When selling up seems impossible renting out can be a handy alternative. We take you through what you need to consider if you are thinking of renting out your home.
Renting can be a cost-effective and even lucrative tack to take when, for whatever reason, selling your house does not suit you.
For example you might not be able to sell your house in a slow market or might not be able to get the asking price you originally wanted for it - in these cases renting the property instead of trying to sell it can be a gainful alternative.
Otherwise, you might simply not be ready to sell your property but wish to live elsewhere for a while, such as for example to take a career break and live abroad for a number of months. You would want to come back to your house at the end of this time but meanwhile you could be earning rent on the property.
On the other hand, you may simply have a second property that would otherwise go empty, and you want to earn a second income on that property by renting it out.
Whatever your reason, anyone can rent out a property with the right know-how.
Before you start setting the wheels in motion to make your house a rented property, it is a good idea to do a bit of your own research into the letting market.
Look into the sorts of properties being let in your area and how much rent they are asking for.
You should also start looking around at the different lettings agents in your area, the sort of service they offer, how much they charge, and so on (if you decide to use a lettings agent rather than a DIY approach, of course).
First and foremost, when you decide to rent out your house you must let your mortgage lender know of your intentions.
Failure to tell your mortgage lender you are renting out your house is likely to mean you are breaking the legal terms and conditions of your mortgage contract, so before you do anything else, approach your mortgage lender and ask their permission.
You will usually have to obtain something called a consent for lease from your lender before you can get started.
Of course you do not have to use a lettings agent when renting out your property, and you can do the whole thing yourself (although if you decide to do this it is likely to be a good idea to seek the advice of a solicitor, accountant, or at least someone who has done it before).
Using a lettings agent however can cut out a huge amount of the legwork of renting out your property as they will advertise your property for you, show prospective tenants around, draw up a tenancy agreement, and can deal directly with the tenant on your behalf if you would prefer to keep things at a distance.
Agents however will generally charge around 10-15% of the rental income you receive, though you may feel this is worth it for the extra work they do for you.
Ask your lettings agent how much they feel you should charge for rent, but remember that this decision is down to you so it may be useful to gather opinions of two or three agents before settling on a figure.
You may prefer that your lettings agent does this completely on your behalf if you are employing the services of one, or you may prefer to meet potential tenants before deciding on who you would be happy with living in your property.
If you are using an agent they can also perform reference and credit checks on potential tenants to ensure everything is above board - if not, you will need to do this yourself.
You will need to decide whether to let your house furnished or unfurnished, but remember that if you do leave some of your own furniture or belongings in the rented property these should be minimal.
It is also a good idea to remove anything from the property that is precious or fragile; at the least they will show wear if you keep them in the property and at worst they could be damaged or stolen.
Before the new tenants move in you will have to make sure any repairs on fixtures and fittings have been carried out and all appliances are in good working order, plus it may be a good idea to give the property a mini-makeover to ensure everything is well-presented and up-to-date.
It is very important that your current insurer knows of your intention to let your property, both in terms of your buildings and your contents home insurance.
These policies may need to be amended or added to as necessary now that your home is becoming a let.
Crucially, you will also now have to sort out a new type of insurance known as landlord insurance. This covers your home when you are not living there and have tenants living there instead. You can explore landlord based insurance products using our comparison table to find a suitable policy that will not only protect your property, but your tenants and your investment as a whole.
It may also be worth looking for landlord insurance that would pay out in the event that your tenants default on making payment if you are worried about this happening.
While you might be making a tidy second income from your tenants' rent, any rental income you receive may be taxed at your usual rate (20% if you are basic rate taxpayer, and 40% if you are a higher-rate taxpayer).
You would have to take into account this deduction as well as any deductions from your agent if you are using one, then see how much you are left with.
This net figure would have to at the very least cover the mortgage payments on that property, and ideally leave you some surplus in case you need to do any maintenance and repairs on the property.
As such you will really have to sit down and do the math to make sure it is worth it financially before you decide to rent.
You may also need to factor in a back-up fund in case you need to continue paying the mortgage between tenants when you are not receiving any rental income.
Remember, if you are moving to a new house and now have two properties to look after, there is double the chance one of them could need sudden expensive repairs, so you will need to keep some money by for this too.
