Should I rent to family members?
Do you have a buy-to-let property but you’re wondering what to do with it? Has renting it out to your siblings crossed your mind but you’re still unsure? Well, as we all know it can sometimes be difficult renting to our relatives and the last thing you want is a family feud. Not only can it have financial implications, but not every family member can be the best model tenant. So getting the necessary checks carried out is extremely important.
We have compiled the considerations we think you should take into account before setting things in stone. Following these steps can you give your arrangement the best possible chance of working.
Even though you know them, you need to follow the process in the same way you would with any other professional letting capacity. Tenant referencing will allow you to be more confident with this new adventure, allowing you to sleep at night knowing that the rent can be paid in full and on time. You will also receive some peace of mind from a reference provided from a previous landlord of theirs (hopefully it comes back good).
Many people slip up because they don’t get a tenancy agreement in place. This can leave you putting financial pressure on your relation for money to pay for all the accidents and breakages that have to be put right. However, having one in place can prevent any difficult conversations and misunderstandings. It may be best to ask your relative to put down a deposit prior to occupancy.
Our Chartered Surveyor in Bristol – Paul Keegan said: “Getting an agreement in place is important as it will set out both of your rights, responsibilities and legal requirements and you will both be aware of what is expected from the start of the tenancy.”
Charge the right amount
We know that you can sometimes feel like you want to give your relative a discount or charge them no rent at all, because after all, they are your family. However, financial implications are often attached, so make sure you receive advice from HMRC about the tax implications of this.
Your mortgage provider may also specify the amount of rent you need to charge if you purchased your property as a buy-to-let. This is usually around 120% of monthly mortgage repayments.
If you choose to rent it out for the market value, then it may be best to look at similar properties in the area and compare their rental rates. Of course, this would have to be a similar size to yours.
It is important to keep on top of your property’s maintenance. This way, you will be able to spot any developing issues and you can deal with them before they become problematic.
Ensure you have the right insurance
Lastly, before your renters move in you need to have the right level of landlord insurance. You will then know that your property is protected and it will protect you against any property damage that might occur. Depending on the level of cover you get, it may also protect against any legal costs or missed payments.
About the Author
This guest blog has been provided by Right Surveyors, a national group of chartered surveyors offering surveys, valuations and property advice to clients all over England and Wales. Check out www.rightsurveyors.co.uk for more information.