What would you do? keep renting it out or cut your losses and run???!!!

Greenst

A friend of mine has a house she rents out near Manchester. She bought the house about 10 years ago and has a mortgage of around 70K on it.

The house has been rented out for around the last 6-7 years from when she moved down South. It's always had tenants apart from the odd few weeks and the rent pays the mortgage and if nothing goes wrong makes her about £200 pm, it's rented out via a letting agent who deals with everything due to the distance involved.

Now for the tricky bit. The house is starting to show signs of it's age and wear and tear, it's really in need of double glazing to at least the front of the property, the roof is leaking, and in a bad way, all the brick work needs re-pointing and there is some worry that there may be subsidance.

The house was originally on the market about 3 years ago at £190 but didn't sell, it was gradually reduced to about £160 and still didn't sell, she decided to continue renting it out, the tenants are (quite rightly) starting to complain about the condition of the property.

She has spent a fair amount on the house so far, internal re decoration, new carpets, new UPVC front door, electrics updated although nothing majorly structural.

Ideally she would like to buy a place in the South where she works, she is currently renting herself, the thing is that houses just aren't selling in the area and she says she would now be lucky to get £130k for it.

I think she should just cut her losses and sell it ASAP for whatever she can, I am sure with a 70k mortgage she will make something out of the place as a deposit on another property in the South.

She seems to want to hang on to it in case property prices go back up, but in the mean time could end up spending thousands on the place to keep it habitable.

It's hard for her to get quotes for the work being several hundred miles away and with tenants in the property, also the letting agents seem to be as useful as a chocolate tea pot with arranging trades persons to go round to look at the issues.

So, phew! after all that what would you do?:(
Also her mum has suggested she put it to auction but she says that houses get such small amounts she may as well keep it?

Werdnal

If the condition of the property is as bad as you say, and she still has tenants living there, she had better do something DPQ before they get Environmental Health involved and she has to either pay for the work immediately and/or re-house her tenants at her cost whilst the work is done.

How can she just sit there and ignore the state of the place she is expecting tenants to live in and pay rent on?

As a LL, to make a letting property viable, she should have a good financial contingency to cover the cost of such work and should have re-invested in the property to maintain it. Sadly, her neglect and the subsequent leaking roof etc, will already have badly affected the price she will get if she tries to sell up.

My advice would be to give her tenants notice, get the place empty and sell it asap. No good trying to sell with tenants in place, it will delay it and complicate matters.

I assume her mortgage gave consent to let, and she has observed all the other regulations regarding letting?

[Deleted User]

Oh the benefit of hindsight!

£200 per month for 6-7 years roughly equates to £15000 and could have gone more than a long way towards more maintenance and the house would no doubt be worth more than it presently is.

Your friend needs to decide what she wants - if she doesn't want to sell, she needs to maintain. If she doesn't want to maintain, she needs to cut her losses and run as fast as she can. Unfortunately she can't have her cake and eat it. The subsidence is a big worry and will also potentially put off buyers however ...

BitterAndTwisted

It seems that the money which has been spent on it is mainly cosmetic at the expense of structural issues. For the most part, owning and renting property is for the long-term increase in equity rather than making a profit between the mortgage and the rent on a month-to-month basis. No-one has a crystal ball about where house-prices are going but my own feeling is that they will drop further in the short-term and we will probably never see raging house-price inflation as in the past in our lifetimes.

If your friend never has had being a professional landlord as part of her long-term investment plans and she can't see herself ever living there again I'd get shot of it asap whatever it will sell for. It sounds like it needs a lot of money spent on it now. If that will not translate into higher rents it's a waste of time. It's all about the maths. It's possible that once she's paid income tax on the rent she may not be making anything.

Greenst

Werdnal wrote: »

If the condition of the property is as bad as you say, and she still has tenants living there, she had better do something DPQ before they get Environmental Health involved and she has to either pay for the work immediately and/or re-house her tenants at her cost whilst the work is done.

How can she just sit there and ignore the state of the place she is expecting tenants to live in and pay rent on?

As a LL, to make a letting property viable, she should have a good financial contingency to cover the cost of such work and should have re-invested in the property to maintain it. Sadly, her neglect and the subsequent leaking roof etc, will already have badly affected the price she will get if she tries to sell up.

My advice would be to give her tenants notice, get the place empty and sell it asap. No good trying to sell with tenants in place, it will delay it and complicate matters.

I assume her mortgage gave consent to let, and she has observed all the other regulations regarding letting?

I bet she doesn't know about the having to re house the tenants! I am seeing her Saturday so will pass on that and any other bits of information that is passed on on here, I think initially she thought she may go back to the house to live but she has made her life in the South now, also I think she looked at it as an investment but rather than invest in the maintenance of the property has enjoyed living off the profit she has got from it each month.

As you all have suggested so far cut and run would by my suggestion, I can only put forward my opinions to her but hopefully as above I can get some more compelling reasons why she should sell I can pass those on to her, I doubt very much that she has thought about the 'legal' position of being a landlord.

I do know that she has told her mortgage company as she said she is having to pay a higher percentage monthly on the mortgage, she has landlords insurance in place etc, but I don't think she has thought of all the pit falls of being a landlord, the house was initially rented out to family friends for the first few years who weren't too bothered about the state of the place as the rent was so low, being friends.

Any more info will be gratefully received, she is a lovely person I don't want to see her get hurt or financially in trouble over this property.

Werdnal

If the tenants decide to take advice from Enviro Health department over her failure to repair the roof and other issues, and they deem it uninhabitable, as LL she has to provide alternative accommodation. If she has LL insurance, this may cover it, but I would advise her not to wait and see! TBH is it is that bad, I am very surprised her tenants are putting up with it and its only a matter of time before it all goes T ! T S up!

Greenst

Thanks for that everyone, I don't think the house is unhabitable yet but as you say if things aren't addressed soon they will only get worse.

Is there anywhere, ideally intrnet site, I can gently point her in the direction of that lists the responsibilities of a landlord? She may have been given info by the letting agents, not sure.
I think she may be worried about paying the mortgage if no tenants in there!!!

tbs624

You could point her in the direction of the Landlord Law web pages, or one of the LL associations. See also here and here as you say her property is near Manchester.

She may find it helpful to google HHSRS ( Housing Health & Safety rating System) which is what the Council uses to assess rental properties when there are repairs issues ( categorised under 29 housing "hazards")

tbs624

Werdnal wrote: »

If she has LL insurance, this may cover it....

... although they may refuse/limit the claim if it can be shown that LL has failed to carry out an appropriate level of repair/maintenance over the past few years to the point where the situation has become drastic.

Greenst

tbs624 wrote: »

... although they may refuse/limit the claim if it can be shown that LL has failed to carry out an appropriate level of repair/maintenance over the past few years to the point where the situation has become drastic.

Yes I thought that, very good point, will look at the other info you have suggested and hopefully when we meet up at the weekend I can point her in the right direction. I don't want to seem nosey and poking into her business but she came over 2 weeks ago and was telling me all about the property and what did I think she should do!
She is not the sort of person I think would do any research on the issues and prefers to stick her head in the sand over it but we all know the problems won't go away only get worse!
Thanks everyone!

Greenst

One more question, how 'awful' is it putting a house up at an auction? This is what my friend is worried about but looking at things it may end up being her only option if it won't sell via an agent?
I feel I may have to do a separate post re houses and auctions but if anyone has any experience of this it would be interesting to know how it works and if it is worth it??