Renting my house out for the first time.
Discussion
I'm moving to pastures new this year and have decided not to sell my house for the time being as its pretty slow moving around here still so i have decided to rent.
Anyway i thought i'd ask the PH massive their advice on renting. I need to know about keeping it legit and above board and practical advice.
Anyway a few questions:
From a legal perspective.....
Do i have to tell my mortgage company i'm renting my property?
Will i have to take out seperate home insurance because i'm renting?
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
How would i go about vetting potential tenants?
Would you include council tax in the rental cost or get the tenants to pay this?
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
Hmmm i think thats it for now.
Sorry for the long winded question and thanks in advance.
Cheers.
Anyway i thought i'd ask the PH massive their advice on renting. I need to know about keeping it legit and above board and practical advice.
Anyway a few questions:
From a legal perspective.....
Do i have to tell my mortgage company i'm renting my property?
Will i have to take out seperate home insurance because i'm renting?
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
How would i go about vetting potential tenants?
Would you include council tax in the rental cost or get the tenants to pay this?
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
Hmmm i think thats it for now.
Sorry for the long winded question and thanks in advance.
Cheers.
CHIEF said:
Do i have to tell my mortgage company i'm renting my property?
Will i have to take out seperate home insurance because i'm renting?
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
How would i go about vetting potential tenants?
Would you include council tax in the rental cost or get the tenants to pay this?
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
You'll need consent to let from your lender.Will i have to take out seperate home insurance because i'm renting?
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
How would i go about vetting potential tenants?
Would you include council tax in the rental cost or get the tenants to pay this?
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
I have contents insurance for mine, only £5 a month.
Tax is paid on anything made above the interest costs of the mortgage, other costs can be offset, repairs, letting agent fees, etc. just inform HMRC and complete a tax return.
I've used an agent that charged 10%, but currently have a guy I know from work in it so no letting fees. The agent did take away all the hassle though.
Council will charge you tax still if it's furnished during down times. However it may be easier to rent furnished. Having said that I rent out a flat so a different market.
Tenant would need to register to vote so would pay the council tax direct to the council.
A separate bank account would make it easier to account but I don't bother as it's not too challenging with just the one property.
And breathe...
The lender may charge a higher rate of interest for the consent to let as well as a yearly admin fee. Mine charged .5%, then as the mortgage terms have changed the LTV they offer is lower, if you are above this then they may charge a higher lending fee. With my lender that equates to another .5%.
CHIEF said:
I'm moving to pastures new this year and have decided not to sell my house for the time being as its pretty slow moving around here still so i have decided to rent.
Anyway i thought i'd ask the PH massive their advice on renting. I need to know about keeping it legit and above board and practical advice.
Anyway a few questions:
From a legal perspective.....
Do i have to tell my mortgage company i'm renting my property?
Yes you should as they have a stake in the property and should be advised of the change. They shouldn't mind but may require a slightly higher rate.
Will i have to take out seperate home insurance because i'm renting?
You must make sure you insure the property. The mortgage company will insist on it. Due to the new risk, you really need good cover to protect yourself.
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
If you rent via a rental agent who should check the property before the tenancy, this isn't necessary in my opinion.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Yes. Don't forget you can deduct the mortgage interest, maintenance, repairs, insurance, ongoing costs etc. from the rental income and only pay tax on the difference.
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
I use a rental agent for some peace of mind. You should be able to get 10%, although many charge 12.5%. The lowest I have seen is 8%.
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
Your choice. If you've got good stuff you like, go unfurnished as tenants won't treat it like you would. You can claim for wear & tear on furnished lets but not unfurnished. However if unfurnished, you will need to find storage which could be around £80 pcm.
How would i go about vetting potential tenants?
If you use a rental agent, they do this - credit checks, proof of income etc.
Would you include council tax in the rental cost or get the tenants to pay this?
Tenants responsibility once the tenancy starts.
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
Main one would suffice but keep good records of all income & expenditure for self-assessment tax form.
