What issues could arise from renting inherited property?

collinofthenorth

Hi there,

I am asking for a little bit of advice. Sadly, my father passed away recently, leaving me and my sibling his house. We are now considering whether to rent it out, or sell it (more leaning towards renting).

As both of us are renting our own homes currently, neither of us have ever been a first time buyer.

I was wondering from others perspectives, is it a wise idea to rent out the property in our situation? 

I understand this may be a silly question, however, I am very new to anything property related due to tbe unforseen circumstances and being thrown into this, and just wanted some advice.

I would be extremely grateful for any help or advice.

user1977

Why are you wanting to let it out rather than sell?

FreeBear

collinofthenorth said: I am asking for a little bit of advice. Sadly, my father passed away recently, leaving me and my sibling his house. We are now considering whether to rent it out, or sell it (more leaning towards renting).

If you become a landlord, there is a load of rules & regulations that you must comply with. On top of that, rental income would be subject to income tax, and if you sell, capital gains tax. You also loose your FTB status, and you'd have to pay extra in stamp duty should you ever buy a property of your own.

If you were to sell this property as part of the estate, you'd probably get as good a return on investing the capital, although you'd loose the growth of value of the asset. Tax returns would be simplified though, and you'd still retain your FTB status and not get clobbered by increased stamp duty.

I'd suggest sitting down with an independent financial adviser that has knowledge of rental properties as well as the wider investment market. You'll get better quality advice than you would from some random on a forum as well as avoiding diatribes from the doom & gloom merchant.

Bookworm105

FreeBear said:

collinofthenorth said: I am asking for a little bit of advice. Sadly, my father passed away recently, leaving me and my sibling his house. We are now considering whether to rent it out, or sell it (more leaning towards renting).

If you become a landlord, there is a load of rules & regulations that you must comply with. On top of that, rental income would be subject to income tax, and if you sell, capital gains tax. You also loose your FTB status, and you'd have to pay extra in stamp duty should you ever buy a property of your own.

If you were to sell this property as part of the estate, you'd probably get as good a return on investing the capital, although you'd loose the growth of value of the asset. Tax returns would be simplified though, and you'd still retain your FTB status and not get clobbered by increased stamp duty.

I'd suggest sitting down with an independent financial adviser that has knowledge of rental properties as well as the wider investment market. You'll get better quality advice than you would from some random on a forum as well as avoiding diatribes from the doom & gloom merchant.

this neatly sums up the main points you need to consider

Stubod

My sibling and I did this about 7 years ago, (and luckily we got a good tenant). 

However, if I had my time again I would have sold it, and I would recommend you do the same. 

Better to have the money invested or saved without the potential hazards of being a Landlord, particularly with all the new legislation which makes it more trouble than its worth....IMHO....

Keep_pedalling

I think you would be crazy to do this. Apart from taking on all the responsibilities of being landlords and losing your FTB status, you and your sibling are going to be financially bound together which could very well cause major issues further down the line. For instance what happens if you need to liquidate your share to buy a place of your own and your sibling refuses to sell up?

dinosaur66

i am a landlord

listen to freebear

sound advice

sell it and use dads inheritance to buy one each

capital gains allowance has been cut massivley

free stamp duty for FTB is huge gain with all the recent rise after rise since 2016

FlorayG

I let my mother's house when she left it to me and I was SO lucky because my tenants were perfect - I didn't know anything about the rules, regulations and rights ( and a letting agent has no responsibility to tell you, it's on you to know). They only wanted to stay 12 months and that suited me as I planned to move into it myself after that. I didn't know that if they had decided not to move I would have struggled to get them out.
I'm still a landlord, I bought a rental with the proceed of selling my house, but I've done considerable research since then and now I know what it entails
There's also the possible sentimental value of your inherited house -rentals are not looked after as well as you might want
You might still want to rent it after doing your homework but PLEASE do the research on being a landlord first

PRAISETHESUN

The biggest pitfall I see is that you would lose your FHB status by inheriting the property. Instead if you let the estate sell it and then distribute the cash then you won't lose it.

If you do go down the rental route, then I'd strongly advise you do some research. There's a lot of rules and regulations surrounding rentals, and potentially a lot of unexpected costs. Not something I'd really recommend going into unprepared.

Albermarle

If you do not go down the rental route ( which would seem wise), you need to give some thought to what you will do with the money from the sale + any other money you will inherit.
Probably the most obvious would be to use it get yourself ( and/or your sibling) on the property ladder at some point.
Whatever you do, do not just let it sit in a current account for ages.
On the MSE  savings and investments board/forum,  there are often questions about how to best deal with inherited money.