Renting out property or hang fire - advice/tips please?

pawlala · 9 January 2010 at 1:02PM

Hi all!

I've been thinking about renting out my current property for a while now and decided that my new year's resolution is to find out about what it involves. Have rented in the past, but never been a landlord before.

BACKGROUND:

I have lived in my property for almost 10 years since new and it has been on the market for 24 months but haven't managed to sell it despite reducing the price by 10%. But, I want to move to a larger property 20 miles away sooner rather than later because of schools&work. I can't see any offers on the horizon unless I reduce the price (again) which I don't particularly want to do. There is negligable mortgage left on the property (see signature) so for all intents and purposes I own it 100%.

Properties for let nearby tend to go very quickly - next-door-but-one has been a rental property for as long as I can remember with a regular turnover of tenants. I can't remember over the last 6-7 years a time when there has not been anyone in it for more than a month or two. There haven't been many house sales recently in my immediate postcode.

NEXT STEP?

Is becoming an accidental landlord a good idea or is it better to hang fire and reduce the price of the property even further?

I would rather use a letting agent if I were to rent the property out (as the properties around here do). 10% commission - is this right? Any advice about what to look out for when engaging one?

Is it better to rent out furnished or unfurnished? Would it be reasonably to say that the definition of unfurnished is no furniture but white goods only? What would the difference in rent be reflected as with the two? If comparably properties in my area are £500-600pcm furnished, then what is a reasonable rate for unfurnished?

Have I got an advantage with not needing to buy-to-let, having already paid off the mortgage on the property? Investment wise, am I in a good position to take advantage?

How does council tax, bills and ground rent etc work?

And of course, nightmare tenants. Should this put me off? If a reputable letting agency is used, should all their checks give me confidence that I won't face too many problems?

I have considered CGT and PPR already and as I have been living in the property as my main residence I think I'm okay with that area of knowledge. As I have lived in it for nearly a decade I think I am in a good position to avoid CGT for the short term?

PHEW!

Lots of questions I know, sorry! I'm sure I'll think of more. If there is more info needed before you can help please let me know. Many thanks in advance for any advice you guys can give!

PL.

James_N · 9 January 2010 at 1:19PM

From one who knows.

Negative side:

If you are not ready for the work, the legal responsibilities or the potential heartbreak, don't rent.

If you don't really need the money don't rent.

If you don't want to take any risks, and are not prepared to pay commission and charges and insurance to cover all eventualities - don't rent.

Positive Side
Do your homework. ((if not Scottish = deposit schemes) / insurance / mortgagee agreement to let / Council Tax / your tax, full inventory etc, etc ...

Set it all up properly

AT A MINIMUM get a solicitor to draw up an agreement (renter pays costs of this). Don't get a DIY pack if you don't know what's what.

Use an agency to get a good tenant, who has been checked out.

DO NOT take anyone not in guaranteed full time employment (sorry folks that's life!)

Take a MINIMUM of SIX weeks deposit (so they cannot walk away in the last month with a month owing and damage to whistle for - I've been there)

Even then, be ready for a bit of bother. Tenants have high expectations and sometimes a low level of respect for another person's property. This can appear to the landlord to be unreasonably fussy - and often is.

PM me if you want some horror stories to put you off.

BitterAndTwisted · 9 January 2010 at 1:35PM

A negligable mortgage is not the same as no mortgage. If you're considering letting you will need permission from your lender.

There are many, honourous responsibilities when being a landlord so you should consider joining a landlords association and getting yourself on the landlordzone forum to read up about all of your responsibilities before you embark on what could be a risky venture.

Generally, unfurnished attracts a lower rent than furnished and most tenants will expect an unfurnished property to include white-goods but anything you supply will be your responsibility to maintain and repair just as it is when letting fully-furnished, but what is included is not set in stone. You will need to do some local research to know what a fair rent in your area might be.

If you choose to let through an agent please, please do some research on them and take up references from other landlords as no-one needs any professional qualifications or to belong to a professional body in order to set up in business as one. It appears that many, many letting agents are ignorant of the law, know nothing about any Landlord & Tenant legislation and don't always credit-check and take up references properly on behalf of their landlords either. It's not unknown for some letting agents to take deposits off tenants, not lodge them in the statutory deposit schemes and then either go out of business or skip off with the cash. This then becomes the landlord's headache to cover.

