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Furnished or unfurnished tenancy?

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Furnished or unfurnished tenancy?

Old 13th Jun 2020, 16:32
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Furnished or unfurnished tenancy?

Doing some research about the property market and, because interest rates are so low, am considering buying an apartment for investment purposes. I have a solicitor going through the legals but wondered if it is preferable and more desirable to rent with or without furniture?
The property is in an affluent area in the south of England, close to a main line station to London and walking distance to a small town. My target market would be young professionals or retirees, not students.
Many thanks.
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Old 13th Jun 2020, 16:42
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I would have thought your target market would have, or want to get, their own stuff. But there's legal differences about which I know nothing, except that a chap in my village has moved to a different house and renting his old one, and put it up unfurnished as the lockdown regs made furnished difficult, something to do with deep cleaning. First potential renters came along, said they would have it, then asked for a rent holiday due to the pandemic.
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Old 13th Jun 2020, 16:49
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Originally Posted by UniFoxOs View Post
I would have thought your target market would have, or want to get, their own stuff. But there's legal differences about which I know nothing, except that a chap in my village has moved to a different house and renting his old one, and put it up unfurnished as the lockdown regs made furnished difficult, something to do with deep cleaning. First potential renters came along, said they would have it, then asked for a rent holiday due to the pandemic.
I’m kind of hoping that that is the case - so, in the worst possible scenario, I wouldn’t have to replace damaged furniture only do cosmetic repairs.
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Old 13th Jun 2020, 17:29
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We have rented long term, we always went for unfurnished houses, we would then not have to worry about things getting damaged, or in the case of breakdowns, waiting for the landlord to arrange repairs as it was entireky our responsibility. Also it means as a tenant you can buy furniture and equipment which suits what you want, and you don't have to be concerned about how the previous tenants treated the furniture/cooker/fridge etc.
The type of tenants you are lookimg for are also likely to either already have their own stuff, or be able to afford new items. First time renters are much more likely to.be interested in furnished properties, and presumably first-timers are not the sort of tenant you'd prefer.

From a landlord perspective, why would you saddle yourself with looking after or replacing expensive items if you don't have to? We were always very respectful of the landlord's house and fittings, but unfortunately some tenants are not and wouldn't think twice about wrecking your stuff, or leaving it in a filthy condition when they leave.

I would definitely go for unfurnished.
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Old 13th Jun 2020, 17:39
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Renting is not what it was and landlords have come under attack from several chancellor’s.

You really need to do the sums before you go down the renting route, though you are not going to get much with your money left in the bank at the moment.
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Old 13th Jun 2020, 17:41
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I would suggest unfurnished, as mentioned, tenants would probably prefer their own. Your solicitor might know the legalities re furnished/unfurnished.

Other things to watch out for are the length of lease, AFAIK if the lease is under 60 years mortgage companies will not give mortgages. Bear that in mind if you want to sell it in the future.

Also on-going costs like Ground Rent, building insurance and service charges must be taken into account. Your estate agent or solicitor should have these figures.

If a property management company is involved check what Major Works have been done recently or any are planned. You could be hit with a hefty bill out of the blue for major repairs. Check their fees.

Maybe you know all this already and as said, estate agents and solicitors should furnish you with these details. Good luck.
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Old 13th Jun 2020, 18:09
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Thank you for your replies - much appreciated.

Yes, I’m getting my solicitor to go through the fine detail on the lease, so no nasty surprises. The apartment is in a purpose built block of 6 that’s just under 10 years old, so plenty of years left on the lease.
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Old 13th Jun 2020, 20:07
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Do your sums and please vet thoroughly any applicants thoroughly. I used a letting/estate agency to do my property management and one of my tenants lied thru his teeth, false previous address etc. This individual was a professional fraudster, my estate agent did zero checks and handed him the keys. he then turned the place into a drug den. He had a criminal record and all of his previous addresses were valid but graveyards, Its a known con. 9 months later and a big police op lifting a million-odd quid in drugs over 3 properties (my property being one of those involved).
The house was trashed with many thousands of pounds of damage. My landlord insurance did pay up a percentage but haggled over everything.

