Renting his home to pay care home fees

Werdnal

If you go ahead with this, you must remember that letting is by no means guaranteed income. If he is going to be dependant on rental income to support his care fees, there is a lot that can go wrong with letting, and leave a LL without rent for months. Also, a major repair bill can wipeout several months value of rent in one hit!

Whilst on paper renting it out might look the best option, you need to be able to cover voids, bad tenants, eviction fees, lost rent, and all the other unpredictable hiccups that naturally go with letting a property.

Are you also aware of all the costs, regulations, tax implications and other requirements of letting a property? It is by no means clear profit, and once all the other expenses and running costs are taken out of that £1200 are you sure you will have enough left to make it work?

xylophone

If the house is sold releasing Father's capital, an immediate needs annuity might be a possibility?

https://www.moneyadviceservice.org.uk/en/articles/immediate-need-care-fee-payment-plans

Tancred

Werdnal wrote: »

If you go ahead with this, you must remember that letting is by no means guaranteed income. If he is going to be dependant on rental income to support his care fees, there is a lot that can go wrong with letting, and leave a LL without rent for months. Also, a major repair bill can wipeout several months value of rent in one hit!

Whilst on paper renting it out might look the best option, you need to be able to cover voids, bad tenants, eviction fees, lost rent, and all the other unpredictable hiccups that naturally go letting a property.

Are you also aware of all the costs, regulations, tax implications and other requirements of letting a property? If is by no means clear profit, and once all the other expenses and running costs are taken out of that £1200 are you sure you will have enough left to make it work?

There are ways of ensuring a guaranteed rent through various schemes that agents offer. It means letting the agent manage the property and take a cut but it gives peace of mind.

Werdnal

Tancred wrote: »

There are ways of ensuring a guaranteed rent through various schemes that agents offer. It means letting the agent manage the property and take a cut but it gives peace of mind.

I am well aware of these schemes, and the pitfalls of them as well. If guaranteed rental income is the LL's main aim, such a scheme can obviously ensure this. However, if the OP signs up, they lose all control over who the agent puts into their property, plus the agreement they sign is not a standard AST, so can be difficult to end should circumstances change and they need their property back before the end of the agreed duration.

Agents tend to chuck anyone they find into the property, just to ensure they have rent coming in and are not out of pocket themselves.

Whilst the schemes are probably fine for some, there are horror stories out there and OP must ensure they fully understand the implications. Here is an example of how it goes wrong:

http://www.landlordzone.co.uk/forums/showthread.php?57070-more-rights-for-landlords

grazzzz

Werdnal wrote: »

Are you also aware of all the costs, regulations, tax implications and other requirements of letting a property? It is by no means clear profit, and once all the other expenses and running costs are taken out of that £1200 are you sure you will have enough left to make it work?

Fully aware hence question re tax and setting up a trust its better to
Get £900 a month net than using the capital as the investment is still
There and have the cash if needed to cover for non letting however
As the house is near a station and is a commuter belt to London ( hornchurch,Essex ) I can't see a problem renting just thought you could either set up a trust or a company to reduce taxation on the profit of rental

malcolmffc

No. Do you not feel even the slightest qualms about relying on the state to help with care whilst similtaneously dodging taxes?

calicocat

Not that i've really thought about it but I didn't know you could do this, I just assumed you had to sell a property. I'm thinking this may well be a good option for my mum to think about, as you never know how long you are going to live, and she would go bananas if she had picked somewhere, her money ran out, and had to move.

Mrs_pbradley936

malcolmffc wrote: »

No. Do you not feel even the slightest qualms about relying on the state to help with care whilst similtaneously dodging taxes?

Well I would not in the same circumstances. The government seem hell bent on milking us wherever they can and if there are legal ways to keep money /assets within the family I am all for it.

grazzzz

malcolmffc wrote: »

No. Do you not feel even the slightest qualms about relying on the state to help with care whilst similtaneously dodging taxes?

How are we relying on the state if his private pensions and rental from the homel pays the bills the only benefit he would get is his attendance allowance . You work all your life and even your pensions are taxed . A care home is expensive how ever is now sadly the only option . If the full amount of taxes had to be paid on the net income so be it, however I presumed that if you set up a trust you could offset the
care, home expense against the profit made. Or set up a company to do that . With companies and celebrities using loopholes in the law to pay as little as possible at 84 why shouldnt he or any person ? If you had the choice of paying 25% tax on your salary or 10% legally what would you do. I came on here to ask advice if a trust was an option .not to be attacked ,. It was a valid question which has been answered responsibly and has given us a lot of options to consider by some great people
Thanks

Errata

When you have POA you are required by law to act in the best interests of the donor, which may be at odds with the interets of those who hope to inherit when the donor dies. That means you should thoroughly explore all the options for funding their care, and take legal advice if necessary.