Anyone have experience renting out a property?

[Beezerk]

So the missus and I are looking for a new house, we currently live in an apartment which we've decided we want to keep to rent out.
We have absolutely zero experience with this so we aren't really sure where to start and how to go about it.
Questions like, should we leave it furnished or not?
What are the pros and cons of going through an agency rather than doing it myself?

So has anyone successfully rented out a property and if so what advice could you give to the new kid on the block?

 

[pbrown7582]

I would go unfurnished myself, I do through an agency as it's 200m away. Starting out I would be inclined to use an agency does save a lot of hassle but obviously at a price.

 

[Crazyface]

My TOP TIP on this is to undercut all other on the market and rent just to cover the mortgage. This way you can entice people you know or friend of friends to rent your property because it's cheap. This also mean they will have been personally recomended so will look after your place. Rent just enough to cover mortgage and costs (don't forget redecoration, gas checks, new carpets etc), therefore no tax to pay and no hassle with tax persons. Get things repaired as soon as they are requested by tenants this way you keep them happy and don't have to constantly get replacements.
No agency fees if you do it this way. Get tenant agreement from WH Smiths.

 

[Lord Tyrion]

We used to have a place, recently sold it. It depends how involved you want to get. Using an agency takes a lot of hassle out of it and gives you some certainty. They handle the lease, will deal with the tenant etc. No awkward conversations, no missed off points that leave the tenant in control. You pay for that service but maybe for your first tenant it is worthwhile as it will allow you to get more experience.

We kept our place furnished as we changed it from a holiday let to a long term let and we did not know what to do with the furniture. The downside is though that it will suffer from wear and tear and you will need to replace it if it wears or breaks and it was not the tenants fault. If it is down of the contents list at the beginning then you need to maintain it. This website gives a good guide regarding this decision.

http://www.propertyhawk.co.uk/?furnishing-a-property

One further piece of advice I would give. Keep the relationship between you and the tenant strictly business. They may be nice, they may be lovely but ultimately this is a business transaction. You may need to have harsh words with them at some point and that is difficult if you have become friends. We never had a problem with any tenant we had and we always had a civil relationship with them but we kept our distance. Best of luck.

 

[Beezerk]

Thanks for the replies, some good advice there.
I meant to ask my PP on Sunday as he works for the tax man, will I have to declare any potential profit to HMRC, I imagine I will.

 

[Lord Tyrion]

Oh yes. Nothing escapes HMRC. There is a deficit to be paid off. You could always try the approach of big corporations and offer to just pay a percentage of what you will owe. Seems to work for them.

 

[pbrown7582]

Thanks for the replies, some good advice there.
I meant to ask my PP on Sunday as he works for the tax man, will I have to declare any potential profit to HMRC, I imagine I will.

yes you have to pay tax on the income, you can deduct fees insurance and mortgage interest but not capital repayments.

 

[BoadieBroadus]

the first thing i would do is look very closely at whether you wouldn't be better off just selling and using the proceeds against your new house. if you're paying off a mortgage on the new house, then it's hard for keeping on the flat to really make economic sense.

you need to compare after tax yield to the mortgage rate on your new house, the likelihood is that it's going to be pretty close, in which case you really need to consider if it's worth the hassle for the sake of £50 a month which will be wiped out for a year if the washing machine breaks.

if you're a higher rate tax payer, then that really kills rental profit.

i can understand how tempting it is to hang on to the property and let it out (i did the same) but one property is tough to see much of a return on, especially if you're paying a mortgage on another.

 

[Beezerk]

the first thing i would do is look very closely at whether you wouldn't be better off just selling and using the proceeds against your new house. if you're paying off a mortgage on the new house, then it's hard for keeping on the flat to really make economic sense.

you need to compare after tax yield to the mortgage rate on your new house, the likelihood is that it's going to be pretty close, in which case you really need to consider if it's worth the hassle for the sake of £50 a month which will be wiped out for a year if the washing machine breaks.

if you're a higher rate tax payer, then that really kills rental profit.

i can understand how tempting it is to hang on to the property and let it out (i did the same) but one property is tough to see much of a return on, especially if you're paying a mortgage on another.

We've done the sums which say we can afford to keep the flat and we've lowered how much we wanted to spend on the new house to reflect this. It's more long term thing for me, I'm not really interested in making a profit at the minute, we only have maybe 10 years left to pay on the flat and they're always in popular demand given their location. I don't think I've ever seen one in our block which has been empty for more than a couple of weeks. The amount of profit we'd make currently make selling isn't that great as prices slumped about £15,000 over the recession, they're slowly creeping back up but nothing like they were about 5 years ago. Once we pay off the flat then yes, maybe we'll sell it but it's at the moment we want to keep it.

 

[BoadieBroadus]

ok. well it then comes down to whether you want to use an agent or not. personally i do, although they tend to cost around 10% i look at it as cheaper than having the flat void for a month while I hunt around for tenants, and saves me the hassle of finding and vetting tenants.

having a reliable, trustworthy agent then becomes key, and I feel i was lucky in having an existing relationship with an agency that i knew were good. they will advise on whether the tenants they have on their books prefer furnished / part furnished / unfurnished. in my experience, tenants seem to prefer part furnished, so leave in wardrobes and they'll bring the rest themselves. totally dependent on the tenant though.

it will depend entirely on your appetite for finding, interviewing, credit referencing tenants / guarantors etc. i'm happy to pay someone else to do that (and they have the experience of being able to do that far better than i can) sorting out tenancy contracts etc.

but there are still some wrong uns who creep through the net, but that's the landlord's risk.

there always seem to be a few teething troubles first few months, they'll break the dishwasher, or the fridge, and something minor that you were happy to live with, they will want sorted out. but usually settles down.

in your situation - i'd have a few estate agents round to give you a rental estimate and you can get an idea of whether you think they are reliable. see what they estimate, see if they have a current list of tenants looking for places like yours. if you don't like any of them and think you'd do better privately then go for that option.

i wouldn't go near doing it without an agent, but that is simply my preference.

 

[Beezerk]

Superb, thanks mate.

 

[PhilTheFragger]

I'm an ex Bank Mortgage Lending Manager and have 4 Buy to let properties
one thing you will need to take into account is the mortgage on the apartment will need to be changed to a buy to let mortgage as it is no longer your main place of residence.
The mortgage company may see this as a higher risk lending and up the interest rate accordingly.

If you dont tell them and they find out, it wont be nice.

I would use an agent, unless you are experienced, The Agent will vet the tenants, hold their deposits in the approved scheme and will keep that professional distance
Expect their fees to be around 10% of the rent for a full managed service, yes a significant wedge, but its then their problem to keep up with red tape, gas safety checks chasing arrears etc

Remember it wont be your apartment any more, it has suddenly changed to a grey box that hopefully makes you money

Feel free to Pm if you want any more info

 

[Hobbit]

Done it furnished. Would do it again but unfurnished - all you need is a run of replacements required and it gets painful for the pocket. Would use an agency - did it myself last time and sometimes a run of problems can get a bit time consuming/wearing.