Updating post from Reddit.
Due to the cladding scandal (another government fuck up) we're in a situation where we have a flat we can't sell very easily, we've considered renting it out until the situation improves for us but I'm worried that it's becoming more and more difficult to be a landlord with all the new rules coming into force, and it would be easier to just leave the flat empty for now until we can sell it (even with the financial hit). What is the general consensus of other landlords/would-be-landlords?
Well yes it's always easier to do nothing, but it's probably not very sensible to turn an asset into a liability.
It's really not that hard.. openrent makes complying with everything very easy if you don't want the expense of an agent.
I'll look at openrent, thanks.
I’ve been in a similar situation for the past 3 years. Decided to rent out my 1-bed as it means I lose less money every year than if I left it empty. Post tax I think I lose about £1000 a year? Partly because I’m a higher rate taxpayer. Definitely expect to lost money either way unless you’re already locked into an amazing mortgage rate or you own the property outright!
Tenant pays council tax for you too, no? I havent paid it in about 18 months when it was vacant for a few weeks.
Tenants pay council tax in most council areas
which are the exceptions?
Which exceptions because after research no council area in mainland uk does it different
You said most councils. I was wondering what the minority would be.
Thank you, yeah I suppose we need to look at it as mitigating losses. My biggest concern is not being able to evict tenants easily when we can finally sell up.
Depending on where in the country you are, you’re likely to see high demand amongst tenants and therefore have quite a lot of choice about who to rent to. We used an EA and went with their recommended tenants, a couple of working professionals with good references, jobs and a desire to commit to a rental agreement of 18m+. Obviously things could still go wrong but you can reduce the chance as much as possible
Contracts are going to get very tight now. Still got till at least towards the end of the year, a few rate cuts and I would sell. Get better returns than housing.
Being a landord isn't particularly difficult as long as you know how to pick good tenants.
That's the bugbear for me, I'm worried about getting bad ones.
Think about this from a risk reward perspective. Empty flat means costs due to: utility standing charges, vacant property insurance, council tax bill and service charge / ground rent (for flats).
This is versus getting income from renting but running the wear and tear / tenant default risk. You can mitigate this by: using a good agent to manage your proper and obtaining legal and rent guarantee insurance. But - even with this when things go south it is extremely stressful!
Personally I would sell using a specialist agent. You will need to take a loss - how much is up to you.
Listen, I was (am) in the exact same position as you. Things are moving at glacial pace but the developer has agreed to cover the cost of replacing the cladding, it will still take a few years for the works to commence.
Back when we had to move out there wasn't a resolution yet, but we would have lost a lot of money if we had sold then, so we changed the mortgage to a let to buy, and put it up for rental.
First tenant, unfortunately, turned out to be a prick who stopped paying. It took nearly a year to evict him, but since we had insurance, it covered lost rent and legal costs. We used his deposit to redecorate after he was evicted, and a bit more from the profit.
We now have two lovely tenants and we do our best to keep them happy. We never wanted to be landlords but here we are. When the cladding is fixed we may sell, or we may choose to keep it, for now having it rented out covers the mortgage, taxes, associated costs, and repairs, as well as leaving us with a small profit. If we were breaking even, I would still consider it positive. Is it more work than not having it? Yes. Can I stop working and live off the profit? Absolutely not. But I'll be damned if I sell at a loss.
You could call your local council and see if they do the private sector leasing scheme (PSL)
Interesting, what is that? I'm new to all of this.
It's a scheme where you lease a property to local council, typically for three years on a rolling extension. It comes with pros and cons. Pros from my experience is that it's very hands off (council sort most issues) and its comparable to rental income post EA fees. Main con is that you aren't in control of choosing tenants. But the council do inventory and return the property to you in its original condition.
Is it not just a valuation issue when it comes to selling these flats? Like if a house has subsidence and gotta price accordingly
You need to run the numbers.
In short term how much would the rent offset the cost of keeping the place (mortgage interest, insurance, gas/electricity safety certificates and work to bring up to code, routine maintenance, cost of finding tenants, ground rent/service charges).
In long term, how much would you net/lose when selling now vs selling x years from now taking into account cost of cladding repairs, any other major repairs expected (roof, boiler), any major improvements needed to keep renting (energy efficiency wise if not meeting the likely future epc requirements), lower sale price if the property is cosmetically in worse condition after tenants, capital gains tax owed when selling (especially if higher rate payer), extra stamp duty if you pay a property to live in.
It rarely makes sense to keep on renting out a property unless it is mortgage free, unlikely to need work done and there is likely gonna be rapid rise in property prices in medium term.
Other responders don’t understand cladding. I will assume you are either trifire assessed or no remediation date. You are correct that incoming laws may make it harder for you to sell. Mainly that’s notice to tenants going up to 4 months.
Otherwise, the calculation you want to do is the one between loss given selling at auction (if you can) vs loss with tenants in given income tax on rent. Leaving it empty is a bad choice unless you know remediation is near and probably voids various insurance and mortgage conditions.
Ps. A good letting agent will find you a good tenant. Ours is amazing.
I’m in the same situation and have been renting at the loss. I’m trying to put it on the market right now
You need to run the numbers - if you end up losing money renting it out then surely better to sell now at a lower price