Renting out a house/becoming a landlord - help

[slimtim]

I may soon be in the position to rent out a 2 bedroom place in bristol. I have never done this before so some pointers would be good.
Specifically, should we use a letting agent for management? General consensus is they are a money grabbing waste of space. My brother and I both live in bristol but don't want to be constantly bothered by tenants problems.
What's the best thing to do in terms of tax? Do it through self assessment or set up a ltd company?
How much work is it to do it all yourself? I don't think we'll have too much trouble finding tenants, its the dealing with problems that concerns me as we both have full time jobs.

As an aside there is potential to convert the loft into a third bedroom, is this worth doing considering the cost involved? It could be done well by having its own access (I.e. not via another room but from the landing) but it would make the pretty big front bedroom smaller by a stairs width.

Any other tips?

Thanks, Tim

[TUFTY]

I have just returned to my own house which I have had let for the past 2 years.

I used agents as I was not living close to the property. They were pretty much a waste of space (and 10% of the monthly rental).

If I did this again I would not use an agent, my overall feeling was that their attitude leant towards the tennants not the landlords. Living nearby means you can address any issues yourself and not get ripped off by the agents and their preferred suppliers of services (plumbers etc)

There you go, this was my experience and may not be a reflection on all agents.

Cheers

Paul

[Kernow Buoy]

Tim I've let residentally for a few years now, we let an agent find tennants for us (complete with references etc.)but then manage the property ourselves. You can of course decide what you'll take by way of pets,smokers,children,students etc and have a couple of local tradesmen on hand in case of repairs (annual safety certificate) By and large we find that the better the condition of the property the better it stays.

[Erin]

Would be worth using a letting agency to find a tentant and sort out the lease/paperwork. It should be easy to manage the property yourself if the tenants are reasonable. Just make sure you comply with relevant legislation such as getting gas boilers serviced and the like. Tenants have a lot of rights these days.

[slimtim]

Tufty, your comments echo many others I have had. So many people have used letting agents in the past and then just given up. I reckon we might give it a try by ourselves and then if we find its a PITA we can then go down the letting agent route.

Any other tips and advice? Anyone have any view on the loft conversion idea?

[Searider]

Tim,

Would definately get a letting agent to find and vet the tennants. But if you live close i'm sure you could sort out plumbers / repairs etc if needed.

Duncan

[slimtim]

I'm not sure if it'll be hard to find tenants using Gumtree and the like, credit checks, references etc. might be a bit harder for me to do though but not impossible?

[Kernow Buoy]

Originally Posted by slimtim

I'm not sure if it'll be hard to find tenants using Gumtree and the like, credit checks, references etc. might be a bit harder for me to do though but not impossible?

No not impossible but are you 100% sure the checks you make and the contract you draw up will be as tight as one from a professional letting agent? Yes you'll pay initially but 6 months of no rent during a dispute will wipe that out ten fold. Loft conversion wise, yes if going down the student route and you have no intentions of selling the property but no if not, there are many couples out there looking to rent (in 10 years I've only had couples) bottom line is fewer people = less wear & tear.

[slimtim]

Someone mentioned to me that I wouldn't really get much benefit from having a letting agent in the event of a dispute as they would just end up getting a solicitor involved at my expense anyway.

I figured tenancy agreements are fairly standard and widely available. My house mate is a solicitor so he can always look over anything. Credit checks can be done online somewhere for a small fee I think. References from employers can be checked out, references from landlords are next to useless anyway because anyone without one is likely to make it up.

We wouldn't go down the student route, family or professionals only. Would a loft conversion be worth it purely for the potential increase in property value?

[Searider]

For the £300 or 50% of first months rent it's good value having the agent do all the credit / employment checks. Well, it has been for me. Never had a bad tennant, never had a vacant period.

Insurance, gas check, repairs etc I can sort myself.

[Doug Stormforce]

As already said DO NOT PAY AN AGENT to manage the property, as soon as the tenant calls them they will call a tradesman, they don't care its your money not theirs.

Agents are useful for tenant find service and will take 50-100% of 1 months rent depending upon the deal you do with them.

Go to every agent in town and haggle the best deal you can. It does not matter then which one finds the tenant as the one that charges 4 weeks rent and finds you a tenant has still done it quicker than the others. In the mean time market the property yourself.

Credit checks have little value, I suspect most experienced landlords would agree.

The tenant find service includes a contract however the AST contract is pretty standard and something you can easily source,

Student sharers always pay more than other families and couples.

My best tip is paint the property internally, make it look good asap. You should not be telling perspective tenants that the following work will take place b4 they move in, it should always look spotless. Once you have tenants look after them. If they get on with you and stay is saves loads of agency fees and void periods. It also saves you doing the obligatory decorating each time someone moves out

At the end of the day any tenant can mess you around but every agent will mess you around.

[Razorbill RIBs]

Originally Posted by slimtim

Anyone have any view on the loft conversion idea?

Hi Tim,

we have a rental property in Cardiff. As others have mentioned, we use an agent to advertise and then manage /maintain the property ourselves...easier said than done, but worth finding a reliable /good tradesman who you trust and have them on hand for any probs (essential for us as we live 100 miles away).

Re the loft, I had similar thoughts to you....

We have three rooms which are used as bedrooms currently (two beds and a second reception room) and had considered turning the loft into a third /fourth bedroom

Generally, if you go multiple occupancy route (students etc) it can be v. costly in terms of getting it up to spec....although sounds like you are looking for straight forward resi (single dwelling)....

