Dilemma over inherited property

theoretica

I find it helps to remember that there is not a right answer that you are searching for if only you can solve the puzzle.  There are lots of answers, many of which may be good in different ways and none perfect.  While you have both properties, you and your husband could try living mostly in the bungalow for a while and see if you do like it.

I don't know the rental market around you, but one option would be for your daughter to stay in the house and manage it for you with lodgers in the other rooms?  Or you could give her the option between coming temporarily to the bungalow or you helping her find a room to rent.

murphya

theoretica said:

I find it helps to remember that there is not a right answer that you are searching for if only you can solve the puzzle.  There are lots of answers, many of which may be good in different ways and none perfect.  While you have both properties, you and your husband could try living mostly in the bungalow for a while and see if you do like it.

I don't know the rental market around you, but one option would be for your daughter to stay in the house and manage it for you with lodgers in the other rooms?  Or you could give her the option between coming temporarily to the bungalow or you helping her find a room to rent.

You are correct. Lots of options and none perfect but one will fit. Thank you.

AdrianC

murphya said:

My house is valued at £180,000 for sale and £795 per month for rental ( more than we expected) and the bungalow £250,000 for sale and £875 for rental (pretty much what I expected). The house would need a few things doing first before renting. Bungalow is easier to empty and doesn’t need anything doing to it. Agent fee to manage rental is 15% + VAT (!) and of course 20% tax . 

Let's be brutally honest here, because there is no other way to deal with the assets of a residential lettings business.

£875/mo less 18% management fee for a £250k-value asset is an atrocious return. 3%. Before maintenance, damages, voids, insurance...

zagubov

If your son and daughter were happy to stay there they could take in lodgers as suggested above. If they each have a lodger there might not be much tax to pay (I only think so, so you'd better investigate that!).
Extremely important that they follow sensible landlord/lodger contracts. Short notice, no locks, rules about guests, noise, smoking, pets, access to rooms, share of cleaning,  and the like, especially if they know the lodger already.
If you charge your children rent there'll be tax on that, and you'll formally be a landlord, with all sorts of formal obligations.
If you keep the house as your postal address and return regularly and retain a room for your exclusive use, that might make things a lot simpler.

Marvel1

Becoming a landlord is a business and must be treated as such, and must read what a landlord must do and what rights a tenant has.
Also as there is a emotional attachment to the property, never a good idea.

saajan_12

murphya said:

I’m also aware that the best financial thing would be to sell one and buy 2 or 3 smaller properties for say 70,000 to 80,000 of which there are plenty and which rent out for around £450/500 per month, therefore giving me a better return. By renting one of our properties I would be taking a much lower yield but obviously retain both.

Whats your aim here - if it was letting to get some return because you want to keep a specific property, then (barring issues of condition of property / emotional attachment) that might make sense. However if you're just looking to make a return on the money, selling and buying smaller properties will mean paying stamp duty plus a time consuming business of letting multiple properties. Managing agents will eat up most of your return, and with them, ultimate responsibility lies with the landlord so don't assume it'll be hands free. I'd compare with other investment options as well - not saying necessarily better but do weigh the time commitment into it. 

Niv

'So ten months have passed. Son has moved out ,I gave him a deposit for a flat and have told daughter she can have the same when she is ready. She doesn’t want to move to the bungalow but is not in a position to move out '

Ultimately if you want to live in the bungalow then you should move into it and in my opinion sell the house - I don't get the impression you 'want' to be a landlord.

The quote above struck me a little. It is irrelevant if your daughter 'wants' to live in the bungalow or not, it is free/cheap accommodation to her to live with her parents, you should not be keeping one of these properties just to keep her happy which is what I suspect may be a factor here. If she doesn't want to live in the new home you buy she can move out and rent  - that's her RL decision - her desire of which property she prefers to live in should not even be part of the conversation.

eidand

Niv said:

'So ten months have passed. Son has moved out ,I gave him a deposit for a flat and have told daughter she can have the same when she is ready. She doesn’t want to move to the bungalow but is not in a position to move out '

Ultimately if you want to live in the bungalow then you should move into it and in my opinion sell the house - I don't get the impression you 'want' to be a landlord.

The quote above struck me a little. It is irrelevant if your daughter 'wants' to live in the bungalow or not, it is free/cheap accommodation to her to live with her parents, you should not be keeping one of these properties just to keep her happy which is what I suspect may be a factor here. If she doesn't want to live in the new home you buy she can move out and rent  - that's her RL decision - her desire of which property she prefers to live in should not even be part of the conversation.

indeed, at the end f the day it will be the OP's decision, the daughter can choose to live in the bungalow or find her own place. I suspect she will gladly move anyway since she still gets free / cheap accommodation.

I don't know about this particular bungalow but they tend to have a nice plot and typically bigger gardens. Plus, between a terrace property and a bungalow, I wouldn't think twice, I much more prefer a bungalow

Claire2989

My house is valued at £180,000 for sale and £795 per month for rental ( more than we expected) and the bungalow £250,000 for sale and £875 for rental (pretty much what I expected). The house would need a few things doing first before renting. Bungalow is easier to empty and doesn’t need anything doing to it. Agent fee to manage rental is 15% + VAT (!) and of course 20% tax . 

I’m reluctant to sell the bungalow as I am still thinking of moving into it in the future, and yes having tenants in isn’t ideal for all the reasons advised, but I can’t have everything my own way so have to compromise somewhere. I acknowledge that I’m in a fortunate position financially but that is down to my parents hard work, and also ours that we are mortgage free, also I have lost both my parents.

I’m also aware that the best financial thing would be to sell one and buy 2 or 3 smaller properties for say 70,000 to 80,000 of which there are plenty and which rent out for around £450/500 per month, therefore giving me a better return. By renting one of our properties I would be taking a much lower yield but obviously retain both.

If you do go down the rental route see if you can negotiate the management rate. 15% + VAT is pretty high. We pay 9% + VAT and get a decent service in a popular city. Also you could consider managing yourself? Would require getting clued up on a few things but as a landlord it would be good practice to do that anyway!

if you sell and buy smaller properties then you’re much more invested in landlording as a career and I would take some time seriously think if that’s what you want long term? You may find much better uses/investments for your money. Landlording is a long game the short term returns aren’t that great. 

I’d be considering selling up the terrace and moving to the bungalow. Working towards retirement and enjoying life. Not saddling myself with a landlord business. But that’s just me, you need to think what will work for you!

AnotherJoe

I can't think of a worse time to become a landlord.

Its a lot of hassle, potential big risks (damage and unpaid rent) plus house price falls on the horizon, that are pretty much the equivalent of investing, increasing regulation and tax issues that will only get more onerous. If you let the house tomorrow, it wouldnt be beyond teh realm of possibility to get tenants that then stopped paying rent and got themselves a 6-9 month rent free holiday whilst you took legal proceedings.

If the three of you could live comfortably in the bungalow why not move there and sell the house, putting the proceeds, minus a portion on deposit for daughter, into longer term investments (with some of that at least in your pensions)