Newbie landlords

Skintski

My partner and I are looking at making the bold move of living together. We both own properties and would look to live in one and rent the other out.

We went to see a large letting agent yesterday who talked us through Fully Managed and Guaranteed Rent. We quite like the idea of the letter because we would be an hour away and so do not want to have to make the journey down to the rent at any given moment if something goes wrong. The house basically needs to pay for itself, we are not looking to make stacks of cash out of it, just cover the mortgage and bills and maybe have a little left over.

As yet no numbers have been discussed but going Guaranteed Rent means basically us renting to them and them subletting it.

What are the cons please? For example what happens if they were to go bust?

There is no immediate panic for us to do anything so all advice is very much appreciated especially as we are so new to all this.

Also, in terms of paperwork I am assuming we need to fill out a tax return each year or is there anything else we need to be looking into please?

Thank you

00ec25

Skintski wrote: »

As yet no numbers have been discussed but going Guaranteed Rent means basically us renting to them and them subletting it.

What are the cons please? For example what happens if they were to go bust?

you have no control over who is the tenant since your tenant is the letting agency, not the physical occupant. Make sure you know what sector of the market the agent operates in and the "quality" of the tenants that use that agency otherwise you may be shocked when you see the state of the place when you get it back again

also be very careful over the nature of the contract between yourself and the LA. For example, you may end up with them as your actual tenant and therefore it is not an AST, it is a commercial letting with very different legal relationships re ending it and who is liable for what

your contract is with the LA. If they go bust you won't get any rent and will have to join their queue of creditors claiming off whatever is left of their business. You will obviously then need to take over the contract with the physical occupant of the property you nonetheless legally own and become their actual (direct) LL. That may, or may not, be an easy legal process.

Skintski wrote: »

Also, in terms of paperwork I am assuming we need to fill out a tax return each year

who is "we"? do you jointly own each other's property?

If not, there is no "we" in terms of who is liable for tax on the rental income, and thus which one of you has to do a tax return each year

Also do read every word of G-M's guide to being a LL
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Fosterdog

The idea of you renting to the agency and them subletting is a bad one. If anything were to go wrong you would have no way to evict the tenant as you are not their landlord, there will probably be ways around it in your contract but it is likely to be drawn out and costly.

Cakeguts

NO to what the letting agent has suggested. Find a better agent. It is possible that your house won't make a good rental. Not all properties do.

theartfullodger

Letting to an agent (agent is your tenant...) apart from the points made above, is almost certainly breaching your mortgage & insurance terms.

You might be able to get more expensive landlord insurance to cover it, almost certainly not get lender to allow it - and they can repossess from you.

Don't do it!

G_M

** Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?