Hmmm i think thats it for now.
Sorry for the long winded question and thanks in advance.
Cheers.
Anyway i thought i'd ask the PH massive their advice on renting. I need to know about keeping it legit and above board and practical advice.
Anyway a few questions:
From a legal perspective.....
Do i have to tell my mortgage company i'm renting my property?
Yes you should as they have a stake in the property and should be advised of the change. They shouldn't mind but may require a slightly higher rate.
Will i have to take out seperate home insurance because i'm renting?
You must make sure you insure the property. The mortgage company will insist on it. Due to the new risk, you really need good cover to protect yourself.
Will i have to take any soort of public liability insurance? i.e. say someone falls down my stairs and decides to sue me etc.
If you rent via a rental agent who should check the property before the tenancy, this isn't necessary in my opinion.
Anything i make what is the taxation situation, if i make a profit i take it i will have to declare it like any other income?
Yes. Don't forget you can deduct the mortgage interest, maintenance, repairs, insurance, ongoing costs etc. from the rental income and only pay tax on the difference.
Anything else legal wise i should know about?
Practical considerations:
Would you use a letting agent or would it be better to go it alone, if the former roughly how much of a percentage will they take?
I use a rental agent for some peace of mind. You should be able to get 10%, although many charge 12.5%. The lowest I have seen is 8%.
Would i be better to rent it furnished or unfurnished? its not a flat incidentally its a 3 bed semi.
Your choice. If you've got good stuff you like, go unfurnished as tenants won't treat it like you would. You can claim for wear & tear on furnished lets but not unfurnished. However if unfurnished, you will need to find storage which could be around £80 pcm.
How would i go about vetting potential tenants?
If you use a rental agent, they do this - credit checks, proof of income etc.
Would you include council tax in the rental cost or get the tenants to pay this?
Tenants responsibility once the tenancy starts.
Would i be best to open a seperate bank account to collect the moeny or would my main one suffice?
Main one would suffice but keep good records of all income & expenditure for self-assessment tax form.
Hmmm i think thats it for now.
Sorry for the long winded question and thanks in advance.
Cheers.
You will need to inform your mortgage company that you intend to rent the property out, and would suggest before you contact them, you read a posting made recently by PH poster Welshbeaf on how his mortgage company dealt with that same issue.
You will need to arrange building insurance with the provision that they know you are renting the property out.
I do not bother with contents insurance, since due to fire safety regulations and let All my properties unfurnished, and would advise you to do the same. Unfurnished also saves on public liability and if things break you are not having to either repair or replace the same.
If you are already submitting a Self Assessment Return to HMR&C, then there is no need to inform them of you letting the property, just request a tax return for UK Land & Property.
I tend not use agents to either find tenants or to manage the properties, preferring to do the same myself, might not be possible in your case, so unless you have a trusted relative or friend, then it will have to be a letting agent.
Another good reason for letting unfurnished is that whilst the property is empty, the Council will not charge you Council Tax for the first 6 months of being empty.
It is not easier to let furnished, I have found quite the opposite, and in the early days of letting became a big pain of moving furniture in and out of the property, where one set of tenants wanted furniture the next set of tenants did not.
Any gas appliances, fire, cooker and central heating boiler will require an annual Landlords Gas Safety Check/Certificate presented by a Corgi engineer. The main Electrics need no checks certificate, but you should never the less be satisfied in your own mind that there are no risks etc. Any electrical appliances only need checking by a competent person, so you can do the same.
As for the rest of the property, including garden just check for “health & safety” risks, low branches, carpets on stairs loose etc.
I do not have a separate bank account, just put the monies into my one personal bank account, ensuring that I make plenty of cross references to differentiate between rental income and other personal credits & debits.
You will of course rent the premises exclusive of All service charges, water, gas, electrics, TV License, Council Tax etc. etc., and you will of course notify these suppliers of the name of the new occupier/s, the date they took up residence and the metre readings.
