Hi. Am currently looking for a 2 bed flat to purchase as an investment and to rent out. Taking into account the new renters act which seems to want to screw the landlord I was wondering if it would be better to rent the bedrooms out instead. Looking at SpareRoom.Com it seems in the areas I have checked more properties are being rented out this way than the whole property to one person/family.
Whilst obviously it can be more hassle and you have to pay the council tax, bills etc you can earn more by renting individual rooms. A nice 2 bed flat where I am will go for 1000/1250 per month. On the other hand it’s possible to get even £800/£850 for a room.
What are the differences between renting a whole flat to one person or to two individuals in legal terms? Do they have more rights than for example if they were renting a room in the house where you lived but maybe they would not have as many rights as if they rented the whole flat? Also would it be worth renting the living room as a bedroom so therefore having 3 tenants in a 2 bed flat or is the whole HMO thing a huge hassle.
Whether you rent rooms or the entire property, if you don’t live there, the RRA applies either way. Letting property is complex and I’d recommend that you sign up to a landlord association and do their training, particularly if you want to do this as an investment. It’ll save you potentially thousands of pounds in the long run.
Thankyou for that. Not sure I would want to go ahead in that case. With these new regulations you could really come unstuck even if you are trying your best. Maybe stocks and shares is the way to go or I could become a regular at Ladbrokes.
3 tenants in a 2 bed flat including using the living room as a 3rd bedroom - so you really want to give them no living space. Think thats a very different sort of tenants - ones who dont have anywhere to bring friends or whatever so they have to do everything in their room except cook and use the bathroom. Im guessing people pay less for less facilities. So it’s not 50% more for having 3 not 2 tenants
Things to think about
-more tenants = more wear n tear, more referencing etc costs
-individual tenancies or a joint one
-what sort of tenants do you want to get - they are less likely to take care of the place if you arent giving them as much living facilities
-will you allow couples (in double rooms) and how to enforce - a risk of inadvertently having an HMO even if original 2 tenants arent?
-some tenants are hoarders and will cover every inch of floorspace - as well as making cleaning impossible and a fire hazard, if they also eat in their room (which more likely to do if no shared living room) that can end up attracting mice/pests (Tho ive also seen this happen with a single guy renting and filling a whole flat )
-more people in the same amount of space causes greater tension and discord (not just mice but humans too)
-as you say lots of rules and things that can go wrong
RRA does apply.
Tbh I’d give up on the idea right now, if you think it would be easy, tho i 'think" youve realised or maybe knew already really, that it isnt
I’d disagree with that. The new regulations really aren’t that onerous if you’re trying your best by keeping up to date with your legal responsibilties and the legislation. As I said, the easiest way to do that is to use a source like a landlord association. It’s actually not that hard if you do it properly. Where most people come unstuck is trying to cut corners and not really put in the effort and take it seriously. This forum is full of examples of exactly that.
Hi AlexRay, I used to do something similar that you propose to do before RR. I could visit the property anytime I wanted to check the communal areas, rent was always on time (much easier for someone to pay £700 vs £1700 every month), much easier to find tenants as well. However in preparation for RR and because of change in my local council HMO regulations, I had to ditch the model and make all the tenants leave. In many councils, HMOs of this nature are increasingly requiring mandatory licensing on par with big 4-5 room HMOs. Also many flats are not allowed to be sublet to like this to multiple parties because of the lease, you can only sublet as a joint tenancy under one contract. Under RR and with HMO licensing it simply did not make sense to continue that model for me personally.
David I am bemused as to why my post has upset you. Perhaps you are not suited to using forums. As you know there are countless properties where the living room is being used as a bedroom. As for ‘cramming’ people in, people can choose where they live. There is no need to choose tenants who pay the least. From my experience renting rooms in my house there are plenty of people who struggle to find rooms and the prices I advertised were not cheap. I didn’t wrongly think the RRA does not apply. It is clear from my post that I didn’t know one way or the other which is why I asked and tatemono already confirmed it does apply so no need for you to repeat it. As for how I proceed, I’ll decide how I do that and not you. Go and take your attitude somewhere else.
