Is renting out a property a nightmare?

[rentaldilemma]

My mum is soon to move into an annexe to our house. She has a lovely flat, the sort that gets flyers through the door asking if she's interested in renting it out.

We've never let a property before, but it does seem sensible-mum is pretty sure she wants to move, but if we rent out rather than sell, she can feel as if she hasn't burnt her bridges. Leaving it empty seem a bit of a security risk and also a waste.

She thinks it will be a huge horrible nightmare to have a rental property, based largely on one friend's experience with a very different property and them being hands on with the day to day issues.

If we used a management company, am I naive to think it could be fairly or almost completely hands off for mum, and is really as we would need to help with anything like that?

Hoping someone at least has had a fairly hassle free time!

Not a nightmare, but don't expect to make any money off it if you take into account your time, taxes, capital gains etc. For hassle free a management agent would help, but massively increases the cost. And get comprehensive landlord insurance.

My MIL died a couple of years ago and we decided to rent out her flat. We use a management agent which helps a lot. They found the tenants, did all the checking of references etc. All we’ve really had to do was source landlord insurance. The property will need both an electric and gas safety check before renting but the agent should be able to help. We have had a number of small repairs since the tenants moved in but again it’s just been a case of authorising with the agents.

In your situation it makes perfect sense and would be a good idea to make sure everyone is happy with the new arrangement. Just realise that it’s not a money making vehicle but a practical one and let the agent manage it as well if you don’t want involvement with sorting out any of the issues that arise. We let our parents house for 6 years and even though no mortgage by the time the gardener had been in throughout the summer and repaint twice plus other repairs it broke even but we were too “kind” with the rent as we trusted the tenant and charged a lowish amount for peace of mind. In your situation I would do it again. But I would never do a buy to let.

We haven’t had any issues Renting out our old flat. Our flat was in good condition and we regularly paint it and maintain it between tenants. We lose money on it but we bought it when prices were high and it’s still a repayment mortgage. Our agent deals with everything and arranges all certificates, safety checks and sends us the bill. He puts forward tenants for the flat but also gives us his personal opinion - this guy is great on paper but I just got a funny vibe off him or something he said doesn’t add up. Our flat is only 1 bedroom & boxroom so it tends to be single professionals. Our current tenant has been in the flat for over 2 years.

Just maintain the flat and be prepared for unexpected expenses. You might need to replace a boiler or hob or something.

I rent out flats and don’t have any issues. I used to use a managing agent but I found them more hassle than they are worth. So now I manage it myself and it takes minimal time.

These replies are very helpful. A bit of me is surprised that there isn't money made-I'll be honest and say that I thought it would be extra income for mum. She is mortgage free so maybe that makes a difference? Or maybe it's just showing my extreme levels of naivety!

Cayrol-are you local to where your flats are? Our problem is that we are a two hour rice away so couldn't just pop in and do stuff.

I've rented out a flat for 16 years. Mostly it's pretty straightforward.

My advice would be use a good agent and opt for the full management service. Once you've been letting a while and understand what the agent does you might want to switch to doing it yourself. I personally just prefer to use an agent and I rely on them to keep upto date with legal requirements and sort out general maintenance on my behalf.

You also need to change your mindset so you no longer regard the property as your mum's home. It will be a rental property. I used to live in the flat I let and it took a while to stop regarding it as mine (as in my home) and to regard it as a property investment instead. Tenants won't look after things quite like your mum would have done and you need to be ok with that right from the start.

Renting the flat has been a good thing for me.

If it's mortgage free and in good condition I don't see any reason why you wouldn't make a good profit on it to provide income for your mum.

Renting regulations are tightening up and there are now several legal obligations. If you get a rogue tenant it will be extremely stressful. You can't rely on the Agents to manage properly and, even if they do, the legal buck stops with the landlord so they need to oversee that the Agent is putting the contract in place correctly , serving the right documents (EPC/How to Rent Guide/annual gas safety certificates etc) correctly. New rules on Section 21 notices and electricity regulations are coming in next year. All income had to be declared and self assessment form filled in or an accountant can do this at extra cost. She'll need ££ set aside to cover decorating, wear and tear, repairs. I would also advise membership of the National Landlords Association so she can keep up to date with the regulations. Landlord Zone might be a good place to browse.

It's a hassle and not one I'd like an elderly relative to take on personally. Sell up and invest the money elsewhere would be my advice.

We became landlords as we kept my husbands flat when we bought a house together. We rented it for 5 years although we've now moved back in while our new house is being renovated. We'll rent it out again when we move into the new house.

We manage it ourselves but live down the road and have always known our tenants before they became tenants - eg knew through work. So we've been fortunate in that sense.

Ours isn't a massive money spinner (other than being in London so capital value increasing) as the mortgage is about 50% of the income and interest is no longer tax deductible plus my husband is a higher rate tax payer. But if it breaks even/doesn't cost much we're happy as it's a good asset to have in London and our DC may live there in the future.