Then once you have the rent and the Deposit, the latter which I ask for 1 ½ months rent as a Deposit, you will then under the legislation register the Deposit under one of the Deposit Bond Scheme.
I hold all Tenancy Agreements, Tenants Application Form, Inventory Form, Deed of Guarantee, Notice 21 & Notice 8 etc.etc
You will need to arrange building insurance with the provision that they know you are renting the property out.
I do not bother with contents insurance, since due to fire safety regulations and let All my properties unfurnished, and would advise you to do the same. Unfurnished also saves on public liability and if things break you are not having to either repair or replace the same.
If you are already submitting a Self Assessment Return to HMR&C, then there is no need to inform them of you letting the property, just request a tax return for UK Land & Property.
I tend not use agents to either find tenants or to manage the properties, preferring to do the same myself, might not be possible in your case, so unless you have a trusted relative or friend, then it will have to be a letting agent.
Another good reason for letting unfurnished is that whilst the property is empty, the Council will not charge you Council Tax for the first 6 months of being empty.
It is not easier to let furnished, I have found quite the opposite, and in the early days of letting became a big pain of moving furniture in and out of the property, where one set of tenants wanted furniture the next set of tenants did not.
Any gas appliances, fire, cooker and central heating boiler will require an annual Landlords Gas Safety Check/Certificate presented by a Corgi engineer. The main Electrics need no checks certificate, but you should never the less be satisfied in your own mind that there are no risks etc. Any electrical appliances only need checking by a competent person, so you can do the same.
As for the rest of the property, including garden just check for “health & safety” risks, low branches, carpets on stairs loose etc.
I do not have a separate bank account, just put the monies into my one personal bank account, ensuring that I make plenty of cross references to differentiate between rental income and other personal credits & debits.
You will of course rent the premises exclusive of All service charges, water, gas, electrics, TV License, Council Tax etc. etc., and you will of course notify these suppliers of the name of the new occupier/s, the date they took up residence and the metre readings.
Then once you have the rent and the Deposit, the latter which I ask for 1 ½ months rent as a Deposit, you will then under the legislation register the Deposit under one of the Deposit Bond Scheme.
I hold all Tenancy Agreements, Tenants Application Form, Inventory Form, Deed of Guarantee, Notice 21 & Notice 8 etc.etc
Prior to renting out the property you will also require an Energy Performance Certificate, with any potential tenant, at the time of viewing the property having the right to request sight of the certificate, with there being a fine for the landlord if the landlord has not had the check/inspection carried out.
This link explains more;
http://www.direct.gov.uk/en/HomeAndCommunity/Buyin...
This link explains more;
http://www.direct.gov.uk/en/HomeAndCommunity/Buyin...
Wings said:
Prior to renting out the property you will also require an Energy Performance Certificate, with any potential tenant, at the time of viewing the property having the right to request sight of the certificate, with there being a fine for the landlord if the landlord has not had the check/inspection carried out.
This link explains more;
http://www.direct.gov.uk/en/HomeAndCommunity/Buyin...
Chers guv!This link explains more;
http://www.direct.gov.uk/en/HomeAndCommunity/Buyin...
I'll tell you a bit of a story from the early 90's...I had a flat that was in negative equity although I'd put down a 25% deposit. I'd bought at the very top of the market. I needed to move away for work reasons and couldn't sell because there were no buyers (other than those who wanted to pay 50% of the current market value) and because I couldn't make up the shortfall in the mortgage.
I planned to rent it out but when I investigated the Mortgage co's approach (I didn't talk to them about MY mortgage) Halifax advised that they would want to convert to a commercial mortgage (BTL didn't really exist in the same way) at a significantly higher rate and at at LTV of 75% of the current market value.
I chose to let without consent. I felt that I didn't really have any choice, I had to move, I couldn't pay the shortfall if I sold and I couldn't produce enough cash to covert to a 75% LTV.
