How do we go about renting out bungalow?

squibbs25

I'm looking for some advice please.

After an accident at home 4 months ago, my nan (94) is finally ready to come home from hospital this week.
She will be going to stay with my mum for a few months (possibly til spring 2011) with a view to her living at my mums permantly.

Nan has her own bungalow and doesnt want to give it up.
(If she goes back to it she will have to have a carer 24 hours a day which she is very dishearted about).

If she wanted to rent the bungalow out what would this involve?
The property is owned outright (no loans or charges registered to it)
so i take it she wont need a consent to let order, but other than that what else would she need to sort out?
Is it hard work being a landlord?

She gets her state pension and attendance allowence. They are her only sorces of income.

What are the tax implications for renting it out?

If she did choose to rent it would be through a lettings/management agency.

Is it worth the bother renting it out or would it be a better option for her if she sold it.
As much as i dont want to see her sell her home, i'm sure she can do without the hassle of being a landlady.
Its a tough one to call.

I'm just putting some feelers out at the moment and wondered if any of you nice people have any advice to share?

Thanks for taking the time to read.

Squibbs

basilsauce

Am sure there will be other people who can give you more detailed info on the tax position etc of renting out a property, but just thought you might appreciate a few thoughts - I am renting out my 1-bed flat at the moment, and I have found it quite stressful, but maybe I am just not cut out to be a landlady!
You will need to think about whether or not you want to rent it out furnished or unfurnished - unfurnished means you will need to sell/store all her furniture somewhere - would she be happy to sell it? Do you have the space to store it at home or the money to pay for storage? Furnished means you must be prepared for it to be damaged - there will be wear and tear with even the most careful tenant and it could be quite emotional and upsetting for her if things get damaged.
I would recommend using a letting agent - they will find tenants, do reference checks etc and can offer a full management service if you require. I started off with the most basic tenant-finding service, then managed the property myself, but found I was always on edge, expecting a phone call at any moment to say that the ceiling had fallen down or the washing machine had leaked etc. and that I wouldn't know what to do about it - I guess that if you are good at doing things like that, or know good tradesmen then its not such a worry, but it has been something that has stressed me at times, so I now have a full management service, which of course means I have to pay more, but the added peace of mind is worth it for me.
I think I would say that, if you can afford it, don't do anything for a few months and see how your nan feels then - she may settle happily into your mum's and then be happy to sell, or if she still wants to keep it, then think again about renting it out.
Anyway, just a few thoughts for you - I don't think being a landlady is for me personally, but there are thousands of people who do it quite happily, so please don't let me put you off!

clutton_2

""I think I would say that, if you can afford it, don't do anything for a few months and see how your nan feels then - she may settle happily into your mum's and then be happy to sell, or if she still wants to keep it, then think again about renting it out.""

my thoughts exactly.. wait and see how nan is and how she settles.... no rush.... but do tell the insurers it is an empty house (which may become long term empty) as you may need folks visiting and/or other insurance conditions....

G_M

Lifted from a recent response I made to a similar query:

Income tax: The rent from her house will be taxable, though of course she has her normal tax free allowance. So it depends how much rent she gets, how much her pension is and what her allowance is. If she's single and aged 65 -74 her allowance this year is £9490. See here.

Capital Gains Tax. Once the house ceases to be her main residence, CGT will be payable when the house is sold. This applies both during her lifetime (ie if she needs the cash to pay for residential care etc) and on/after her death. If she sells it now no CPG would be payable as it is currently her residence. Tax free allowances for CGT are here.

If she rents the house there are also many issues related to being a landlord. Even if using a reputable agent, it can be stressful, time-consuming and problematic. And if the house is empty for a period, or the 'tenants-from-hell' stop paying her rent, then how could she pay your partners rent, so how could he pay his mortgage. True, an unlikely scenario, but you need to go into renting with both eyes open.

julie03

i would think seriously about this as lots could go wrong.

the tenant could trash the house which could be very upsetting for your nan, and what if your nan decided she wanted to move back with assistance but the tennent didnt want to move and you have to get eviction orders, another stressful experience.

i would wait till your nan is more settled and able to make an objective decision

PasturesNew

94. Seriously, convince her to sell it and spend the money on a spot of luxury for herself.

squibbs25

PasturesNew wrote: »

94. Seriously, convince her to sell it and spend the money on a spot of luxury for herself.

That's the family opinion!
Unfortunately she dont have the same view

squibbs25

MadnessOfHPC wrote: »

94. Seriously, what is it with some people? You'd let her be a landlady at that age?

Madness.

Nan is a lady whom you cannot stop doing anything!
She is very 'with it' LOL
(it was her body that suffered in the accident not her mind).
Though i can totally see your point, it does sound like madness to an extent BUT she is the one that doesn't want to sell.

Although my mum would act on her behalf if she did choose to let it out, it's what it would involve. The bungalow is solely my nan's, so i assume any tax implications would be down to nan and that's the info i'm trying to find out, also what insurance(s) she would need, or anything else for that matter.
Also if my mum acts on nan's behalf is she liable for tax or anything? (mum's retired)


Thanks for your comments so far.

squibbs25

Another question!

Would she have to register as a business for tax purposes?

clutton_2

yes nan would have to complete an income tax returns form annually if she lets out this property

yes she would have to pay tax

she would need to get Buy To Let insurance to cover her for legal liabilities

she would need to comply with all the legislation surrounding tenancies as she would be the landlord with utimate legal responsibility (unless she drafted a power of attorney so that your mum acted legally on her behalf.. but that has got Very complicated and expensive these days and she may need a solicitor to do that for her)

mum would not be liable to pay any tax - unless gran paid her to act as her agent.


As a LL of 11 years i seriously think using mum as a letting agent is a crazy idea - if nan absolutley insists on doing this, then use an ARLA registered letting agent and let the professionals do it.

tyllwyd

If your mum acts for your nan on a purely voluntary basis - she doesn't get paid, and none of the money goes into her bank account, then your mum is not getting any income so she isn't liable for any tax.

BUT if your nan is 94 and in poor health, she really ought to go to a solicitor and make sure that your mum has a lasting power of attorney to deal with her affairs, so that your mum can sort things out if your nan can't cope.

Tax - you will get better advice on the cutting tax board, but as a starting point your nan will need to declare the money to HMRC so she will need to make sure she fills in a self-assessment tax form. I don't think there will be any need or any advantage in setting up a limited company for just one rental property. You should make sure she or your mum understands all the responsibilities of being a landlord, and what expenses can be claimed against the income for tax purposes. If the rent money pushes your nan's total income (including income from savings and pension) above the tax threshold for her age, there will be a tax bill.