Renting a house I will inherit. Novice, costs breakdown

BitterAndTwisted

That's £7200 of taxable income before you've offset any expenses against it. Get one lousy tenant who stops paying the rent and trashes the place and it costs you thousands of pounds and months of your life to get shot of them and that's one year when there's no income at all.

There's a lot more to being a landlord than sitting back and watching the money roll in. More than one occupant is the same amount of potential hassle squared. Fancy getting phone calls at three in the morning because the heating has broken down? And they haven't paid their rent for two months, maybe three.

ognum

jimsmillions wrote: »

Thanks to all. Its a lot to take in.

In respect to the property. My parents vacated it rather sooner than expected. One was taken seriously ill at and died after 3 months and the other had a mental health issue so went in to a care home. So the house is not in a bad state at all.

Kitchen refitted about 2.5 years ago

Bathroom 5k refit around 3 years ago

Fully double glazed has been for years redone maybe 7 years ago

Combination boiler around 2.5 years old

House was rewired fully about 4 years ago

Cavity walls done

Gardens made low maintenance due to the mental health issue. No grass left at all everything is patio and chippings.

Garage built in garden about 7 years ago, all doors replaced about 18 months ago.

Potential issues I can see are. DIY attic flooring is about 20 years old and not up to scratch. Could simply be removed. There is a perfectly sound lean to at the rear of the house built by a relative. Its wood stained with perspex panel's. Its sound, build and designed by a Master builder but I would imagine not most peoples ideal of a modern lean to. In other words its not over priced and white PVC

I of course have a sentimental attachment to the house. I might rent it. I have thought about dividing it in multiple occupancy and renting it that way (More complicated I know). House rent prices here of this type are 550 to 600 pcm where as a house just up the road same type and build was letting rooms at 325 pcm 2 years ago. 4 occupants = 1300. I might even live in it and rent or sell my own house.

My reasons for wanting to rent are to gain rental income. Nothing is owed on the house. At 600 pcm It cant surely cost more to run/maintain the house than the rental income is? That would be mad.

Re The Loft

Don't spend any money on it, make it excluded within the tenancy agreement. Many landlords have excluded part, garages, lofts sheds sometimes bedrooms that they lock off and use for there own storage.

My own opinion is I would not exclude a room or a garage but to exclude the loft is acceptable.

jimsmillions

BitterAndTwisted wrote: »

That's £7200 of taxable income before you've offset any expenses against it. Get one lousy tenant who stops paying the rent and trashes the place and it costs you thousands of pounds and months of your life to get shot of them and that's one year when there's no income at all.

There's a lot more to being a landlord than sitting back and watching the money roll in. More than one occupant is the same amount of potential hassle squared. Fancy getting phone calls at three in the morning because the heating has broken down? And they haven't paid their rent for two months, maybe three.

I had thought abouot these things but not in detail yet. This is part of the costs breakdown I was enquiring about in the original post. There are guaranteed rental income programmes. Dont know if these are any good and would guess they come at a price. I would if not using a letting agency hope to have a maintainance/emergency contract in place.

The deciding factor is simply. Realistic financial gain for renting the property annualy vs other wasy to generate income from 125k annualy. Savings accounts at present wont get close, any other suggestions?

getmore4less

So £550-£600pm on £125k, gross yield 5.28% - 5.76%

jimsmillions

getmore4less wrote: »

So £550-£600pm on £125k, gross yield 5.28% - 5.76%

Many thanks. You are talking to someone with minimal financial prowess! I am guessing the two above figures are the rates of a say a savings account that would be needed to equal the rental income?

motherofstudents

If you do decide to rent, you could join a landlord's association so that you always have somewhere to get information and help. There are various types of insurance, buildings and contents, rent guarantee, legal etc etc but you need to check the small print.

If you check tenants properly you will give yourself the best chance of reducing any problems although in the current financial times, anyone can struggle with money. Find out as much as possible so that you start off by going into it with your eyes open. The same if you sell and invest the money. The more you research your options, the better the outcome will be. Good luck.

getmore4less

jimsmillions wrote: »

Many thanks. You are talking to someone with minimal financial prowess! I am guessing the two above figures are the rates of a say a savings account that would be needed to equal the rental income?

Those are grosss the max you can make, after costs the numbers will be lower.

If you factor in your own time as well that will bring the yield down further.

net yields would be a reasonable comparison against other investments.

You also have the capital considerations.




I understand the sentimental side of things but most of us will move homes 2 or 3 times in our adult life, if we hung on to the past we would all be living in our grannies houses.

getmore4less

One other thing, do you rent or have a mortgage, you need to consider the opportunity costs or reducing those by either moving in or selling.


If you have another house then that opens up more options depending on lifestyle locations which gives the best yield, lodgers etc.


A good way to look at this is to step back and think .......

If you had the money in the bank...... would you buy this place and become a landlord?

jimsmillions

getmore4less wrote: »

One other thing, do you rent or have a mortgage, you need to consider the opportunity costs or reducing those by either moving in or selling.


If you have another house then that opens up more options depending on lifestyle locations which gives the best yield, lodgers etc.


A good way to look at this is to step back and think .......

If you had the money in the bank...... would you buy this place and become a landlord?

Yes I have my own mortgaged property, its the same exactly as the one above. I do owe on it and we do in fact have a failing Endowment (red letters) That needs acting on. I will also get cash as part of this inheritance which could well take off the entire mortgage on my own home. Then I have an Endowment to consider, keep it, sell it, cash it in. It was originally supposed to make 42k and now looks like it will make maybe half the amount. Its 12 years into a 25 year mortgage. With lifes cost about 102 a month.

I have strangely always wanted to be a Landlord/property investor.

Contessa

Eton_Rifle wrote: »

Do not underestimate the cost of repairs. They are beyond whatever you can imagine! Tenants are not of the same mindset as homeowners.

I'm being comical here to make a point but start with the assumption that tenants expect to be living in hotel like conditions and have no tolerance for even the tiniest house quirks that homeowners don't think twice about and wouldn't even bother fixing.
That window that has always needed a wee shove to open? Tenants will demand a carpenter immediately!

Also assume they are like little children who have to have everything done for them. They can't do the simplest repairs themselves and probably you wouldn't want them to anyway.

If you use an agency for maintenance, you will find yourself paying professional rates for incredibly simple tasks that you would do without thinking and would cost virtually nothing (e.g. £95 for me to replace a toilet ballcock recently because it was beneath the tenant's dignity or ability to do it himself.)
Sometimes I wonder that they can bring themselves to change lightbulbs without ringing a bell and having a professional lightbulb fitter run round!

I'm laughing about it of course because it's all part of the landlord's job but you do need to realise tenant mentality can be diametrically opposed to that of a homeowner and you are responsible for the resulting costs. Don't underestimate them.

E.R., I have a friend who would agree with you. Funnily enough it's not the major repairs but the minor, niggly ones which annoy him. I won't be surprised if he decides to sell up soon.