Renting out a 2 bed Flat

MrPayless

Hi

Im thinking about renting out my 2 bed top floor flat.

At the moment it is pretty bare but does have a cooker, fridge freezer and beds. A few questions if someone could help me out please:

1) What would I need to do to make it "fully furnished"?

2) If I used a letting agent, what would there service include? Is it worth using them? Any idea what kind of fees they charge?

3) Can I specify things like no smokers or no pets as I want the flat to stay clean! Its only 2 years old and barely lived in?

4) The rental income I generate; if I that is my sole income and it is say £5000 p/a, do I get taxed on this?

littlereddevil

My daughter rents out a flat privately and has never had any problems.
She previously let it through a leasing agency and they took 11%
They didn't really do much for their money checked the flat once a year and when the tenants didn't pay they took ages to sort it out.
Only problem with letting privately is if people don't pay but we just keep a key and if they didn't pay the worst that could happen is we go in and change the locks.It has never happened to us though.
You do pay tax over a certain amount but I think £5000 would be ok but unsure.
For furnished you would probably need sofas and either wardrobes or drawers for the bedroom.Sometimes tenants don't want too much as they like to bring bits and pieces of their own.
Oh and i forgot to say letting agents charge for doing an initial inventory of all things in flat[about £100] and when tenants leave.

GOOD LUCK

TheDink

You would only get taxed on the income after costs as far as I understand it. So, if you have to pay a mortgage on the flat of say £3000 per year, the amount subject to tax each year would only be £2000 - well below the tax threshold (£4700ish). If you have to buy furniture I think you can also write this off as a cost against your income.

If you then decide to sell the flat though, you would have to pay capital gains tax on any profit made on the sale.

JanCee

There is no advantage to renting out fully furnished , part furnished, or empty. Different tenants have different requirements. Why not wait until you have people interested and then provide them with what they want. A happy tenant is a good tenant. I use an agent to find tenants initially and then look after the rest myself. Agents charge different amounts and you are best to shop around. Rental income is taxable but only after your personal allowance of about £4700, you can also deduct interest on any mortgage on the property and any fees payable to the agents. You can't deduct the initial cost of any furniture etc., but you can deduct either replacement costs or 10% depreciation each year. I can recommend The Which Guide to Renting and Letting. Good luck!

dougk_2

The advantage of renting out fully furnished is the fact you can claim the 10% of rent as depreciation/wear and tear. If it is not furnished you cannot do this. Another advantage is in many cases you can charge more (£25 to £50 a month) for a furnished property.

If you want to cover all eventuallities you need to be flexible as JanCee says. If you have furniture in the property its best to offer it furnished but say you will remove it if not required.

Letting agents are a good idea if you a) do not live near to the property its your first attempt at letting (their advice worth the fee to a certain extent) c) you don't want the hassle of dealing wit tenants yourself.

Typically letting agents charge between 10 to 15% of the monthly rent (and depending on the size of the company this will then attract VAT on top) for a "full" managed service.

You can specify what you like in terms of smoking/non smoking, pets , dss/ non dss, couples only etc. The more you specify the more limiting you are. I specified small house trained pets only (+ higher deposit) and no smoking in the house - not to say that smokers could not rent but that they were not to do so inside the house.

I would suggest renting your property for dummies - it can be bought from amazon.
It is very good at explaining everything and even tells you how to deal with problems.

The inland revenue website is worth looking at too about all the tax implications etc.

JanCee

dougk wrote:

The advantage of renting out fully furnished is the fact you can claim the 10% of rent as depreciation/wear and tear. If it is not furnished you cannot do this.

You can claim the 10% depreciation off your tax if you have provided any furnishings (carpets, curtains and light fittings) without having to fully furnish the property. Many tenants have furniture of their own and need the space to put it. My point was to be flexible, there would be no point in buying furniture and then having to remove and store it.

dougk_2

This is not the case according to the inland revenue - it has to be fully furnished they quote the following:

"A furnished property is one which is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc. The provision of nominal furnishings will not meet this requirement. If the accommodation isn’t furnished, or only partly furnished, the 10 per cent wear and tear allowance isn’t due."

The letting agent I used confirmed this to me and suggested that I supplied even the things the tenant did not need (in my case bed and wardrobe) and that these were stored at the property to meet the requirements. In my case this was not a problem as they are kept in the garage.

I think there is a fine line to tread here. So I think essentials i.e. bed, sofa, table and chairs need to be supplied even if they are not "used".

m00nie

when i first came to rent out property i used an agency as i didnt know much about it.

they charged 10% for which they found and vetted tenants, provided the contract. collected the rent each month, etc.

then after 12 motnths ( 2*6 months terms) i decided to go it alone, i used the contract they had provided ammending the relevant information etc.

MrPayless

thanks for the info, Ive thanked you all!

ohit

Instead of starting another thread, I'll ask here as I think it's related to the idea of using a letting agent...

Some agents provide guranteed rent for a fixed term regardless if they can find tenants or not. What's the score with insuring this gurantee, as obviously the whole ball game of tenancy laws come into play. For example, if the letting agent doesn't actually pay me the rent for however many months, it's a court case to sort it out. All costing more time and more money.

Equally, what insurance products are available outside of guranteed letting agents or for even private (doing it yourself) approach to letting?

I'm new to this, and I've seen some properties advertised for sale with rental yields of about 9%-11% in my student town. Sounds too good to be true...I'm having nightmares if non-paying tennants that I can't even "kick out".

dougk_2

Most of the guarantees are insurance backed and only payout if your tenants do not pay the rent. Very few agents guarantee to keep your property occupied and even if they did I would worry they were not vetting them properly and just allowing anybody to move in so they meet their agreement.

Personally I would work on the basis that you need to cover all your costs over a 10 month period and therefore the rent for the last two months is a bonus.