Dilemma; Rent or Sell?

Out_Of_Darkness_2

I am dealing with the estate of my father, who died in July 2016, on behalf of my mother for whom I obtained LPoA in September 2016. Dad’s estate is pretty straightforward as most of the assets were in Mom’s name anyway, and apart from expenses and a small legacy to myself, his estate was left to her.

Mom is in a care home and her total expenses are around £2200.00 per month. Her income (Attendance Allowance, State Pension and five private/works pensions inherited from Dad) is around £1600.00 per month.

Mom has around £120k in savings/investments, and the house (no mortgage) is worth £180 – 200k.

I therefore believe that Mom will be able to self-fund for the rest of her life (she is 82).

She wishes to leave as much as possible to her beneficiaries (myself and my brother) when she dies.

I was told by two professionals (the probate valuation representative and the auctioneer who handled the clearance/sale of the house contents) that the house could rent tomorrow for £650.00 per month. I am dubious (since there’s no Gas Safety/Electrical Certificate as yet, and there is some cosmetic work to be done inside and outside), but estimate that with a £5 – 10k spend I could achieve a rent of around £700.00 per calendar month. I live near to the property and believe I could manage the tenancy myself (I work as a legal adviser for a well-known charity, specializing in debt and housing).

My brother and I both feel it would be wise to keep the house “in the family” for the following reasons:-

He lives abroad and has a wife and two children; should they ever wish to return to the UK at some point in the future it would be convenient if there was a property here which they could use;

The usual house price uncertainty in the current economic climate;

The house, whilst nothing special (3-bed, 2-bath semi), is in a particularly good area of Town and has a large garden. Neighbours are great and there are plenty of local amenities etc. I have not ruled out the possibility of buying him out and living there myself at some point in the future!

However, there are of course downsides with renting. Although I am confident in my ability to be a good landlord, no-one is totally immune from nightmare tenants! And as we know, the net is tightening for “accidental” landlords and their legal obligations, tax position etc.

As Mom’s POA I have a duty to do what is best for her financially – so which is it – rent or sell?

cloo

It sounds like renting's best for you at the moment. Gives you options going forward and the market's not wild at the moment. But do read up on all the tax liabilities for landlords so you are realistic about what you'll get from renting and upon selling up.

I'd recommend getting family as tenants rather than professional sharers if you want less hassle - they'll stay longer and are more likely to look after it.

Out_Of_Darkness_2

Thanks for that - yes, lots of research on tax etc still to be done .....

Incidentally, everything I've read so far starts with "NEVER rent to friends or family!

Fireflyaway

Renting it sounds a good move but if this were me in the same situation I would sell as I wouldn't want to run the risk of dodgy tenants. At best you will get called every time something breaks and at worse you will have occupiers who don't pay the rent or trash the place. That's just me though - I'm quite cautious! Like you I work in housing and hear about some right nightmare tenants.

Out_Of_Darkness_2

Yes, exactly .... and there's the dilemma!

It's one thing accepting risk for reward when you're playing with your own money but of course I'm not - it's Mom's, and I have a duty to safeguard it.

marksoton

Liquidate the asset. Sell.

Out_Of_Darkness_2

Yes, and then I only need to find an investment/savings product that returns the same potential yield as renting ..... not sure it exists LOL!

slopemaster

Assuming your mom has capacity (and altho you mention POA you don't say otherwise) you should be asking her.
As she may well have a preference for keeping the house and renting out rather than selling.

xylophone

You have said that your mother is desirous of leaving as much as possible to you and your brother.

Has she ever discussed the sale or otherwise of her property?


You currently live near the property and seem fond of it - had you thought of selling your current home and buying your mother's at market value?

The sale proceeds together with your mother's other savings could be invested/held on deposit etc. with a view to ensuring her comfort and security and trying to meet her wishes concerning an inheritance for you and your brother.

Had you looked at getting quotes for an Immediate Needs Annuity?

https://forums.moneysavingexpert.com/discussion/comment/71645033#Comment_71645033

Marvel1

I see 2 problems with renting:

1. It will no longer be the family home, it will be the tenants home (your business) and should be treated as such. If you have tenants and they did something while living there you don't like let's go with messy home, dust, cobweb in corners, you can't do anything about it - they only have to leave it in a condition as it was at the start.

2. If your Brother returns to the UK he has a house to use - how? There are tenets living there, and if on a fixed term it could take months if they do not wish to leave after being served a section 21.

FBaby

You could give it a try and see how it goes? In a way, you are under no pressure so can stick to taking as minimum risk as possible and if it doesn't work, you can sell.

Minimizing the risks mean being very picky as to who you rent to, which would involve discarding anyone on benefits (purely on the basis that if you do need to sell, it is much harder to get them to leave the property), discarding the self-employed (because if their business go bust, you can't get anything from them even taking them to court) and stick to professionals.

You then only give a 6 months tenancy and only renew for 6 months or let it roll out. Do inspections yourself every 3 months to start with, and however uncomfortable it feels, do have a reasonable look. At the first mention that they can't pay the rent on time, give them an S21 and do the same at the end of the fix period if the place looks not cared for.

Of course, the nicer the property, the easier it is to apply the above and find someone else quickly. Importantly, you need to have a buffer to ensure you can pay for repairs in a promptly manner, that includes costly repairs, boiler, roof etc...

There are many great tenants out there, but you need to attract them.