Does anyone rent a home out?

ancient_mariner

ancient_mariner

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We had some inheritence money a few years back & we've been trying to invest it with building societies etc, but TBH interest rates are so low it has been difficult to barely break even with inflation - our capital is probably worth less than it was when we started out. We're thinking about buying a flat or similar in order to rent it to at least ensure we get a small increase on our investment - we don't want to be greedy, but it also feels like we're being unwise in the present situation.

However.

This is a new area for us. Is there anything that you would advise someone starting out on this path to be aware of, pitfalls and risks that one should know? Obviously we'll research, but sometimes that misses key info.
 
Speak to an IFA, they can take into account all your wants/needs and suggest investments you might not have considered.
 
Definitely have a managed letting agent. Also talk to potential ones first about what kind of property lets out the easiest. There's no point in buying something then finding out due to something you didn't consider it won't rent out.

Also remember that repairs and maintenance can easily swallow any profit. There's also tax returns to consider as you have to know the difference between capital improvements and repairs and it isn't always as obvious as you think plus anything you do before you rent it out isn't allowable against rental income. You can only allow expenses once it is actually rented out so if you do up a dump you can't allow any of that against income.

I'd also look into buying places which can't be mortgaged and making them mortgageble and selling them on (assuming you can buy cash). That might be another way to make a reasonable return but without the hassle of having tenants and complying with the masses of legislation that surrounds letting out a property.
 
I agree with Neil - costs (a bit) but they deal with the hassles. I think we were lucky because the one we use is excellent but I can imagine some being more keen on just getting any tenant in than doing any checks.

Find out what level of service they offer. Ours offered various options such as finding a tenant but we would do everything else (eg collecting rent, taking queries from the tenant, annual check of the flat and getting gas certification, sorting repairs), up to doing everything, which is what we chose. As you can imagine each has a different cost.

Check how they charge does it include VAT?

Although ours does everything they keep us informed of anything of note and we always have the option of using other workmen than the ones they employ, though we never have. There hasn't been much big needed doing over the years but the agent always gives us a quote from their workmen first, and as noted above they deal with all the calls.

We've also been lucky with tenants,so far, though one did ring the agent and ask if they could get us to sort out a problem with a mouse. The agent suggested they don't leave food around and to buy a mousetrap.

Dave
 
Couple of obvious points.....

1. Don't forget you'll pay an extra 3% SDLT on any property you buy.
2. There's some new legislation around your intentions when buying a property - can't remember all the details but if you buy a property hoping to make a capital gain (as opposed to hoping to make a return on letting it) then you pay more tax. It's awkward because most people invest for both purposes and it's a new law so it's unclear how it will bed in.
3. Oh yeah - mortgage payments will soon not be tax deductible (well, kind of - it's hideously complicated especially during the taper).

Plus a whole bunch of other regs that vary from council to council. For example, our local council has decided that if your property is untenanted then you pay full council tax.

Bottom line: all the major political parties have it in for private landlords. Even the one that basically said "c'mon chaps - put your pensions into property". Honestly, I'd do a lot of research before doing anything. And I probably wouldn't enter the market in the next 6 months. My guess is that this time next year there will be far fewer private landlords than there are now.

Honestly, if you fit their new criteria, you might be better chucking your money into Lendinvest for at least a while.
 
JonathanRyan said:
Bottom line: all the major political parties have it in for private landlords. Even the one that basically said "c'mon chaps - put your pensions into property".
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Was that Labour / Gordon Brown, with the 1998 budget that took taxed dividends on shares held in private pensions? (while leaving the taxpayer funded pensions of his public sector buddies untouched). My uncle had something to say about that as a self-employed carpenter all his working life, saw a third wiped off his annuity between the projection before the budget and when he came to take it a few months later.
 
onomatopoeia said:
Was that Labour / Gordon Brown, with the 1998 budget that took taxed dividends on shares held in private pensions? (while leaving the taxpayer funded pensions of his public sector buddies untouched). My uncle had something to say about that as a self-employed carpenter all his working life, saw a third wiped off his annuity between the projection before the budget and when he came to take it a few months later.
Click to expand...

Actually on this occasion I was thinking of the 2015 pension changes that basically said "take your money out and manage it yourself - after all aren't you the best person to look after your future?". A *lot* of people put pension money into the property market. IMO it's not all going to end well - and that's without the current government (and all other major parties) deciding that small landlords are evil and must be taxed accordingly.

But yeah, the last 20 years were pretty shaky times for pensions. Just not as bad as the next 20 years are going to be.

Politics aside: I think the property market is a dangerous place to start investing in right now. I'd suggest letting other people taking (most of) the risk and checking out some of the property based peer to peer lending as a way to reap the benefits while avoiding some of the more sweeping tax changes.
 