If your mum's place is mortgage free and doesn't need expensive improvements (boiler/new bathroom/new kitchen etc) in the near future then I think it would be a good investment. The PP who said you have to treat it as a rental is correct but now we've moved back in ours feels like home again!

IF she is mortgage free and IF she gets a decent tenant and IF the flat is in good condition in the first place then of course she will make money. We've rented our old flat out for years and not made much profit, but we have essentially paid off a mortgage, so we've always been happy with that.

We've never had a problem with tenants but to be honest we've both always worked for big companies so have been able to find tenants with a personal connection. For those reasons (and because DH is handy at DIY) we've never gone through an agency. In your case I would.

It won't bring untold riches and you should always be prepared for a nightmare tenant who will default and have to be evicted, but 9 times out of 10 it will be fine.

We rent out a flat, mortgage free as well. It does earn some money to be honest.

Expenses are;

ground rent, service charge (equivalent to approx 2.5 month's rent p/a).

Insurance (make sure you get proper landlord insurance)

Electric and gas safety checks.

Repairing breakages (think new boiler/replacement carpet after a messy tenant/electrical work). Most of these are one off expenses, we've had an amazing tenant the last few years who really looks after everything, lets us know if we need to send a plumber round before there is a massive leak etc. Its a good idea to build up a slush fund so any of these can be paid out of that rather than having to panic about unexpected expenses.

We could increase the rent but we don't need the money and, as our tenant is amazing, it's worth less income for less hassle as we don't want to price her out of the flat.

If you use a management service they charge between 15-20 per cent of rent per month. If you rent it out yourself you will make a profit. I rent out 6 houses and manage them myself.

Before a property is let you will need gas and electric certificates. You can ask any had Safe person and any qualified electrician to do these. They cost about £50 each. They last got one year. You will need to.reD gas, electricity and water metres whilst tenant is present. Get them to sign the figures at bottom of lease. You must provide tenants with s copy of How to Rent which explains a tenants rights. You need to take passport number for migration check. Take a bond of 1 cm and put into deposit scheme. Get tenant to set up direct debit got rent. You.must provide each tenant with s copy of the lease and sign it and initial each page. You keep a signed copy too. You will need to endure fire ala on each floor and carbon monoxide monitor. Get tenants to sign to say all of these things have been provided. You have 24 days to get deposit bond into scheme who will write to tenant to confirm they hold the bond.

Your Mum can earn £12,500 per annum before she pays income tax. Any repairs you must get s receipt for work done or replacement white goods. Do not lose receipts as these can be written off against tax. You should always ask to see last 2 bank statements and previous accommodation reference and latedt pay slip to prove working. Be clear on contract if tenant can have pets or not, paint property or not etc.

You might find a management service helpful.

Just to add: your mum has to be prepared to not see it as her home any more. A tenant will change the way it looks and they rarely look after a flat in the way you would. So expect redecorating as a fairly standard requirement. Think about windows - blinds of curtains? What white goods are you leaving? What about any furnishings and do they meet fire regs? Does it have built in wardrobe?

I do rent out a flat and a house. I’m aware my house needs a new kitchen! In a house I used to rent out I replaced the boiler, did a garden make over, replaced fencing and replaced the front door. I still made a profit but when something goes wrong, your income takes a hit. As does any time without a tenant.

Fees do add up if you don’t do it yourself but it’s a lot easier to be distant from management of it. I pay 11%. Not 20%. That’s way too high.

I think CGT would be payable upon any sale as it’s not your mums main residence and she won’t be paying the bills at the flat. I would take advice on this. At what date do they calculate the gain? When she moves out or when she bought it? Not sure but you need to know!

You should also work out if she should sell and get a better return from having a managed investment portfolio. This could be better, but you need financial advice but if the flat is worth a lot, this could be less hassle. Is she going to move back into it? Also check if you can let it out. Any restrictive covenants?

Me and dp have a rental each. Both are mortgage free. We make enough profit to pay all of our bills so we can now work part-time. Plus they have gone up in value by many thousands. They're going to be a good chunk of income to add to our pensions when we retire in a couple of years. We've never had any voids, always gone through an agency and had decent tenants so far and we always allow pets. It's not a day to day job at all.
Smoke alarm checks, electric (only from 1st July 2020 for new tenants, next April otherwise), epc every 10 years, landlord insurance, inventory (we do our own) and you will have to pay the bills on any voids eg Council tax.
Keep receipts and records of all spends.

My MIL did get income from a flat she rented out. She converted what was a shop and living accommodation above into 2 flats when she retired. She rented out upstairs and did get an income from it.

Tenants were usually long term (think she had 5 tenants in 20 years). 1 of the 5 tenants ended up owing rent and left the flat in a bit of a mess but all others were good. Flat was mortgage free, she used an agent and had an accountant to do her tax return.

Looking at her accounts she probably received 60% of the max rental income, the rest went on fees and repairs.

We rent out our elderly aunt's flat for her. We no longer use a managing agent as they cost a lot and just phoned us up everytime there was a job or issue and charged a whack on top if we used their recommended tradesperson, they collected the rent and there was a delay with it being passed on. However, we DO use an agent to find the tenant as it is easier to get them to show viewers around, do the contracts, do credit and affordability, immigration checks etc. and they pass on details of potential renters situations so we can choose our preferred person. It costs about 80% of one month's rent for the service. We tried to let it ourselves but just got timewasters who couldn't afford the flat when the checks came back and then cut up rough or got upset when we wouldn't rent to them.
We organise the gas safety check each year, public liability insurance (the flat is in a block with its own buildings insurance), check each month the rent has been paid and put the deposit money in the deposit protection scheme. We also pay all the block's service charges and ground rent etc.
My aunt has a leasehold flat so permission had to be granted to let it by the freeholder/managing agents.The leasehold for the block also has a no pets clause which we make everyone aware of before renting.

We haven't had any major problems, tenants are a bit harder on appliances and bathrooms. We've had to replace appliances and some flooring more than in our own home. My aunt won't be returning to the flat and we did a very light refurb to make it more trendy/ modern before letting and let unfurnished so aren't emotionally attached to anything. We leave the tenant alone but get a tradesman in quick for any issues.
The money is really useful for my aunt to help pay for extra care and contribute to living with her younger sister.

I hated being an accidental landlord when circumstances meant I had to rent out a flat in between purchases, and it has put me off ever buying a btl property. I used an expensive letting and management company but as a pp has said it was still a nightmare with insufficiently checked tenants, costly repairs etc. I certainly didn't make any money on it (although that wasn't the intention) and sold as soon as I could. I think it can work if you have plenty of time and resources when things go wrong, but in my case it was very stressful.

Check out the MSE forums...the housing one specifically.

There are some excellent stickies with guides to be landlords with everything you need to consider before you take plunge

England:

• you need insurance for contents (presumably not buildings as this is a flat?), legal expenses, rent guarantee, malicious damage, tenant home emergency
• you need gas safe annually (if gas appliances) and electrical check five yearly. (not annually as someone said)
• you need smoke alarms tested and working
• you need deposit protection
• you need to do right to rent checks, give how to rent to the tenant, epc, any referencing to ensure insurance works
• everything needs to be working and everything you provide, you need to fix
• you need an inventory if you want any chance of the deposit back
• you need to be contactable if things break. You being away or in hospital is no excuse if the boiler doesn't work.
• you need enough spare money for voids, non payment, fixes.
• you need to do a tax return

you need to distance from the attachment to the property but still realise that the buck stops with you. Stuff up any of the above and you could be stuck with a non-payer/dealer/wrecker, a big fine or both. Bad tenants aren't that common but they are out there, and some of them can spot a clueless landlord a mile off.

believe me, you need an agent - decent ones know the local area and will filter out the people you don't want.

In your place I would sell it. You'll get very little income from the money but you'll have zero hassle. Landlording is either very little trouble or a huge amount and you need to be prepared for the latter.

I’m a hands off landlord of 6 properties. Most are mortgage free. I do make money annually but there are a lot of costs involved and fewer can be set off income for tax purposes. I pay my agents around 9-10% to deal with absolutely everything. I also pay an accountant to do my tax return as it gets complicated.

I think you’ve got to plan for the worst: does your Mum have sufficient savings to get the rental up and running: gas and electric certificates, insurance, possible decorating, storage of furniture if to be let unfurnished (preferable: less to replace!). Could the potential income/savings after expenses cover the cost of A large thing like the boiler going kaput? Could she cover legal expenses if she had to evict non paying tenants? Could she refurb/redecorate a completely trashed property? Does she still have an emotional attachment to the property: can she deal with people not treating it nicely?

People will always rush in to say you won’t make any money out of it. If that were the case, would there be 2.5 million landlords in the U.K.? . As others have said, you need to go into it with your eyes open, make sure you are legally compliant. Good resources are the landlord zone forums, and the NRLA which costs around £100 per year to join and for that you get a helpline, and access to loads of resources including downloadable tenancy contracts. But if your aunt has no mortgage, and the place isn’t a can of maintenance worms you should make an income out of it, albeit maybe not a huge one. I have done it, accidentally at first and then through choice. There have been some very stressful times especially in the beginning ( water escape and leaking floor to sort out on Boxing Day was a highlight), but equally things can tick over quite nicely once all the property’s issues have been ironed out.

Sorry, your mum not your aunt.

I guess part of the reason for renting it out is to keep mum's capital and to potentially allow her to make money if the value increases.
But I don't think either we or she would want to rent it out for no profit.
The going rate for her flat at rental, looking at others in her building, seems to be nearly £2k per month. She surely wouldn't lose all of that in costs, even with a management company on board?