Renting out house vs rent-a-room(s)

ThisIsWeird

Hi.

A friend has a 4-bed house that he's been renting out for more than a decade since he bought a small flat 'in a better part of town' where he moved to. Both the house and flat are on interest-only mortgages, and he's now feeling the pinch. He's considering his options, and that will likely mean selling one of them.

He's considering selling the flat and moving back in to the 4-bed house, but that will mean losing the rental income. As he'd be one person in a largish 4-bed house, I've suggested - if he could bear it - that he could rent out a couple of rooms in the house, possibly even offering these two spaces to a couple of his current ASTers (typically a mix of nice and bolshie...).

This is at a very basic stage of thinking! Could anyone give an idea - pros and cons of - the differences between renting out the whole house on ASTs, and just renting out a couple of rooms, possibly on an all-bills-included term? He'd want to keep a couple of bedrooms for himself - one as his own private sitting room as needed.

Obviously the biggie is sharing his house with other folk, but he's away a lot, and reckons could cope with this quite easily if he chose the renters carefully, and it would likely only be for a couple of years in any case.

Qs:

No ASTs required, so only one month notice if he had to get rid of someone?

Likely room rent amount compared to previous setup?

Thanks.

theartfullodger

If current occupants on ASTs remain when he moves back in then they will remain on AST.

New occupants thereafter would be lodgers.

FreeBear

theartfullodger said: If current occupants on ASTs remain when he moves back in then they will remain on AST.

But would the current tenants want the landlord moving back in and potentially bring a lodger or two with him ?

It would put the household in HMO territory, so that might throw a spanner in the works.

sourpuss2021

FreeBear said:

theartfullodger said: If current occupants on ASTs remain when he moves back in then they will remain on AST.

But would the current tenants want the landlord moving back in and potentially bring a lodger or two with him ?

It would put the household in HMO territory, so that might throw a spanner in the works.

He would escape HMO status so long as he did keep two bedrooms for himself.   He can then rent the other two rooms to lodgers and it won’t be an HMO.

Two lodgers may be more than twice the trouble of one, however! 

ThisIsWeird

Thanks all.

I think his intention was just to serve notice on them all as he'd be selling his current abode and moving back in to the house. I mooted the option of him then renting out one or two rooms if he found the lack of rental income a bind. The idea of him perhaps offering one or two of the current tenants lodging rooms was just another thought, as he hates the idea of chucking them all out (but one, at least, he'd have no qualms about - the longest serving, who thinks he owns the place, and no-one likes...).

Please ignore the 'offering current tenants lodging status' bit. In general, if he were to rent out a couple of rooms after moving in, CT and bills included (as he'd be paying this anyway), what are the pros and cons of this in economic terms, and also in liabilities? How would the monthly rate compare? What technical and legal things will he need to consider? Surely not more complex than tenanting?!

Cheers.

propertyrental

* he moves in and the existing AST tenants remain AST tenants. Of course, he'd need their consent since they are renting the property so he has no right to just 'move in'. He'd effectively be their lodger, paying them rent.
* he evicts the existing tenants (S21) which takes time, depends on type of AST, and might fall foul of S21 rules. Then moves in and gets lodgers. Rent-a-room scheme applies subject to its conditions
* if lodgers, why 1 months notice? Draw up lodger licence requiring 1 weeks notice - in case the lodgers from hell move in
* Rent? depends on local factors- look at going rate for lodgers locally

Post 10: Lodgers: advice & links for landlords & lodgers

(all assuming England)

silvercar

If the current tenants in the house are on individual ASTs, they have no right to choose who the landlord rents out the other rooms to, so he could move in without their agreement. They remain on ASTs.

The tricky part is that presumably this mortgage is a BTL mortgage, in which case the lender would have to agree to transfer it to a residential one, or at least consent for the mortgagor to occupy.

ThisIsWeird

propertyrental said:

* he moves in and the existing AST tenants remain AST tenants. Of course, he'd need their consent since they are renting the property so he has no right to just 'move in'. He'd effectively be their lodger, paying them rent.
* he evicts the existing tenants (S21) which takes time, depends on type of AST, and might fall foul of S21 rules. Then moves in and gets lodgers. Rent-a-room scheme applies subject to its conditions
* if lodgers, why 1 months notice? Draw up lodger licence requiring 1 weeks notice - in case the lodgers from hell move in
* Rent? depends on local factors- look at going rate for lodgers locally

Post 10: Lodgers: advice & links for landlords & lodgers

(all assuming England)

Thanks. Yes, England.

All good info. Yes, it looks as tho' the biggest hurdle is simply evicting the tenants if they aren't agreeable to it! (Possibly not, as he charges significantly less rent than is typical in the area).

No obvious comparison between the rent achievable from a tenancy compared to a lodger? The former is more protected, obviously, but the latter more bills-included.

propertyrental

Good point from silvercar - are the occupants on a single 'joint and several' AST, or each on individual ASTs?

Re the rent, do a proper business case and that will become clear, but obviously renting out a whole property on an AST will generate more rent than renting rooms. But your business case will also take into account the costs of an AST, insurance, tax, etc etc

badmemory

Sell both & buy a smaller property more suitable for his needs & hope he has some decent equity & wonder what he was thinking to have both properties on interest only mortgages.

ThisIsWeird

propertyrental said:

Good point from silvercar - are the occupants on a single 'joint and several' AST, or each on individual ASTs?

No idea. He's let them find new tenants as and when others have left - usually friends and colleagues - but they do all sign a tenancy agreement when they move in. I presume individual, then?