valuation and advise you if there is anything specific you need to do to the house. Use the opportunity to ask about fees for tenant find and their management services. Generally fully managed charges around 8-10% + VAT although it can be higher.

As an inexperienced landlord I would recommend getting tenant find and then fully managed, at least initially. If all goes well you can give notice to the agents if you wish and manage yourself (check the notice period required in the contract).

Have a couple of spare sets of keys cut ready for viewings and for the tenants. Arrange gas safety checks (if needed) and an EPC.

When you start letting keep a detailed record of all of your income and expenses- group your expenses by type, eg mortgage interest, agent fees etc. It will make your tax return easier.

As someone who rented privately for a long time I personally think "accidental" landlords should be banned.

They very rarely truly understand or accept their responsibilities and often forget it's no longer their (or whoever they inherited it from) home.

You need to thoroughly learn all the legal responsibilities you will have AND let the property go to a fair degree emotionally which few manage to do.

You also need to consider if you have the financial security to cover unexpected expenses and the effects of things like brexit!

You also need to consider if your children are intended to become the owners within I'd say less than 5 years that

A that's a pretty Insecure situation to potentially put your renters into

B that legally and morally you can't just boot them out when you choose!

First and foremost
Get a bloody good letting agent, if you’ve got a big name like Knight Frank/Hamptons/savills in your area go for them every time.
Read up on the costs of getting the property ready, you’ll need an EPC, GSC, PAT cert and EIRC, as well as legionella risk assessments. This could realistically come to £400ish.
If the property hasn’t had much work done you may find you need to rewire it.
Do you have enough spare to replace a boiler or pay for an out of hours contractor at the drop of a hat?
If you’ve never done it before paying a 10% management fee is well worth it