I think the key is to make absolutely sure you know the rules fully like you have implied. However this obviously does not allow for tenants who want to be assholes and who are clever at playing games with the law. I believe with the new regs it can be possible for tenants to claim back rent dating back months for example. Sure they can only do that if you as a landlord have slipped up or maybe it many come down to legal action, high costs and no rent payment for months. Just looking at the worst case scenarios. Anyway at the moment I am just doing my research and seeing if buying a property is the way to go. It’s obviously not like it used to be and no telling if it will get worse. If there was an alternative more secure than stocks and shares then I would go that route as being a landlord can obviously be difficult. I know that from personal experience of renting a house years ago.
What did you do with the property? Did you just go for one tenant renting the whole property? Why would a small HMO of say 3 tenants be different from one with 4-5?
stocks and shares beat property hands down for security. If I didn’t need rental income as monthly income, I would switch my investments out of property in an instant.
As with all investments, you need to know what you’re doing or you risk making huge losses.
What I’ve always understood is that stocks and shares are risky even if you know something about them. I know almost zilch but have been looking at a bunch of YouTube videos to try and learn. The S&P 500 looks interesting. Obviously stocks and shares don’t carry the hassle of renting, dealing with tenants, property issues etc and if you need some money then I suppose you simply sell some. You have the advantage of knowing about them. I’m assuming many of the landlords who have sold up due to the ever increasing changes to renting have put their money into stocks and shares also.
I haven’t much of a clue. That’s why I paid an IFA to handle all that side of our investments. Three years in and some very good returns. Do your homework (and I don’t mean YouTube) no matter what line of investment you decide on. From the sound of both your approach to property and the stock market, I think you might be better off finding a well-regarded IFA.
I think my approach to property is fine personally. I’m just putting ideas out there to get opinions. If I go down that route I will buy an apartment and rent to one person.
I have been looking at IFAs this week. Just need to find the right one as a bad one can of course cost me badly. I find YouTube really good for so many different things that interest me. There are plenty of extremely knowledgeable people on there.
I was not thinking of shops ,tho i do have some and they are full. Got to get shops in a good area.Thinking more of industrial commercial units//. Land with containers on for rent very good earner
Renting properties by room still leaves you subject to the full RRA plus a load of other legislation on HMOs, council tax etc. Given your initial statement about the RRA, which I wouldnt disagree with, this doesnt sound like the right option for you.
I think that the era of the small landlord is sadly coming to an end and I could not recommend that you go ahead with this plan.
I understand renting rooms only still leaves you subject to the full RRA.This has now been covered a few times on here. It’s not so much whether or not renting is the right option for me, it’s whether it’s right for anyone considering it’s been made more difficult. As there are not that many options where you can invest money ‘safely’ it’s an option many people had always considered the safest. I still think it’s a decent option if your mortgage is not too high, if you buy decent property, if you are careful in who you rent to. I believe one reason why people buy properties as opposed to investing elsewhere is that owning properties makes them feel rich. Makes them feel like the’ve achieved something. Personally I don’t think the era of the small landlord is coming to an end. If that did happen then the consequences for those who cannot afford to buy and have to rent would of course be enormous. I believe there has already been a big impact by way of higher rents due to landlords selling up and less rentable properties. This can only get worse and maybe it will make the government or the next government re-think things. I was looking at rent for 2 bed properties in my area yesterday and was surprised at how much they have jumped since I last looked.
I haven’t really looked into HMOs and can imagine they are a pain however it might be a pain that is well worth it. I agree with tatemono that stocks and shares are better if you find the right IFA.
Another option I suppose is to look abroad. I invested in two small units in Dubai a while back when Dubai was really booming. Started off with one cheque covering a whole year’s rent and no problems with the tenants.
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