I did everything else by the book and let it for around 17 years finally selling at the end of 2007 (October as the market crumbled under my toes!).
I don't know what response you'll get from your mortgage co and I haven't seen the other thread to which Wings refers. Just make sure you have a feel for what your mortgage co's approach will be before you jump in too far with them unless you've got some other options if they won't play ball.
I planned to rent it out but when I investigated the Mortgage co's approach (I didn't talk to them about MY mortgage) Halifax advised that they would want to convert to a commercial mortgage (BTL didn't really exist in the same way) at a significantly higher rate and at at LTV of 75% of the current market value.
I chose to let without consent. I felt that I didn't really have any choice, I had to move, I couldn't pay the shortfall if I sold and I couldn't produce enough cash to covert to a 75% LTV.
I did everything else by the book and let it for around 17 years finally selling at the end of 2007 (October as the market crumbled under my toes!).
I don't know what response you'll get from your mortgage co and I haven't seen the other thread to which Wings refers. Just make sure you have a feel for what your mortgage co's approach will be before you jump in too far with them unless you've got some other options if they won't play ball.
Daughter is presently in the same situation, but thankfully greatly reduced her mortgage, so if push came to shove, she could settle the mortgage. She did however inform the insurance company that we was letting the property, so was covered in the event of any eventuality.
Welshbeef’s posting was on the “Finance” forum under the title of “Buy to let mortgage rates”dated 15 December 2009, so not far back link posted below;
http://www.pistonheads.com/gassing/topic.asp?h=0&a...
Welshbeef’s posting was on the “Finance” forum under the title of “Buy to let mortgage rates”dated 15 December 2009, so not far back link posted below;
http://www.pistonheads.com/gassing/topic.asp?h=0&a...
Thanks Wings. I also made sure that the buildings insurers knew and everything else was above board.
I know many people have a hissy fit about letting without consent but in many cases people have very few options in climates such as these and I'm not convinced that this alone leaves a tenant more exposed - at the end of a 6 months AST the tenant is subject to the tenancy being terminated with two months notice anyway. I also fail to be convinced that a lender will immediately demand repayment on a let property where there is negative equity if the loan is being serviced with no problems.
I continued to service my mortgage with no problems and once things got a bit better I remortgaged to C&G on a BTL basis.
I know many people have a hissy fit about letting without consent but in many cases people have very few options in climates such as these and I'm not convinced that this alone leaves a tenant more exposed - at the end of a 6 months AST the tenant is subject to the tenancy being terminated with two months notice anyway. I also fail to be convinced that a lender will immediately demand repayment on a let property where there is negative equity if the loan is being serviced with no problems.
I continued to service my mortgage with no problems and once things got a bit better I remortgaged to C&G on a BTL basis.
Not sure if it was covered in the loner posts, but you'll need to have a landlord certificate for any gas appliances and boiler. Also electrical I think.
Even though i'm not a huge fan of British Gas (won't go into that) it might be worth having homecare, just in case there is any problems. I was paying full whack so it covered the boiler, all plumbing and electrical faults.
When I informed my lender, Northern Rock, I just paid an administration fee of about £100. The rate was th same as m residential rate.
You should also install smoke and carbon monoxide detectors (carbon one not compulsary I don't think, but could be a life saver) and ask them to tes it every month and tick/sign a check sheet.
Even though i'm not a huge fan of British Gas (won't go into that) it might be worth having homecare, just in case there is any problems. I was paying full whack so it covered the boiler, all plumbing and electrical faults.
When I informed my lender, Northern Rock, I just paid an administration fee of about £100. The rate was th same as m residential rate.
You should also install smoke and carbon monoxide detectors (carbon one not compulsary I don't think, but could be a life saver) and ask them to tes it every month and tick/sign a check sheet.
M400 NBL said:
Not sure if it was covered in the loner posts, but you'll need to have a landlord certificate for any gas appliances and boiler. Also electrical I think.