Ultimately the decision to rent out your house will mean that you go from being a home-owner and occupier to a landlord, and with your new status as landlord you will have certain new responsibilities.
For example, as well as being responsible for all repairs, maintenance, and any necessary refurbishment to your rented property, you will have to make sure your home is up to scratch before you rent it out.
You will need to fit smoke alarms and extractor fans if you do not already have them as well as have any gas appliances tested by a Gas Safe registered engineer.
You will also need to make sure any upholstered furniture is fireproof. Landlords must also now have an Energy Performance Certificate arranged for their tenants, as well as register with the Tenancy Deposit Scheme which holds the tenancy deposit independently to then be returned to the tenant at the end of the tenancy as long as everything is still in good condition.
i am renting my house for housing association ,i would like to know the best deal for home insurance please.
hi, i want to rent out my house 4 bedroom. what do i do.
I will help you you can drop me a email on my email I will give you some best deal to rent your houses
hi i like to rent my 5 bed house for rent can you help me ?
good afternoon I am a lettings Negotiator so in terms of lettings that is something I specialize withinShauna Thanks
You also need to get an Assured Shorthold Tenancy (AST) agreement etc
hi sally, great article, and as a landlord myself note it is easy to understand for any newbees there is only one thing that needs updating CORGI is no longer recognised it is now Gas Safe - registered engineer
Good advice, I'm thinking of renting out my house and its given me an idea about where to start and what to research. Thanks!
I want to rent out my 1 Flat sector-34, noida
I want to rent out my garden shed. Is this the same as renting out my house?
hi meandmyshed and welcome to the forum, not really, unless it's for someone to live in, in which case you would need to apply for change of use, if it's just for someone to use as a shed it would just be an agreement between you and the other person but remember you should declare it for tax purposes as it would be classed as income.
if i rent my house out and live abroad where do i get insurance from
hi selby16 welcome to the forum, you should be able to get insurance from any of the major insurance companies as it's the house you are insuring not you, it would need to be a landlord's insurance though and assuming everything else is ok, if there is a mortgage on the house you will need to check with the mortgage company to see if it is allowed, there are other areas you would need to look at i.e. having an letting agent, checking your tax liability etc.
hope this helps
I am renting my friends house as she lives abroad but it was a private contract and was not done through an agency. Now the house insurance has run out and she is having trouble finding an insurance company that will insure the property because there is no agency involved in the letting. Do you know of any insurance company that will insure a property on this basis, or is there some law preventing them? If so, how on earth is she going to get the property insured?
hi casacoco58, have you considered trying to insure it as a tenant, it may be a way around the problem, even if the premium is paid by her out of your rent.
i hope this helps
i am in need of a house in welkom freestate. from 1 July 2013. who can help me.
My property is not selling, so im seeking to rent this off as ive put an offer to buy another.Mine is leasehold, so I will need to sublet...Paying an agency i think helps with keeping it distance between the landlord and tenant.Some agency pay the rent even when it is empty, but I sure it will be alot less.
hi itchybeard, welcome to the forum, you will need to check the terms of the lease to make sure you can sub-let, if this is ok then it is basically the same as a buy to let BUT make sure you have the proper insurance in place as you will still be responsible for the property as you are the lease holder, a letting agent is a good idea as a good agent (depending on your package) will find, vet and manage the tenant for you.good luck and i hope this helps
Thanksthe management of the lease charges £180 just to apply, then extra once a tenant has moved in..!On a new mortgage, as seen as risk? interest will go up on the renting property, if they know...also landlord insurance and do it myself or get charged 9% monthly for estate agent to run this.
9% letting agent's fees is quite good, it can range from 7% to 15% for full management, which normally includes finding and vetting tenants, collecting rent, placing the deposit in deposit scheme, inventory, regular inspections of property, etc, etc i know it sounds a lot of money but it is worth it because if something does go wrong they will either get it sorted of help you get it sorted, i would also recommend a 6 month AST (Assured Shorthold Tenancy) with new tenants to start, this allows you both to see if you are all happy, then at the end of the term if this is the case you can if you both wish re-new the AST for another 6 months or increase it to 12 months.
still not sold. Have looked into renting. Northwood do guarantee rent, this covers the mortgage on 12 month contract.
