Renting Properties

[Howard]

Hi gang ,

Just a quicky , and nothing serious at the moment ....

If I was to get a tied cottage with my job and rent out my flat that i have at the moment , what would i need to do ?

Would my mortgage still be ok , if i didn't live there , or would i have to change mortgage , i have been with the lenders for 4 years now .... so they know i haven't bought it to let ....

Will i get hit for tax on the rental monies ? If so , what percentage ?

Will i need to have the electrics certified , boiler etc ?

All i am looking to do , is to be able to pay the mortgage with the rental money , not looking to make a profit, that way i still have the flat to fall back on should the job ever go t**s up , or when i retire ....

Any advice ? as i say , it's all hypothetical at the moment ....

Thanks

 

[guydewdney]

yes, you have to declare the income - its the same rate as your normal income.

but - you can claim any and all expenses related to the income (so driving over to check property, phone calls, stationary, even a part of your new mortgage/rent/electricity to cover your 'office' needed for admin purposes). wear and tear is a good one

yes, you need landlords gas safety certificate (annual, not a lot of money). Not as far as I know on electrics. do need CO monitor and fire alarm / smoke alarm.

dont know about mortgage company, every one is different. dont see why they shouldnt say its ok.

You DONT need this new govt based thing where the deposit is put into a govt bond thing. (if you dont know / never heard of this, then dont worry, ignore me )

 

[wobbly]

Howard

I would inform the mortgage company, that you are going to rent out the property, some may say its ok for a fixed term, others will insist that you change to a buy to let mortgage.

Some mortgage companies, only lend on a six month tenancy agreement, so it you are considering renting to say a housing trust, which may want a three to five year agreement, only certain lenders will agree to this.

Contact your friendly financial advisor is your best bet.

Wobbly

 

[scotth_uk]

You DONT need this new govt based thing where the deposit is put into a govt bond thing. (if you dont know / never heard of this, then dont worry, ignore me )

From a tenant's point of view, this is the best thing to happen to renting in years. I'd strongly urge Howard to take a look at this.

Having a third party government controlled entity looking after your bond/deposit is a fantastic idea. Protects both parties.

 

[Benzowner]

If you intend to let a flat, I assume the rest of the building is up to scratch, i.e. emergency lighting, fire alarms, etc etc If it is not, then the fact you are renting, the onus will fall onto the landlord, you. The boiler will need to be certified as will the electrical installation. Any appliancies you leave that need to be plugged in will also need annual pat testing. There should be a fire blanket in the kitchen and fire extinguisher. If you get a council inspection, all these points and more will need to be addressed. Many landlords we have dealt with have sold the house because it was cheaper than bringing the property up to the required standard for HMO (houses in multiple occupation) IMO the standards are a little strange, I can live in my house with my two children 23 & 28 year olds but if they move out and I rent the rooms out, mine field

As regards the financial side, any income generated by the rental of your flat should be declared, but as others have said any expences can also be offset. You do have a good opportunity to set yourself up with a good "pension", and who knows, if it works you may become a property developer in your spare time.

 

[DITTRICH]

Guy has provided good information, but I will add my 2c as usual as I have been renting out a property for 15 years now...
You are assessed to income tax on your "profit" which is income less allowable expenses. Visit HMRC's website and look for SA105 and SA105 Notes for guidance. One point to note, you have a choice when it comes to repairs and maintenance (replacement/refurbishment - not capital/enhancement) because there is an allowance for "wear and tear" of 10% of rental income, or, if actual expenses are larger, you can charge what you actually spent. Also note it is mortgage interest which can be deducted which is not the same as the repayments which will probably include capital unless your mortgage is interest only. Your insurer will need to know as will the mortgage company. One point to consider is placing an agent between yourself and the tenant. The agent will swallow say 8%+vat for finding a tenant, 8%+vat renewal fees and maybe 5%+vat for managing the property. If something goes wrong then you have a certain piece of mind that you can sue the @rse off them if they stuff up - otherwise all the admin you have to do yourself - mainly ensuring that the money gets paid on time, the tenant's problems are sorted out and the contractual and safety aspects. Getting the contract right if you do it yourself is very very important in order to avoid [possible]problems later on [in case the tenant is difficult and you want him/her out quickly]. Use the HMRC stuff to work out what you might make in taxable profits and then deduct income tax at your marginal rate. If your family has tax credits then the extra income may affect the amount you get - consider this.
Best Regards
Les
Edit: If you ever make a taxable loss then that loss can be carried forward to offset against future profits from the same property. The loss can only be offset against other Land & Buildings income in certain specific ways - so if this seems likely then research this from HMRC - their advice centres are FREE - check out the website. Circumstances where losses might occur are if the mortgage is very large relative to the value of the house or if the house needs a substantial roof repair (if not covered by insurance).
Edit: I have referred to taxable profits and income tax but you ALSO need to work out your cashflow from the venture - main adjusting items to taxable profit being the 10% allowance added back and deducting the capital part of your mortgage repayments.

 

[wobbly]

You dont need to worry HMO if you are renting a flat, which is self contained, to a couple, or a single person.

Its only when you rent out individual rooms in a property, to various tenants that you need to be aware of HMO.

 

[guydewdney]

From a tenant's point of view, this is the best thing to happen to renting in years. I'd strongly urge Howard to take a look at this.

Having a third party government controlled entity looking after your bond/deposit is a fantastic idea. Protects both parties.

interesting - how, exactly, does it protect the landlord? I rent several properties , with deposits taken, and stored in separate bank accounts. OK - I get the income from the interest.

I, and only I, decide that the property is in an acceptable state when I return the deposit. If some faceless beaurocrat decides for me - I have to 'prove' the the flat is now minging, filthy, and the tea cup didn't have a crack in it before....?

Ok - Im honest, and have morals, and 99% of the time return 99% of the deposit. very rarely, and only when the place is disgusting, do I charge for cleaning. I don't charge for the odd missing teaspoon! BUT - the rule is there for the scum landlords who withold deposits for no reason... But - once again, the honest man is being stuffed for the sake / reason of the dishonest one...