I tried to sue the estate agents but they sold up or sold their book as they told me, the property ombudsman, was useless and incompetent. They said "tough luck".
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Old 13th Jun 2020, 20:57
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Our accountants have just published an article on furnished versus unfurnished holiday lets, not sure what the differences in tax would be if it's not classed as a holiday let but it may be of some interest to you - Randall & Payne - Furnished versus Unfurnished
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Old 14th Jun 2020, 01:34
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First potential renters came along, said they would have it, then asked for a rent holiday due to the pandemic
You have to love chancers like this, grab a few months rent free then have another few months of not paying whilst the eviction process goes through. They could easily end up occupying the property free of charge for six months or more.

No one gets to live in one of my properties for free, if necessary I’ll do a short lease at a reduced rate, or a longer lease with a rental review after a set period of time. I don’t mind passing on a government subsidy to current tenants or lowering the rent for a while for someone who’s lost his job but I’m not a charity.
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Old 14th Jun 2020, 01:37
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if the lease is under 60 years mortgage companies will not give mortgages.
60 years for a lease? Really?
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Old 14th Jun 2020, 01:56
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Originally Posted by visibility3miles View Post
60 years for a lease? Really?
No but yes.

It's complicated and I don't I understand it.

Edit:
The "owner" of the apartment, BehindBlueEyes, doesn't really own it. He has it on a 60 year lease, has to pay ground rent, ...

I guess it's a remnant of when there was a Ruling Class who owned everything, oops, wait a minute, there may still be one.
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Old 14th Jun 2020, 04:11
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Do your sums carefully since the removal of what’s termed a tax break puts private (not company) landlords in a disadvantageous position. If it’s rented for say £600 a month and your mortgage is £400/month,if you’re a higher rate taxpayer (caution:oversimplification) you pay tax on £600 not £200. Do take professional advice.
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Old 14th Jun 2020, 04:13
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Also, some leasehold flats don’t allow renters. Small print is v important.
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Old 14th Jun 2020, 05:57
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As someone who has rented out many properties for over 30 years, I can assure you that the return on any investment is at the lowest ever unless you are a low rate tax payer.

I choose to do the advertising, vetting, contracts, tax, interactions with DPS, and minor repairs that are required, with the exception of plumbing where I have a man who can. Generally, I find the exorbitant fees charged by management companies to be totally without merit. I have not yet found one that could manage a social brewery event. Even so, my returns are not fantastic.

I also never lease any property. I tend to buy outright.

If you are not confident, or cannot do the management yourself, seek out a specialist and especially one who is independent.

IG

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Old 14th Jun 2020, 08:47
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Being “independent” doesn’t mean their aims necessarily align with yours. Which for them is charging the maximum for as little as possible in return.
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Old 14th Jun 2020, 09:27
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It’s a mugs game these days. You are taxed on the money you use to pay the mortgage and the law makes it incredibly difficult to get people out if they do not pay rent, if they trash the place or they are a nuisance to the neighbours. Should you enjoy being “parent” to a bunch of strangers then it may be your thing but you are likely to have the tenants from hell at some point ( maybe more than once) and the law will always take their side.
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Old 14th Jun 2020, 09:44
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The property in question is completely unencumbered, less than 10 years old, purpose built apartment with 117 years left on the lease. It’s in immaculate condition having been a part exchanged to a large house building company to enable the previous owners to purchase a new home - so vacant possession. Ground floor with a small privately enclosed courtyard garden in a block of 6. 1/2 mile one way to a mainline London station, 1/2 mile to a high street and midway between two major airports.

Short term, our son will be living in it and, apart from him covering his bills, we would not be looking for an income from him on it during this period.

We’ve taken the view that although there will be a fairly hefty ground rent/service charge, it’s not going to cripple us or put us under financial pressure if it remains empty for a while. However, we hope it will eventually pay its way as that’s the whole point of the exercise and the return we would get on the capital - which we had set aside anyway - would be better than the virtual non existence on current interest rates.



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Old 14th Jun 2020, 12:13
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if it remains empty for a while
Don't leave it empty too long - councils put up the rates regularly on empty properties, it's quite galling to be paying double rates and getting no service for it.
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Old 14th Jun 2020, 19:58
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If son pays minimal payments, does that mean it won't technically be "empty?"

Not legal advice...
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