Hi,I've been trying to sell my property without any luck. I'm now considering renting it out. Price I've been told I can rent out for is £525 PCM As I intend to move into and rent someone else's property at £600 PCM Do I still have to pay tax on the profit of property I own and am renting out? This will leave me well short.And also what sort of difference in mortgage prices are there usually from living in yourself and renting out? I'm considering changing to a pay interest only deal. Any responses would be very helpful and I would be most grateful.ThanksDan
quite frankly i dont see the point, if you want to rent out it should be to cover your expenses, where are you saving money
hi casacoco58, don't know if you are still looking for your friend to get insurance but this has just come to my notice:-
City Landlord Insurance.Simple things like their application form can accept international phone numbers makes buying insurance from abroad MUCH easier. City Landlord Insurance can handle international addresses and can call back international numbers. The only one of 8 or 9 insurance brokers I tried. I have no idea if their pricing is competitive, as was only able to get a quote from them, but their service is excellent if you live abroad and and have property in the UK.
Read more: http://reviews.money.co.uk/review/114864-city-landlord-insurance-good-service-suited-to-people-living-abroad.htm#ixzz2pk0dfQ5X
i hope this helps.
Hi i have family member living in house rent free we pay morgage but morgage company says we still need consent to let?
Hi i have my mum living in our house rent free we pay morgage but mortgage company say we need consent to let
Can any1 help
Hi, shez1. Sorry, I've only just seen your question.
Have you tried asking the mortgage company for the necessary consent?
If my landlord hasn't provided safety record and isn't registered also doesn't pay any tax where do I stand?
tax wise it is not your problem, it also depends on if you just rent a room or rent a house, you should have a rent book or some means of showing you have paid your rent to him/her in either case, but if you rent out a house if you have paid a deposit on top of your rent and you are a AST (assured short term tenant) i believe it is a requirement by law to be held in a landlord deposit scheme.
We rent a house but now worried about gas situation, were do I stand asking for this certificate? ?? Landlord doesn't want rent books or any other form of Paper work just bank transfer also doesn't hold insurance we have been forced to provide insurance for the house??? Is there a legal body we can contact??? Thanks
the landlord should have a gas safety check done as a legal requirement annually, not too sure on the insurance as i insure all of mine anyway, your best course of action would be to go to the citizens advice bureau who would have all of the information to hand and maybe help you if needed. good luck
forgot to mention the bank transfer acts as your rent receipt.
We rent a house but now worried about gas situation, were do I stand asking for this certificate? ?? Landlord doesn't want rent books or any other form of Paper work just bank transfer also doesn't hold insurance we have been forced to provide insurance for the house??? Is there a legal body I can contact??? Thanks
My landlord has not provided none of the above the central heating does not work, the wiring is 42 yes old and faulty and there are no smoke alarms and the cell ants on the windows have gone what should I do
hi loci04,if this is through a letting agent you should ask to see any certificates that are required and also request the landlord has the repairs needed to be done sorted out.
if you have rented through your landlord then i would suggest contacting the citizens advice bureau.
this lays down your rights as a tenant
Try an initial threat to with hold your rent.
I'm wanting to rent my bungalow iv been told I could get 1400-1800 pound I'm going to be new as a land lord but don't know where to start ect tax how much iv got to lay out a month Also I want to buy a second property, if I sell this one will I have to pay capital gains tax
Adding to my post my mortgage is 820 pound a month
hi harrison01, the article at the start of this thread is very informative and gives you virtually all you need to know except for costs as these vary, but if you add about £180 pm to your mortgage payments that should be enough to cover your expenses i.e. tax, insurance agents fees etc and of course your mortgage, and if as you say you can get between £1400-1800 pm it would give you £400-800 pm on top of anything else you can afford towards a mortgage on another property.
CGT would only apply if/when you sell, and only on the profit, but i would suggest you talk to an accountant as there may be a way to put it off if you re-invest it.
