Renting/selling - advice please

[zico]

I've inherited a bungalow which has been up for sale for 9 months with very little interest from buyers so am taking it off the market over winter. It's structurally sound, but old-fashioned decoration, 3/4 bedrooms and very nice view over fields at the back. It was on at £350k, then reduced to £325k.

I've seen house prices are expected to drop next year, before starting on a strong, continuous upward path again from 2025 onwards.

It seems my options are
1. Sell now for whatever I can get for it. Likely to be around £270k mark. But we don't need the money, and this would be selling at the worst time.
2. Spend about £12k to re-wire and decorate, then -
a) Sell a (slightly) modernised house. The idea that it would be easier to sell, even if we don't get back the money invested in it.
b) Rent. Estate agents say I'd get about £1,000 - £1,200 per month.

Seems to me that if we rented, we'd need to rent for about 3-5 years at least to make it a worthwhile option. The idea would be then to sell the house in a healthier housing market.

We don't really want to have a lot of hassle, but it is possible to rent through estate agents with minimum hassle, or is there a significant amount of hassle in any case?

If we did go down the rental route, for tax purposes, I'd like the rental income to go to my wife. However, the bungalow is in my sole name. Would I have to transfer the deeds to my wife for her to get the income, or is there a simpler way to ensure my wife is credited with the rental income?

There are probably a lot of other issues I've not considered, as we've never rented a property out before. Would appreciate your views and suggestions.

[modellingman]

To rent I would talk to an agent in a bit more depth first.

They should be able to give you an honest assessment of whether you are going to hit the same problems with renting that you have encountered with selling. Eg If it has not been updated for a long time will it benefit from a new kitchen and bathroom. They will also be able to give you some pointers about furnished vs unfurnished and an indication of ongoing costs (typically a percentage of the monthly rent plus VAT).

There are a few must haves that you will need to have in place for renting out:

• an energy performance certificate (EPC) which currently will need to be at grade E or above currently and C at some stage in the future
• an electrical inspection condition report (EICR) which will need to show that the electrical installation is in a satisfactory condition
• a gas safety record (often known as a CP12) if the property has a gas supply
• suitable smoke and CO detectors

An EICR will take around half a day of a qualified tradesman's time - anything less will have so many qualifications (not inspecteds) on it to be not worthwhile. EPCs are quicker but are done to a formula that it is really a box ticking exercise. CP12 requires a gas safe registered person to undertake it. A decent agent who does lettings will have tradesmen and energy assessors who they can recommend.

There are other requirements and these relate to providing a safe environment for living in - most are commonsense but if you want chapter and verse start here https://www.gov.uk/government/collectio ... s-guidance

Unfortunately, most of the expenses that you might incur in getting the property ready for letting will not be allowable for tax purposes against future rental income. Expenses of a capital nature are not allowable anyway against income tax but replacement expenditure normally is once you have the property business up and running. However it is not up and running until you have actually done some letting out and got some income in and that's what prevents you claiming pre-start expenses against income tax.

There's probably quite a bit more to consider and, even if you use an agent to manage it for you that is not entirely hassle free. You will be involved in decision-making along the line: if repairs are needed a good agent will get a quote but you decide whether to accept it or ask the agent for a quote from someone else.

Anyone who tells you that letting properties are a form of investment is wrong. It is a business.

Best of luck

modellingman

[DrFfybes]

A few 'off the cuff thoughts'.

It is a bungalow, generally bungalows are in demand so there has to be a reason it hasn't sold. Try and identify and address this by talking to agents, especially ones that have sold other properties in the area.

Renting out is more work than people realise. You are getting someone to pay you to make somewhere their home, even short term. That has a lot of emotion attached to it. My s-i-l has had so much hassle with the 2 BTLs she got about 8 years ago she wishes she'd never bought them. Everything was great for a few years, until it wasn't and the stress has not been good for her as it coincided with other family problems. Before considering this talk to several agents who manage local properties, get the relevant inspections done and work out what remedial works will be needed to get it to a rentable condition.

For renting having it in one name might be better for tax now, but possibly not when you do finally sell (although given the way the CGT allowance is going, who knows?).

If it is dated, then the rent will be lower, and you could well end up getting tenants who aren't as considerate of the property as it is shabby.

For selling, do nothing except clean and declutter and keep the garden tidy. Any works you do are unlikely to be what a buyer would do, right down to positions of sockets and lights. UNLESS you renovate it completely so it is ready to move in to.

Do you have a family member who could live there to keep it ticking over? You might end up liable for double council tax and have insurance costs if left empty. Can you make it your home for the winter and then move out again in 6 months when you put it back on the market?

Lastly, you say you don't need the money. Ask youself would the effort involved in looking after a second property be worth the extr £25k or so you'll possibly eventually get for it (assuming rental profit covers the income from selling and having the capital).

Paul

[zico]

Thanks for your replies. It does sound like it isn't worth the hassle of renting. On empty property situation, we don't have any family members who could live there for a while, but just wondering how much time we'd realistically have to stay there in order to say the property wasn't empty?

[Nimrod103]

As with a lot of property issues - "it depends". My family have let two houses for over 10 years without any problems, both using estate agents to manage the properties. As others said in general bungalows are desireable because they are scarce, older people want them, and younger people are often happy with them because they can often be easily enlarged. Why was there little demand for this one?? Is it isolated?

Houses to let attract families who want to stay longer (which is good), and bungalows tend to have low maintenance costs (which is also good), and no ground rents & maintenance charges like flats. For renting, pay attention to the electrics (rewire if necessary), central heating (put in a new boiler if unreliable), declutter (take out ugly fitted cupboards), redecorate (plain painting will do), and clean up the kitchen very thoroughly, but I certainly would not bother fitting a new one. Make the garden easy to maintain.

If you let, and share the ownership with your wife, the income must be split 50/50. But if you share the ownership with another family meber, you can split the income any way you like with a Deed of Trust, as long as it is not designed specifically to avoid a higher tax rate.

[modellingman]

Thanks for your replies. It does sound like it isn't worth the hassle of renting. On empty property situation, we don't have any family members who could live there for a while, but just wondering how much time we'd realistically have to stay there in order to say the property wasn't empty?

After a property has been empty for 2 years and substantially unfurnished it is liable for Council Tax at up twice its normal liability. After 5 years this increases to 3 times the normal liability and after 10 years to 4 times. These empty property rates depend on the empty homes policy adopted by the local charging authority.

A property needs to be occupied for more than 6 weeks to count as occupied. Good luck with convincing the charging authority that you moving into the property for a month or so means you have taken up residence there. (The legislation is actually written so that any period of occupancy of less than 6 weeks cannot be used for determining how long a property has been empty.)

(See https://www.legislation.gov.uk/ukpga/19 ... ection/11B )

modellingman