When I informed my lender, Northern Rock, I just paid an administration fee of about £100. The rate was th same as m residential rate.
You should also install smoke and carbon monoxide detectors (carbon one not compulsary I don't think, but could be a life saver) and ask them to tes it every month and tick/sign a check sheet.
Agree, and very good advice.When I informed my lender, Northern Rock, I just paid an administration fee of about £100. The rate was th same as m residential rate.
You should also install smoke and carbon monoxide detectors (carbon one not compulsary I don't think, but could be a life saver) and ask them to tes it every month and tick/sign a check sheet.
Making sure you have a proper Landlords Residential Insurance policy would be high on my list.
My worst experience was when a female tenant fell out with her partner and he decided (in his wisdom) to vandalise the house with the intention that she would be evicted. The damage ran to 18k (fortunately covered by insurance) and took nearly 3 months to sort out during which time the house was uninhabitable. She, and her 3 kids ended up in a Council emergency accomodation and he ended up in the cells for the night. Crazy thing is that the police/prosecution took no further action against him and they both got back together again presumably to rent from some other mug.
Unfortunately I believe some physical harm came to the guy the next time I was abroad on holiday.
My worst experience was when a female tenant fell out with her partner and he decided (in his wisdom) to vandalise the house with the intention that she would be evicted. The damage ran to 18k (fortunately covered by insurance) and took nearly 3 months to sort out during which time the house was uninhabitable. She, and her 3 kids ended up in a Council emergency accomodation and he ended up in the cells for the night. Crazy thing is that the police/prosecution took no further action against him and they both got back together again presumably to rent from some other mug.
Unfortunately I believe some physical harm came to the guy the next time I was abroad on holiday.
Piglet said:
Thanks Wings. I also made sure that the buildings insurers knew and everything else was above board.
I know many people have a hissy fit about letting without consent but in many cases people have very few options in climates such as these and I'm not convinced that this alone leaves a tenant more exposed - at the end of a 6 months AST the tenant is subject to the tenancy being terminated with two months notice anyway. I also fail to be convinced that a lender will immediately demand repayment on a let property where there is negative equity if the loan is being serviced with no problems.
I continued to service my mortgage with no problems and once things got a bit better I remortgaged to C&G on a BTL basis.
I agree with your comments, although when my daughter contacted her mortgage lender, Ingdirect, they were very adamant, in fact quite aggressive that they would want the mortgage immediately settled. I know many people have a hissy fit about letting without consent but in many cases people have very few options in climates such as these and I'm not convinced that this alone leaves a tenant more exposed - at the end of a 6 months AST the tenant is subject to the tenancy being terminated with two months notice anyway. I also fail to be convinced that a lender will immediately demand repayment on a let property where there is negative equity if the loan is being serviced with no problems.
I continued to service my mortgage with no problems and once things got a bit better I remortgaged to C&G on a BTL basis.
I took out a loan/mortgage on my home, so the interest rate was slightly lower, and I was able to get an Offset type mortgage with Intelligent Finance, who are part of Halifax. The Offset type allows one to use the same as a savings, cheque account, so paying all the rents directing into account, reduces the amount I owe, and therefore the interest I pay. In fact Intelligence Finance say that since January 2005 I have saved £33,599.40 in interests.
CHIEF said:
I must admit after what i have read here i'm worrying now about telling my mortgage company but obviously if i want to keep things totally legit its something i have to do.
If you have the LTV and the income it shouldn't be a problem (of course there are other factors). Best bet would be to talk to a mortgage advisor, someone like scotal maybe able to give you an idea if your lender will be favourable to your situation or not.Road Pest said:
CHIEF said:
I must admit after what i have read here i'm worrying now about telling my mortgage company but obviously if i want to keep things totally legit its something i have to do.
If you have the LTV and the income it shouldn't be a problem (of course there are other factors). Best bet would be to talk to a mortgage advisor, someone like scotal maybe able to give you an idea if your lender will be favourable to your situation or not.Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff