It’s your pension

Some people are concerned that they may not have enough invested to pay a nice bonus for retirement, and decide that by letting out property they can ensure that they receive an income while holding on to the equity of the rising value of their bricks and mortar. Few landlord insurance customers make a lot of money from rental income: the bulk of their profit is gained through cashing in on the rising value of the properties they let. While property prices have gone up in recent years, they can, of course, fall as well, and it is vital to allow for periods when you are ‘in between’ tenancies when calculating your anticipated income from letting. As always, when making crucial decisions about your future finances, it makes sense to get advice from an IFA.

Room to let

One of the many ways in which people let property is by renting out a room in their own house. There are many reasons why you might choose to do this:

• To help pay the mortgage or for extra income.
• For company, to combat the loneliness of living on your own, maybe after the children have fled the nest or after being widowed or divorced.
• As a way of staying in a much loved residence that would otherwise be too big.
• Because you have the space and feel it is the right thing to do to share it.

You may be able to offer some self-contained accommodation, such as a granny flat with its own bathroom and kitchen. Sometimes the arrangement begins informally as a way of helping out a friend who needs a room for a short time. If you want to try out such an arrangement but do not want to enter into long-term commitments, you could try:

• Local churches, which often have links with groups in other parts of the country and may know of someone looking for a local room.
• English language teaching schools. There are many of these around the country, mainly based in cities and some towns, where students come from abroad to attend a course for a set period and need somewhere to stay.
• Local companies or other large employers, who might be taking on someone based at another location, perhaps as a temporary arrangement.

First Time Landlord

Don’t be afraid to ask a local specialist letting agent for advice before you start. They are likely to want to help because they’ll be aware you might decide to market or manage the property through them. Look in local paper advertisements and ask letting agents for their rental lists to get an idea of local demand and prices.

You’re relocating

Another reason you might opt to let out your property is if you need to move to work away, possibly abroad, and do not want to sell your home because you love it or are unwilling to lose your place on the property ladder. Letting out your home allows you to return to it when it is convenient for you to live in it again, while still covering the cost of owning a property. The downside is that, unlike other properties, this is your home and you have emotional ties to it. You may not feel comfortable with the idea of others living in it, and the inevitable wear and tear that goes with occupancy may feel like an intrusion when it is not your children’s shoes that scuffed the paintwork.

Working away from home

In today’s job market, change happens fast. You might take on a temporary contract for, say, six months in another part of the country, or be offered a job elsewhere with the prospect of changing your conditions of work to do more from home, or from a base nearer to it. You may take a job elsewhere but want to maintain the equity of your current home, or keep your children attending a school where they are happy. There are many circumstances in which it makes sense to take on a flat near work but keep hold of your family home, even if you can only be there at weekends. You might then choose to rent out a spare room in the flat, thus improving its security by having someone living there all the time, and offsetting some of your own costs. The tenant gets a good deal because they will probably have the place to themselves when they most want it, at the weekend.

Your student children need a roof over their heads

One factor that has prompted a number of people to take the plunge into letting is the high costs of student accommodation at a time when further education is already expensive. Buying a property near the university your son or daughter attends means they won’t have to pay any rent if you choose not to charge them. You may well be able to let out other rooms in the property, and will be confident that at least one of the tenants has your interests at heart, so the property should be treated fairly well, Of course, you could still be the landlord insurance customer and will have to shoulder the legal and practical responsibilities that this entails.

You inherited property

Many people inherit property from their parents. They may choose to move in to it themselves, or to sell it. However, it may not be easy to market or they may be reluctant to let go of what may be a much-loved property that houses many memories, or prefer to see it as an investment. In such cases letting is an option.

You want a holiday home

Buying a second property as a holiday home is a popular choice for many who wish to combine property investment with pleasure. The advantages of this arrangement are that you have ready access to your holiday accommodation, but cover its costs through letting it to other occupants during the holiday season. If you decide not to holiday at it one year, you can rent it out instead. You may decide to limit the renting to friends and family, which may make you very popular within your social circle but won’t necessarily earn as much. Buying a holiday home to let out is an excellent way of establishing a foothold in a new area, perhaps with a view to retiring there.

A disadvantage is that the property may only attract interest during the holiday period and could stand empty (unoccupied property insurance) for half of the year while you still have to pay the mortgage and upkeep. There is also the hassle of advertising for and dealing with holiday renters, although you can pay an agency to do this. Also, the holiday home is likely to be some distance from where you live, so you will not be able to deal with on-site problems quickly or easily. You’ll need to do your sums and your business plan carefully if you plan to treat a holiday home as an investment.