Renting house out to the council

mancitychick

My Mum is considering renting her house out, but instead of renting it to a private tenant she is looking at letting it to Hammersmith Council.

They rent it for a fixed 3 year period and the rent is paid to you by the council each month, therefore you are sure of your rent each month (unlike the private sector). The rent is not as much per month as you could potentially receive of a private tenant.

Has anybody any experience of this, either good of bad? Or any possible downfalls we haven't thought of.

PasturesNew

I phoned the council for this to find out the figures - and so did my friend.

For my house they were offering way too little, a lot less than the mortgage and about half what the private rental would be for that area.

My friend, who had in my opinion a much more rentable house, was told by the council they weren't looking for his type of property.

So before you even get excited it's worth calling the council and asking if they're interested in that sort of property in that road/area - and how much they pay.

The major downfall at the moment is tying the house up, not being able to touch/sell it for the 3 years minimum, while house prices are falling.

mancitychick

PasturesNew wrote: »

I phoned the council for this to find out the figures - and so did my friend.

For my house they were offering way too little, a lot less than the mortgage and about half what the private rental would be for that area.

My friend, who had in my opinion a much more rentable house, was told by the council they weren't looking for his type of property.

So before you even get excited it's worth calling the council and asking if they're interested in that sort of property in that road/area - and how much they pay.

The major downfall at the moment is tying the house up, not being able to touch/sell it for the 3 years minimum, while house prices are falling.

She has already spoke to the council & they have been to see her house and they do want her type of property. It is just a case of my Mum sorting out the p/work.

Oh on the value front she has had 3 valuations and ithas dropped in value, the 3rd estate agent. Hope the market will be more stable in 3 years.

Thanks for your comments.

mancitychick

I should of said privately the letting agents have suggest 1100 per month, dropping to 1000 per month if no interest. Council will pay 740 per month. I know its a big difference but my main worry was if she had tenants that stopped paying the rent or empty periods between lets she would struggle to cover the overheads. Whereas the council rent covers mortgage, 24hr boiler cover with BG & landlord insurance and leaves her about £170 left over.

Of course it would be nice to have a big fat profit each month but the security in guaranteed rent is better. She has been put off slightly as must peoples reaction is ooh not to the council it will be a reck when you get it back. Personally I think that could happen with private tentants too.

nmiah786

Some councils pay a lot more then the rentals available privately (considering the EA fees etc).

Wesminster is one which I know of, they even give you a bonus for letting to the council (was about £1000 last year).

poppysarah

mancitychick wrote: »

Of course it would be nice to have a big fat profit each month but the security in guaranteed rent is better. She has been put off slightly as must peoples reaction is ooh not to the council it will be a reck when you get it back. Personally I think that could happen with private tentants too.

If it gets wrecked don't the council put it right? Who does repairs? Gas checks etc?

Guaranteed rent is a great thing - plus you can benefit someone much more by allowing a lower rent.

mamamia

mancitychick wrote: »

My Mum is considering renting her house out, but instead of renting it to a private tenant she is looking at letting it to Hammersmith Council.

They rent it for a fixed 3 year period and the rent is paid to you by the council each month, therefore you are sure of your rent each month (unlike the private sector). The rent is not as much per month as you could potentially receive of a private tenant.

Has anybody any experience of this, either good of bad? Or any possible downfalls we haven't thought of.

We leased our property to a council in East London for several years and we have no regrets at all. It was initially for 3 years but we renewed the contracts. As you have said, the rent is so small compared to what the EA would offer but it was regular and we had peace of mind. It is better you lease the property to them unfurnished as in our case, they did not replace any furniture that was missing but they gave our property back to us in a good condition. It is also worth knowing that you have no control of how often the council changes the tenants in your house or what the tenants are up to.

If all your mum is after is peace of mind, I will say let her go for it. In our case, the rent did not cover the mortgage, but we were happy. We only took our property back as the council was not renewing the contracts nor renting from private landlords anymore.

mancitychick

mamamia wrote: »

We leased our property to a council in East London for several years and we have no regrets at all. It was initially for 3 years but we renewed the contracts. As you have said, the rent is so small compared to what the EA would offer but it was regular and we had peace of mind. It is better you lease the property to them unfurnished as in our case, they did not replace any furniture that was missing but they gave our property back to us in a good condition. It is also worth knowing that you have no control of how often the council changes the tenants in your house or what the tenants are up to.

If all your mum is after is peace of mind, I will say let her go for it. In our case, the rent did not cover the mortgage, but we were happy. We only took our property back as the council was not renewing the contracts nor renting from private landlords anymore.

Thanks for this, this is what I was hoping to hear - poeple with good experiences. Just thought if loads of people said we did it and it was a nightmare, then I would suggest my Mum to think again.

hethmar

I think its a great idea - you get a guaranteed payment, you get the decorations etc. done for you, no admin work and you get the house back in one piece. I think its a good deal for your mum.

PasturesNew

If you want an easy ride, then they take it from you and you can forget the property entirely. They pay each month (whether it's empty or not) and when they hand it back to you it's in the same condition as when you handed it over.

In a falling market though, it's worth thinking about how the market will perform in the next three years and what you're trying to achieve.

e.g. if the market falls by 20% in 3 years and stays there for another 2 and if the house is worth £250k now, that means it'd drop by £50k. So you're swapping £50k now for £170/month for 36 months (£6120).

It might be that one question you have to ask yourself is: "what are the chances of the house being worth more than £6120 less in 3 years' time?"

If, on the other hand, she wants to hold onto the house for you to have it in 20-30 years' time, then this might not bother her if it's THAT house she's keen to pass on (uniqueness/memories)