To be used as a bedroom rather than a loft room you will need to meet bulding regs and will have to involve /get signed off by bldg inspector.....IMO not worth taking any risks if renting.

Prob obvious, but guess you need to number crunch / consider what the cost would be to carry out work vs increased yield and increased resale value (as well as any cost of borrowing if req to do work....including interest etc)

Obviously, each property is different, but some main considerations are:

Would it need to have a 'protected' stairwell (fire)?
Whether you can achieve the min head clearance (2m IIRC)where stairs open into loft /allowing for pitch of roof?
Whether you have enough space for a complaint staircase in terms of travel etc?
Dependent on when the house was built, what kind of roof / trusses you have etc....would prob need to provide calcs for any mods? - employ a struct eng
Is the current ceiling (loft floor) suitable for load bearing as built?
Cost of regs compliant insulation /power install and testing etc (all has to be certificated)
Fire /bldg regs in general (escape skylights etc)

Would be worth having a chat with your local bldg inspector....and downloading the regs.

When we looked into it, and despite the fact that the roof structure and floor needed no work, it still wasn't finacially viable for the increased revenue /sale value....the latter was especially influenced by the fact that the rest of the accommodation (kitchen size, no. toilets, size of living room etc.) were not really large enough for a 4 bed property....Plus, the property isn't earning income while you are doing the work....

Ultimately though, its the numbers which matter the most!

Dan

[slimtim]

Thanks Doug and Dan, some good advice and info. What are the things that we have to make sure we comply to? This is what I can think of:

Smoke alarms (where and how many?)
Carbon monoxide alarm, optional but a good idea.
Gas certificates for all gas appliances
Fire resistant furnishings
Electrics inspected if over 15 years old

Anything else?

[neilda]

Hi Tim, I have a couple of rental properties and would echo much of what's been said here.

The two big things I would add are:

1. As Doug posted above, don't use the agent to 'manage' the property. The agent will call the most expensive tradesperson to fix any problem and, of course, you're paying an extra 5% for the privilege.

2. It's really very important to negotiate the renewal rate now - at the outset. I didn't think to do this and have to cough up 10% (many thousands of pounds) just for the existing tenants to sign a bit of paper with Hamptons. I think the renewal rate should be half of the finders commission, or lower if you can negotiate it.

If you decide to go it alone, let me know as I have emailable tenancy agreements you could have a look at.

I would continue to use an agent as they find a tenant and ensure you're complying with the law - but with the above reservations.

Can I add a PS....

Be aware of CGT and your ability to flip properties if you're thinking of selling this flat (which sounds additional to your needs for some reason). There are some tax issues with long-term renting - not terribly complex, but good to consider these points now. Once rented you can't flip it to a PPR for example... that kind of stuff.

[willk]

Originally Posted by Erin

Just make sure you comply with relevant legislation such as getting gas boilers serviced and the like. Tenants have a lot of rights these days.

Aye, the bu@@ers.

Gone are the days when we could gas 'em with Impunity. Or Gas.

[Mollers]

Originally Posted by Erin

Tenants have a lot of rights these days.

My experience is in commercial prop letting. The legislation is much kinder on the landlord as your not providing a home. Private residential is a whole different ball game. It's just cost us £1200 to issue formal notice of eviction on a couple who had converted the spare room into a dope factory.

Use an agent to find and vet prospective tenants and nothing else. This will incur a one off finder's fee. Agent management is a joke.

[slimtim]

neilda, thanks for the info. Sounds like an agent will have all sorts of ridiculous charges I hadn't thought of. Would be good if you could email me those documents, email on my website (see below).

Its interesting that everyone has said use an agent to find the tenants because I thought I could probably do that myself. I know that they can advertise in more places and perhaps we would save money by finding tenants quickly but other than that, I don't see much advantage? If I pay them to find the tenants but NOT do the management then they aren't going to give two hoots about who they find so I think I'd rather find and vet tenants myself...thoughts?

The house (not a flat by the way) has been part left to me by my lovely Aunty who recently passed away which is the reason I want it to be looked after. Rough plan is to rent it until such time that my brother and I want to buy houses or its the right time to sell financially.

Mollers, £1200 to evict a couple?!!! Why so much? Do you get it back? That's got to make you mad

[Mollers]

Originally Posted by slimtim

Mollers, £1200 to evict a couple?!!! Why so much? Do you get it back?

No chance. I say "out", they say "no", it goes legal, they get legal aid, I don't. That's how it works. Be very, very thorough vetting and checking all references. I try to go with friends,relatives or work colleagues of existing tenants if poss. That policy tends to work.

[free]

Got to agree with Mollers here, took 9 months to get rid of one tenant and all I managed to claw back was a few hundred quid. All judgements in my favour, arrested wages etc but they knew exactly what they were doing. Perfectly respectable couple, in their forties, both working. I've let comercial and domestic, both were a pain in the erse, but I've never been near an agent. You can do it all yourself but it's hard work.

If you can get a long term occupancy (5 years ish) it makes life so much easier, as has already been mentioned, you usually end up redecorating between lets. I guess I used to get about 3 years out of a refurb, (decorating and carpets) possibly a little more out of a kitchen but not much and about 5 for a bathroom. Remember, they'll not treat it as well as you would. You also tend to find that as things slowly deteriorate, people don't notice, but bring in a new tenant and they'll walk straight back out.

Only other bit of advice would be visit regularly for at least the first few months, I didn't and found the tenant had traded the flat for a drug debt and there was a hooker operating from it.

Good luck.

free

[Mollers]

Originally Posted by free

......and there was a hooker operating from it.


free

£1200 worth?