Renting a Property

Discussion in 'OT (OFF Topic) Forums' started by M3 SHAM, Jul 20, 2011.

  1. M3 SHAM

    M3 SHAM Active Member

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    Hi Guys,

    I am considering renting out my house for a period of time and was wondering what I would have to do to stay 'above board'

    I have contacted my Mortgage company and they have provided me with written authorisation to the rent the property should i wish to (had to pay £60 for this as its currently on a residential mortgage)

    I am aware I will need to get a landlord gas safe certificate for the boiler and have renting building insurance.

    Is anyone aware of any tax implications? Do I have to register this as a business or something? As it stands it looks like the rent per month will be equal to the mortgage payment so in essence there will be no profit made?

    Any help greatly appreciated.
     
  2. renault12ts

    renault12ts MB Club Veteran

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    Is it a business? You can't offset your normal income against your mortgage payments, so there is no reason why the rent received will be off set against the mortgage payments. So, declare the rent.
     
  3. OP
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    M3 SHAM

    M3 SHAM Active Member

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    It is not a business, it is my residential home which I will be renting out potentially for 12 months whilst working abroad.

    I understand your point but I have heard this does not apply in this case and there are different rules when it comes to renting property. Hopefully I will get some more feedback.
     
  4. EDZ649

    EDZ649 MB Enthusiast

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    If you take a deposit, which I'm sure you will, you have to place it in a deposit protection scheme in case of dispute when the tenant leaves the property.

    As for insurance you only need to cover the building itself, the contents are the responsibility of the tenant.

    Take lots of detailed photo's before you rent it.....
     
  5. E CLASS

    E CLASS Active Member

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    1. Are you going to manage it yourself? By that I mean draw up all the paperwork and attend to anything that needs doing. When you are abroad this could prove tricky. Leaky tap, dishwasher packs in etc...

    2. Or get a company to manage it for you and take 15% (usually) of the rental payments?

    3. You'll need to let furnished I imagine - so get cover for your contents also. Direct Line offer landlord insurance.

    4. If you manage yourself ensure all the paperwork is correct and above board - could prove your undoing should anything happen.

    5. Vet your tenants.

    6. Do a scrupulous inventory of everything in the house right down to the light shades and teaspoons.

    7. You may need to register as a landlord with the local authority - check this.

    8. Fot smoke alarms everywhere.

    9. Don't cut corners.

    10. Rent to professionals only...


    You'll need to complete a tax return stating rental income versus mortgage payments.

    Take a deposit usually 1.5 times monthly rental payment.
     
  6. martin_a

    martin_a Active Member

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    Paperwork might well be Gas Safe as you've mentioned, plus electrical checks on everything, plus a home efficiency report to say how much energy is expected to be used.

    Check out www.landlordzone.co.uk for more advice.

    m.
     
  7. davidjpowell

    davidjpowell MB Enthusiast

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    You can only offset mortgage interest against tax, not capital repayments. You can offset an amount towards cost of replacing fixtures and fittings etc.

    If a letting agent is sending rent to a non Uk tax payer they must deduct tax and send hmrc.

    Good inventory required at start of tenancy if you are to have a leg to stand on in case of damage
     
  8. Chrishazle

    Chrishazle MB Enthusiast

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    For the rental agreement, there is ARLA - I think that's Association of Rental and Leasing Agents, who have a very good standard agreement that reputable rental agencies use. My daughter had lots of problems renting through non-ARLA agents when a student in Bath, whereas we had no problem renting through an ARLA agent using the standard ARLA contract with a few minor changes when we rented for a year (unfurnished).
     
  9. wemorgan

    wemorgan MB Enthusiast

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    If you're abroad I can recommend paying for a full managed estate agent. Their fees are ~10%, which can also be used to offset against the income from the rental.

    Unfurnished is less hassle and depending on size/location wont make much difference to the rental anyway.
     
  10. OP
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    M3 SHAM

    M3 SHAM Active Member

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    If I go ahead with this I will be renting to a family friend who himself has a partner and 2 young children that will be living in the property. I will be managing this myself so will not be using a property management company.

    I just want to be fully aware of my leagal responsabilities in terms of tax, I heard from someone else that if rent is equal to the mortgage then you dont need to pay any tax? Not sure if this is true?
     
  11. A-AvantGarde

    A-AvantGarde MB Enthusiast

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    Lots of good advice above.

    I've previously worked in Lettings (during a gap year at Uni):

    If you're going to be abroad, I'd seriously recommend going for a managed let, i.e. agent finds tenants, vets tenant, draws up contract, collects rent and then takes calls from tenants about any issues with the property.