Tread very, very carefully!

pawlala · 9 January 2010 at 1:59PM

BitterAndTwisted wrote: »

A negligable mortgage is not the same as no mortgage. If you're considering letting you will need permission from your lender.

thanks for the info

I will need a second mortgage for a new property anyway so I could pay off the negligable sum remaining at that time. Thus eliminating the need for said lender's permission on original property?

BitterAndTwisted wrote: »

If you choose to let through an agent please, please do some research on them and take up references from other landlords as no-one needs any professional qualifications or to belong to a professional body in order to set up in business as one. It appears that many, many letting agents are ignorant of the law, know nothing about any Landlord & Tenant legislation and don't always credit-check and take up references properly on behalf of their landlords either. It's not unknown for some letting agents to take deposits off tenants, not lodge them in the statutory deposit schemes and then either go out of business or skip off with the cash. This then becomes the landlord's headache to cover.

I have a couple of estate agents in mind, established in the area since the 1960s and have high street branches. They seem to have many boards up in the past, both sale and rent. They also have a letting and management service and deal with repairs/maintenance through their approved subcontractors. They are both members of RLA and approved by NALS. Sound better?

pawlala · 9 January 2010 at 2:02PM

James_N wrote: »

AT A MINIMUM get a solicitor to draw up an agreement (renter pays costs of this). Don't get a DIY pack if you don't know what's what.

Would I still need the services of a solicitor if a reputable estate agent were to do the agreement on my behalf?

G_M · 9 January 2010 at 2:20PM

There are MANY things you need to do, and to understand. Posting a question here and getting bits and pieces of information is NOT the way to start.

Get a good book on letting properties. A decent bookshop or your library.

Go to Landlordzone and browse the site / read the forum.

Join a landlords association like RLA or NLA.

Talk to a good agent - one who is a member of an association like ARLA.

Read the Shelter website - a wealth of info, a lot of it from a tenant's point of view but it teaches you your obligations as a LL and shows you what tenants might expect/demand/have a right to.

Would I still need the services of a solicitor if a reputable estate agent were to do the agreement on my behalf?

No, but still check it against against all you've learnt from the above, and against other examples (free off the web) - and you can get reputable contracts from the LLs associations above.

I could pay off the negligable sum remaining at that time. Thus eliminating the need for said lender's permission on original property?

Correct.

I have a couple of estate agents in mind

Ask for references/contact details form existing LLs on their books to see if they are happy! Mystery shop them by posing as a tenant to see a) how you are treated and b) what they charge tenants (tenants who are fleeced by agents start out begrudging the rental and blame the LL!)

Have I got an advantage with not needing to buy-to-let, having already paid off the mortgage on the property?

Not necessarily! Mortgage interest is tax-deductable. Without a mortgage you will pay more tax! But yes, a buy-to-let mortgage would be at a higher rate than a residential one on your new house.

BitterAndTwisted · 9 January 2010 at 2:21PM

No, you probably won't but you should see a draft copy of any rental agreement they have on file and check it yourself. This is why you need to acquaint yourself with LL & T acts as any agent is purely acting on your behalf and if the agreement is incorrect it will be you who will have to face up to the consequences. Hence joining a landlord's association. This still wouldn't deter me from getting references from landlords who the agents act on behalf of and if they are reputable they won't be surprised by you asking. Never forget that they are going to be responsible for protecting the most valuable asset you will ever be in possession of.

dopester · 9 January 2010 at 2:27PM

As the great Bard once said 'two dwellings will cause thee problems thrice fold'.

Don't come looking for sympathy from me on the forums, when you see the house you rent out, and the bigger home you purchase, crash significantly in value.

pawlala · 9 January 2010 at 2:48PM

BitterAndTwisted wrote: »

Hence joining a landlord's association.

Are the RLA and NLA much of a muchness? Recommend one over the other?

clutton_2 · 9 January 2010 at 3:31PM

national landlords assocation is the biggest - the one i belong to - their joining fee is tax deductible, you also get discount BLT insurance (Eeeesential) and many other perks including a legal helpline to answer all your problem questions

An ESTATE agent is not the same as a LETTING agent - dont use an established EA who has in recent years become a LA as they are 2 entirely separate businesses...

look on local website for dedicated letting agents, ask how long they have been in business... (the longer the better) ask how many tenants they have on their books, and how many they had to evict via the courts last year - (smaller number the better)

Ask which deposit protection scheme they use

Ask who they use for their energy certificate..

ask who they use for their LGSC (*landlords gas safety certificate)

pawlala · 9 January 2010 at 4:36PM

thanks clutton

Renting out property or hang fire - advice/tips please?

What should I do given my circumstances? 11 votes

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free