JonathanRyan said:
Actually on this occasion I was thinking of the 2015 pension changes that basically said "take your money out and manage it yourself - after all aren't you the best person to look after your future?". A *lot* of people put pension money into the property market. IMO it's not all going to end well - and that's without the current government (and all other major parties) deciding that small landlords are evil and must be taxed accordingly.
Click to expand...
I could be cynical and suggest that the 2015 changes predicted that a significant amount of capital would be released from shares/bond equity and invested into property, keeping a little more air in the housing market bubble for a while longer yet.

Between the private landlord housing market bubble and the relative newcomer that is the PCP market the resilience of the personal finance economy isn't looking the strongest it's ever been. I know the PCP threat is being downplayed, but the reports of concern in this market are increasing. I can't help think that the changes to taxation and private letting may be aimed at weaning the buy-to-let market off the expectation of capital gains and taking the sting out of any bubble burst down the road.
 
Alastair said:
I can't help think that the changes to taxation and private letting may be aimed at weaning the buy-to-let market off the expectation of capital gains and taking the sting out of any bubble burst down the road.
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Plausible. But I've a funny feeling it's about getting more money ;)

I think a bunch of people are currently learning the difference between liquid and illiquid assets.
 
JonathanRyan said:
Couple of obvious points.....

1. Don't forget you'll pay an extra 3% SDLT on any property you buy.
2. There's some new legislation around your intentions when buying a property - can't remember all the details but if you buy a property hoping to make a capital gain (as opposed to hoping to make a return on letting it) then you pay more tax. It's awkward because most people invest for both purposes and it's a new law so it's unclear how it will bed in.
3. Oh yeah - mortgage payments will soon not be tax deductible (well, kind of - it's hideously complicated especially during the taper).

Plus a whole bunch of other regs that vary from council to council. For example, our local council has decided that if your property is untenanted then you pay full council tax.

Bottom line: all the major political parties have it in for private landlords. Even the one that basically said "c'mon chaps - put your pensions into property". Honestly, I'd do a lot of research before doing anything. And I probably wouldn't enter the market in the next 6 months. My guess is that this time next year there will be far fewer private landlords than there are now.

Honestly, if you fit their new criteria, you might be better chucking your money into Lendinvest for at least a while.
Click to expand...

regarding 3, is it that complicated? I thought it was just capped at 20% relief?
 
KitsuneAndy said:
regarding 3, is it that complicated? I thought it was just capped at 20% relief?
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srichards said:
Not quite It isn't deducted first any more so you can be pushed into higher tax bracket even when profits are lower.
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Basically that ;) There is also the taper as they bring the changes in. It's not *that* complicated (just basically unfair) but HMRC have a way to make it complicated.....

https://www.gov.uk/guidance/changes...rds-how-its-worked-out-including-case-studies

KitsuneAndy said:
Ah yes, forgot that.

Lucky it's in my wife's name :)
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Just as long as she owns the whole property and it's not considered a settlement ;)

https://www.taxinsider.co.uk/1057-Making_a_gift_Avoid_the_settlements_trap.html
 
We have just done the same ... money was doing nothing in the bank so we have just purchased a 2 bedroom flat. It was an executors sale so we got it at a decent price (even after the extra 3% stamp duty) Once done up we have the option to sell it on for a reasonable profit or rent it out. As others have said though, if we go down the rental route we will use an agent, we rented a house out once before off our own back and it was a nightmare.

We have just started stripping the wallpaper .... Have to say ... WHO WALLPAPERS CEILINGS? every bloody one has paper on and it is a pig to get off.
 
JonathanRyan said:
Basically that ;) There is also the taper as they bring the changes in. It's not *that* complicated (just basically unfair) but HMRC have a way to make it complicated.....

https://www.gov.uk/guidance/changes...rds-how-its-worked-out-including-case-studies



Just as long as she owns the whole property and it's not considered a settlement ;)

https://www.taxinsider.co.uk/1057-Making_a_gift_Avoid_the_settlements_trap.html
Click to expand...
She owned it when we met, so is entirely hers. I never contributed anything towards it
 
Mike.P said:
We have just started stripping the wallpaper .... Have to say ... WHO WALLPAPERS CEILINGS? every bloody one has paper on and it is a pig to get off.
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Not even going to try stripping it off in our house, I suspect it's structural - at least as far as keeping the ceiling plaster on the laths..

Could be worse, could be textured artex.
 
Air B &B, yes.
Pop-up brothels abound. :D;)
 
Mike.P said:
It was an executors sale so we got it at a decent price
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Mike.P said:
Just to add to my previous post I went over to the flat this afternoon and decided to knock out a built in wardrobe. As I belted the frame with a hammer out fell £1000 in £20 notes.

Result !
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Haha, brilliant! :cool: (think i'll get my 4lb lump hammer out tomorrow & give the wife's side of the wardrobe a gentle tap :LOL: )
 
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