    If you have contacts here (general builder / DIY handyman) then that could suffice but do you really want to get a call in the middle of the night about a leaking shower?

    Also if leaving the property furnished, all of the soft furnishings (e.g. sofas, beds etc have to comply with fire regulations - the labels need to be present). All new (from approx 1997 I think) furniture (except mattresses and bed bases) must carry a permanent label in accordance with the regulations, check your sofa and you should find a fire safety label.

    If the property is a flat you may most likely need permission from the leasholder / managing agents too.
     
  12. A-AvantGarde

    A-AvantGarde MB Enthusiast

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    I would be wary about letting to a family friend unless you know them really well. I'd like to keep busines and family life separate.

    As for the tax implications check this:

    Tax on rental income - an overview : Directgov - Money, tax and benefits

    Essentially you shouldn't have any major issues with the situation you've described.

    The most important thing is that you have the mortgage company approval. It's also most likley they will increase your mortgage rate by at least 1%.
     
  13. HR17

    HR17 Active Member

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    I have property I let. Top tip for an easy life is to have a good agent do it on your behalf, and negotiate a fee down from their usual. You might be able to get away with <10% of the gross rent if lucky. It’s worth every penny when something goes wrong - blocked drain, dishwasher leaks, gas needs testing, boiler dies etc. (And frozen pipe work following last winter!)

    Also get buildings and contents insurance - both very cheap when combined.

    When it comes to tax, I declare everything on my return, and claim interest, agency fees, insurance and all the maintenance against the rental income. It’s very easy if you file on line.

    Tenant wise, my agent gave me carte blanche to decide who I want. I opt for professionals only with references and deposits(which the agent looks after). Also non smokers, no cat/dog owners, no benefit claimants, no asylum seekers etc.

    I've never had any problems with tenants, and any maintenance, breakages or repairs have been organised by my agent. My contracts also state that tenants are responsible for making good any paintwork/damage through wear and tear, carpets are shampooed when they leave, and that gardens are maintained and lawns cut etc.

    I sit back and bank the cash at the end of the month, and hold it in a savings account til the tax man wants his cut, and I keep the rest.
     
  14. OP
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    M3 SHAM

    M3 SHAM Active Member

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  15. Harrythedog

    Harrythedog MB Enthusiast

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    As someone said you can only claim against the interest on the mortgage repayment not the whole amount. Any profit between rental income and interest repayment is taxable. Get an accountant ( cost about £100-£150) to do your tax return and that'll keep you sweet with HMRC. the most important thing is to get a signed shortterm tenancy agreement with a specified termination date otherwise tenants may be classed as "sitting" and you'll never shift them (unless they've changed the law)
     
  16. HR17

    HR17 Active Member

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    If you do your return on line, there's an option to add let property and record the outgoings such as interest, agency fees and maintenance etc against the rental income. It works out the tax payable on the profit for you, and is very easy to to. Takes only a few seconds and is free.
     
  17. HR17

    HR17 Active Member

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    Tricky letting to friends or family. I'd still use an agent as an intermediary if you can. My agent sorted a couple of issues over the xmas holidays for me without me having to get involved. One broken down boiler, one frozen downpipe and a dead fridge. Not major things, but time consuming enough to have to sort out plumbers etc and pay for yourself. Would have been quite intrusive for me and my family when we're trying to have xmas, but also these things need to be done quickly as tenants can't be without heating, hot water, flushable toilet or a fridge etc. and I wouldn't have been able to do that alone.
     
  18. donubenz

    donubenz Active Member

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    If you want an example of an agreement for short leasehold tenant. pm me.
    Don
     
  19. OP
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    M3 SHAM

    M3 SHAM Active Member

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    Thank you very much for the info guys, at the moment its is a possibility so I will see how things turn out.
     
  20. rizzer

    rizzer Active Member

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    Mortgage interest is offset against rent. You will need an Energy Performance Certificate, EPC, cost around £40 one off. Landlord Gas Safety Cert, LGSC, cost around £50 yearly, I think electrical installation test is recommended, we always do it and it should last 10 years, cost can vary, we normally do it as part of rewire, cost around £50 - £150. I think there will be a Capital Gains tax issue when you sell, but as its only for a year and you will have a CGT allowance, any tax payable shouldnt be to much. You can also put any expense against the income. You'll need Property Owners Insurance for Letting and you can protect rent income in the event if the tenants unable to live in the property for some reason, it would also pay for alternative accommodation if needed. Always use an Agent and try and speak to a local builder you can trust, yes we do exist, to deal with any issues while your away. Hope all works out okay for you.
     

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