Renting out a property you've inherited.
Inheriting a property may be tinged with sadness, so it’s understandable if you decide to sell up and close the door on that chapter of your life. Sometimes, the terms of the will mean it’s your only option.
If you’re not planning to sell the property, though, you could rent it out as an extra income stream –whether by teaming up with other beneficiaries, or by buying them out with a small buy-to-let mortgage.
Our simple guide provides a bird’s-eye view of what’s involved.
Finding a tenant
There are lots of ways to find a tenant if you’re going it alone. Perhaps pop an advert online somewhere like Gumtree, in your local paper, or even on your social media account – you might find someone in your network is in need.
You’ll need to draw up a tenancy agreement (you can find templates online) and should strongly consider credit-checking your potential tenant. If you’re in England, you’ll also need to check any potential tenants (including under-18s not named on the agreement) also have the right to live in the UK.
Otherwise, you could elect to work with a lettings agent, who can do the legwork for you. Some agents offer a let-only service for a one-off fee. They’ll advertise the property, conduct viewings and do all the paperwork, but then hand off management to you once the tenant has the keys.
Managing the property
You can either manage this yourself, or engage a lettings agent on a full-management basis.
There is obviously a cost involved with this, and can make life easier if you prefer a more hands-off approach to being a landlord. Their fees are typically a percentage of your rent, not fixed – so could represent poor value if your property is (for instance) a large family home that commands a high rent.
Either way, you’ll need to cover any costs associated with repairs and maintenance separately, so budget for this.
Check property sites like Zoopla or Rightmove for similar rental properties in the local area, to get a rough idea of where to pitch yours. Remember, setting a lower-than-average rent could help to secure a tenant sooner, but tenants regularly pay over the odds for a particularly beautiful home.
If you’ve engaged a lettings agent to do full management of your property, their fee is will be deducted from whatever you rent it at. ThisIsMoney.co.uk reckons these fees could be anywhere from 7% upwards (depending on where you are in the country).
Your legal obligations
If you’re taking a deposit, you’ll need to place it in a Government-approved scheme. You can’t simply put it to one side in a bank account.
Before renting the property out, you must also ensure it’s safe. This includes fitting (and regularly testing) smoke alarms and carbon monoxide alarms, and making sure all gas and electrical equipment is safely installed by certified professionals. You must also provide an Energy Performance Certificate.
- In Scotland, you’re obliged to join the Scottish Landlord Register. You’ll need to pass a ‘fit and proper person’ test, and list your landlord registration number in any adverts.
- In Wales, you need to register online with Rent Smart Wales. If you’re managing the property yourself, you also need to apply for a licence.
- In Northern Ireland, you must register with the Landlord Registration Scheme.
- In England, there’s no legal obligation to register as a private landlord.
And that’s not all. Our First-time Landlord Checklist goes into more detail.
You’ll need to declare any rental income and pay tax by completing an Income Tax Self-Assessment. But, assuming that being a landlord isn’t your main job, your first £1,000 of income from renting out a personal property is tax-free. If you’re confused, an accountant could be a very worthwhile investment.
You can reclaim some expenses to reduce your tax burden – including (but not limited to) lettings agents’ fees, buildings insurance, the cost of maintenance and repairs, plus the cost of some domestic items like sofas, beds and white goods.
There’s more detailed information on the Government’s online guide to tax on rental properties.
Renovation and modernisation
With more and more rental properties out there, tenants are increasingly discerning. So you may want to update the property, especially if it’s not been touched in years. You could put in a new kitchen or bathroom, replace the floor coverings, or completely redecorate from ceiling to skirting board.
You may need (as a matter of urgency) to rewire, or add central heating. This may not significantly increase the rental yield, but could certainly make it easier to rent. And, you should also know, the local council can intervene and force your hand if the wiring is faulty, or there’s damp or mould causing your tenant health problems.
If you need to free up cash in order to complete renovations, you could consider a small buy-to-let mortgage. This is secured against the house, so could carry a lower APR % than an unsecured personal loan.
Together will consider your circumstances even if other lenders won’t – perhaps because the property is a non-standard construction, or you’ve already retired yourself.
We’ll take your potential future rental income into account when looking at what you can afford to repay each month, and you could borrow up to 70% of the property’s value (depending on your circumstances).
Find out more about our Buy-to-Let mortgage for an inherited home.
Articles on our website are designed to be useful for our customers, and potential customers. A variety of different topics are covered, touching on legal, taxation, financial, and practical issues. However, we offer no warranty or assurance that the content is accurate in all respects, and you should not therefore act in reliance on any of the information presented here. We would always recommend that you consult with qualified professionals with specific knowledge of your circumstances before proceeding (for example: a solicitor, surveyor or accountant, as the case may be).
Lending decisions are subject to an affordability/creditworthiness assessment.
Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.