Thanks for the reply many thanks Great advise
Hi, this is a really helpful article, thanks. I am looking to let our family home (only property) in the UK while we work abroad for a few years. We have a 40% LTV ratio. Our current lender will not allow us to let it at all under their T+Cs. We will be working in a developing country for an NGO so will have subsistance living costs paid but no 'salary' or other independant UK income. Will that be a problem for mortgage lenders or can anyone recommend a broker or lender that would understand our needs.Also, is there a 'rule of thumb' % for how much bigger the rental income should be with respect to mortgage, to cover agent's fees, unoccupied periods, increased insurance etc...thanks x
hi timetosmile,if memory serves me right i was told 125% i.e. if your mortgage is £100pm your rental should be £125pm, i personally prefer more like 165% but the larger the difference between mortgage and rental the better.
can i also suggest contacting one of the mortgage advisor's on this site to see about changing your mortgage provider to one that is willing to allow you to let.
Hi I'm looking to rent my house to my son I only have 2 yrs left on my morgage how do I go about with contracts etc and do I get taxed on the monthly rent ? Thanks
hi rat-rie,if you can, i would suggest paying off your mortgage as there is only a short time left and setting up a contract with your son through a solicitor (even though it is family) as things do go wrong.
yes you are liable for tax on his rent.
renting can be a minefield especially for family if you still have a mortgage, as there will be conditions in your mortgage contract, but once it has been paid off virtually all the problems would be gone and it would make it so much easier to rent to him.
We rented out ours and it got trashed even though we paid a so called agent to look after our affairs. Never again.
hi bryce,sorry to hear that, unfortunately these things do happen even with the best agent or tenant.
The same happened to friends of mine. What a horror of a place it was when they got the tenants out eventually. They were paying an Estate Agent to see all was well. It's cost them hundreds and hundreds of pounds to get it back on track.
i'm having the same problem with one of my tenants at this moment but hopefully will be removed in three weeks.
We're considering renting our our home (no mortgage) for a year to live by the sea. If we are using the rental income to pay rent on what will be our home for that year, do we still have to pay tax on the rental income? Hope that makes sense!!
You will if it is over a certain amount.
a word of warning, make sure it is let out on a AST (Assured Shorthold Tenancy Agreement) or you may have problems retrieving your property at the end of the term, there are a number of other things you will need to do i.e. landlord insurance, Gas Safe certificate, EPC (Energy Performance Certificate) also you will need to put their deposit in to a Tenancy Deposit Scheme. i would advise you do it through a letting agent as they can let you know everything you will need, to have for a successful let.
Thanks for your help. With the AST can you state the length of time that you want to rent the property out for? should we declare at the start that it is likely to only be a year we are looking to rent out for?
yes it would be advisable, the two i use are six and twelve months, but as mine are ongoing i use the six month one to see if the tenant is suitable for a longer term, in your case i would suggest the six month term allowing you to extend it on a rolling one month basis as a tenant may not be available straight away, this would allow you adjust the period as required.
Hi. I currently have a shared ownership mortgage on a 2 bedroom flat that I a 50% share on. The housing association have told me it's unlikely I can rent my property out unless I own all of it. I am now looking to staircase to 100%. Basically I am unhappy in my current employment and want to work abroad for 1 year to teach. I would like to let my flat out for 1 year, but would a mortgage lender agree to this if I was to quit my UK job? I have around £10,000 in savings that I could use as a back up if I was unable to get a job as soon as I arrive back. Would be grateful for any information on this, Many thanks. PS I currently have 60% LTV, but would increases to around 80% LTV with the added share.
hi clive123,i'm sorry to say but i believe the chance of renting out your property is very slim, firstly you would not be resident in the uk, secondly you are a shared owner and third if it was possible which i doubt, you would probably need to change your mortgage to a buy to let and this would give you further problems as you would no longer be allowed to live there yourself in the future.
my only suggestion is to speak to your mortgage provider to see if they have a solution to your problem.
Thanks for your reply Paul. I would no longer be a shared owner as I am planning on buying the other 50% stake in my property, So that would eliminate the HA from my property, Can I not change my mortgage to a buy to let for a fixed period and move back in at a later date? I am not planning on staying abroad for more then 12-18 months. Not sure how all this works regarding tax etc, will need to look into that, thanks for any more information, Will contact my mortgage provider in due course.
I want to rent out my house. My mortgage is paid every month and has been for 15 years. My lender has refused me permission and I think it is because it is a tracker mortgage. I am 63 and they will not offer me a buy to let mortgage. Is there anything I can do!
hi mobile60,unfortunately in this case your only option is to change mortgage provider, if you are happy to do this there are mortgage advisor's on this site that would be more than happy to help.
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