Help make a decision to rent or sell inherited house

Dazza

Hi all,

Was hoping for some of your expertise with what to do with a house we have inherited.

Unfortunately my MIL passed away last month and we are now in the process of having to deal with her estate. Basically my wife was an only child and has been determined sole beneficary, a will was left stating this and we are the process of getting probate as a property is involved. It is not anything substantial and everything when totalled including the house and remaining accounts etc will come in well below the inheritance tax threshold.

Our dilemma is what to do with the house. We had an estate agent out today to value it and she estimated that we would get around 65000 for it in the market. She said that if we considered renting we should be able to get 425 per month for it as well. From reading here as a potentially new landlord it could be quite daunting but I am wondering if we should still consider it or just sell up. We could be prepared to try renting it out and selling in the future when the market is more buoyant, would this mean would we have captial gains to pay on it?

On our home we stil owe 163000 and have 20 years left to pay it . My job is reasonably well paid (below 40%) and my wife works part time earning around 8000. I am presuming if we rent the house we have to add any rental income to our overall earnings for the year, is this straight forward to do? Would this be better added to my wifes income/mine or joint? Any pointers, guidance, recommendations would be welcome.

Thanks,

Dazza

BitterAndTwisted

Becoming a landlord is running a business. A business which you have no experience of, so are probably unaware of any of the risks, responsibilities (which are many) and the pitfalls.

Unless you have the time and inclination to educate yourself about becoming a landlord and are then prepared to accept the risks I would suggest that you sell it. Quick, no stress and then money in the bank. You could then choose to use those funds to pay down some of that big mortgage round your necks.

ffacoffipawb

BitterAndTwisted wrote: »

Becoming a landlord is running a business. A business which you have no experience of, so are probably unaware of any of the risks, responsibilities (which are many) and the pitfalls.

Unless you have the time and inclination to educate yourself about becoming a landlord and are then prepared to accept the risks I would suggest that you sell it. Quick, no stress and then money in the bank. You could then choose to use those funds to pay down some of that big mortgage round your necks.

Agree 100% with this!

Dazza

BitterAndTwisted wrote: »

Becoming a landlord is running a business. A business which you have no experience of, so are probably unaware of any of the risks, responsibilities (which are many) and the pitfalls.

Unless you have the time and inclination to educate yourself about becoming a landlord and are then prepared to accept the risks I would suggest that you sell it. Quick, no stress and then money in the bank. You could then choose to use those funds to pay down some of that big mortgage round your necks.

Thanks for the responses so far. I have been reading this post today and its associated links:
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12
As it will be mortgage free then I realise some points aren't valid. With regards to getting insurance, EPC, certificates of gas/electric safety I think these are do-able, I also have access to electricians and plumbers. Obviously I would have to read into tenant-landlord law some more (Northern Ireland), but if the long term investment of keeping the house outweigh a short term bit of stress then, probably yes, would be prepared to educate myself a bit more. As I mentioned, how would renting the house affect our income tax? And if we were to sell in 5 or 10 years then I presume we pay capital gains on the price we mention at probate against the then market value.

Also meant to say it would be our hope to use the income from this property to overpay on our own mortgage (we are allowed to pay 500 extra per month without penalty, we have 3 accounts so potentially 1500 without penalty).

Thanks again,

Dazza

googler

You may well be ready to run this as a business, but is your wife prepared to see her parents' home (possibly) damaged by thoughtless tenants? Are you sure that every tenant will treat it with respect?

Is your wife ready to regard this house as a BUSINESS ASSET, and not as her parents' home?

ellies_angel

I rent out my house, pay my leasing agent that bit more % wise to manage it and am just finishing my second year of leasing. The tax bit is straight forward. I work full time so have to pay tax on the rent. It's not difficult to do a self assessment.
I have been lucky with my leasing agents. I have had good tennants, the leasing agents have been very particular in who they lease properties to and how often they inspect them. They arranged for landlords insurance for me. arrange for my annual gas safety certificate etc. I have a policy with british gas (landlords) which covers my boiler, central heating, electrics, plumbing as well as my gas fire and all my kitchen applicances (all which are tax deductable) so that if anything goes wrong.........I am covered.
I'm not sure about the regulations where you are. I loved my house, it was very personal to me, I had gutted it when I bought it all those years ago, however it didn't take long for me to lose that personal attachment to it. It is a house, an investment and I will continue to lease it until I decide the time is right to sell.

BitterAndTwisted

How will you cope emotionally (or even know how to deal with it on a practical basis) with strangers in there, who trash the place, stop paying the rent the moment they take possession and it takes you six months or more and over a grand in expenses to get shot of them?

Not looking like such a money-spinner now, is it?

mrschaucer

As far as tax is concerned, then the income from the house if rented out will of course be taxed, less the expenses you can claim in running the business. It looks like the house will be in your wife's name - she will add the rental income to her part time income and pay appropriately (I'm guessing basic rate). There would be capital gains tax to pay on finally selling. Alternatively, I believe you have something like 2 years to sell an inherited property before cgt kicks in.

chiefgoobster

BitterAndTwisted wrote: »

How will you cope emotionally (or even know how to deal with it on a practical basis) with strangers in there, who trash the place, stop paying the rent the moment they take possession and it takes you six months or more and over a grand in expenses to get shot of them?

Not looking like such a money-spinner now, is it?

Do your homework and choose carefully and you'll find that not all strangers (potential tenants) trash houses/flats.
Pick the right one and you can be a happy landlord and have happy tenants. It's not a walk in the park being a landlord but equally it's not all doom and gloom.

hcb42

personally, I would sell it , but that represents my attitude to becoming a reluctant landlord. We sold my Dad's house a year or so ago.

The rent isnt bad, compared to the amount you will get for selling, but if you do the division, you will have to rent it for 12 years to get to £65k rental - although it might take some time to sell, the other side of that is that you need to be ready to declutter and present it for market, and that is definitely not an easy thing to do.

On the other hand, you could pay down your mortgage, and give yourselves a bit of space. I took a career break, as I needed to, and I have been living quite frugally for a few months as a result, but I like to think my Dad would have wanted that break for me.

Dazza

Our gut feeling is still to sell it and pay off a chunk of our own mortgage. But we have three kids ourselves and are just looking at the options before making a decision as we have their futures to consider to. It is still very early days and probate needs to be completed, but thank you for all your comments so far

Dazza