Kyle T
Premium Member
Registered: 11th Sep 04
Location: Selby, North Yorkshire
User status: Offline
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I made a thread some months ago asking on opinions of selling my house and renting somewhere bigger for similar monthly payments whilst we saved up a deposit for a proper house which we want to spend a good few years in.
I've just sat on the idea since because my place is worth about 8k less than what I still owe on it - so I have been half heartedly saving up to cover that £8k before considering posting it on the market.
I've talked to my Sister tonight however and she's considering moving out from my Dads into the town I'm currently living, so I half joked and asked if she wanted to rent my place off of me, allowing me and my GF to rent somewhere a bit bigger (we've got an immediate requirement for more space, and we're happy to slow down our rate of saving if it means renting somewhere a little bigger and ultimately taking longer to buy again).
She sounds up for it, I gave her a p/month price off the top of my head which appears competetive on the market but would still leave me £100p/month down on what I'm paying on my mortgage.
I'm trying to think things through and so far I've got more negatives than positives, BUT the positive I have got (bigger house) is a significant one. We're really unhappy where we are due to lack of space.
Negatives:
Sister might decide she can't afford it, or might split up with her BF, etc - and leave me with a rented property AND a mortgage.
I'll be £100 down p/month AND I'll probably have to spend my mortgage+£100 to rent somewhere appropriate, so ultimately £200 less to save each month.
Doing business with family, PITA?
Positives:
I get to enjoy existing a bit more in a larger property and also somebody else is helping to pay my mortgage. If we maintain the agreement for long enough, the value of my house may start to rise again and I could end up quids in at the end after bleeding ~£100 per month on my losses.
She's family, so technically I should trust her more than a random 
Unknowns/Questions:
Technically I'm not allowed to rent my property. It's a leasehold property and one of the associated rules is that I can't rent it. I know for fact that other people on my estate have rented theirs out so I can only assume there are some loopholes. If I'm renting to a family member, does that give me any more freedom or any official channels to avoid?
Normally you need a buy to let mortgage right? Can I exploit the fact it's my family renting to avoid that? Can I call it something else to allow me to avoid such requirements?
I guess I'm going to get income taxed on whatever rent I get? If I have to pay out 40% on what we've preliminarily agreed there's no way I can afford it. Google says that I only have to pay tax on the "profit" of the rental, so total rental income minus expenses = taxable amount. What exactly are my expenses? Can I take the piss a little bit in that department?
Reading back on this thread - it's looking like a bit of a minefield but I'll happily do my research and discuss things in length with my sister before we commit to anything. I'd appreciate CS's input on this as I knew a few here are landlords or renters.
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Toby
Premium Member
Registered: 29th Nov 05
User status: Offline
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I'm in a similar situation and its a bit backwards all of it but at present, I have a house locally, being rented long term and creaming a nice profit and I'm moving to Lincoln.Rather than sell and re buy (costs of doing so) my brother wants a foot on the ladder but being in the army and only 19 doesn't have a massive requirement to live in it so he's going to buy in Lincoln of which I will rent off him. There will be an agreement of some description but I would never consider a falling out or anything, they are family and chances of it going Pete tong are slim so not a consideration imo.
With regards to renting, there is a correct way and then there's the not so correct way......
Legally you would inform your mortgage company and take the required action (99% of the time not in your favour) inform inland rev of additional income, set up a tenancy agreement, purchase the relevant insurances as landlord and make the legal requirements for compliance (gas safety certificate etc).
Its up to you really how much you conform, I know people that do it all the way in your situation and those that haven't, those that haven't are getting away with it but do run a risk. Personally, I have done all of the above other than my mortgage. They don't know that I'm not there and all it means is a statement gets sent there once a year that's all.
Rather than waffle on pages and pages abouts the ins and outs of tax etc, have a scan at MattK's thread (on this page I think) where I put some info in and also feel free to ask more specific questions.
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Kyle T
Premium Member
Registered: 11th Sep 04
Location: Selby, North Yorkshire
User status: Offline
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Thanks Toby.
I don't plan on running any risks with the leasehold rules, insurance, tax, etc - I just want to make sure everything is legit and I'm not going to bleed too much money.
I checked my lease document the other night and found the paragraphs which suggest I can't sublet the property. My sister works for a legal firm so she's taking the documents for some of her colleagues to look at and translate - all the legal mumbo jumbo means nothing to me 
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laingyla
Member
Registered: 7th Jan 09
Location: Coedpoeth, Wrexham
User status: Offline
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Don't do it family and money don't mix
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cecil
Member
Registered: 25th Jun 11
Location: stoke
User status: Offline
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quote:
Originally posted by laingyla
Don't do it family and money don't mix
disagree... my brothers been in mine for 3 years, no problems whatsoever. just have to set in stone n not let family take ghe piss
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Ian
Site Administrator
Registered: 28th Aug 99
Location: Liverpool
User status: Offline
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Expenses are typically any fees you incur during setting up the lease, plus the interest portion of your mortgage. As you've only just started paying it off that will probably form quite a large portion of it which in that case works in your favour.
Also just because other people have done it, don't assume its OK. Its very easy to just agree with someone to pay you some money, doing it properly is an entirely different thing, and if you're not allowed, you're not allowed.
Probably less of a worry if its your sister but things like if you fall out with the tenant and they punch holes in the wall and rip the taps off the sink before leaving you're not insured unless you declared it.
I'd be looking to set it up as if it were an unknown person but with the benefit that you won't need to advertise it. If it is viable as a private let then its probably a good idea. You'll also have equal protection in law for breach of contact, notice periods etc. which gives you both a bit of clarity.
The family and friends thing only breaks down when your sister finishes her boyfriend and wants to move out that afternoon, leaving you with a mortgage to pay and a messy shit bin to photograph for adverts. If she's contractually bound that is less likely to happen. Plus when she does go you'll be more familiar with the rental market and processes and less likely to do a poor deal with your next tenants.
Just don't piss anyone off if you owe them lots of money in case they send you the bill.
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