Asking how to rent out an inherited flat in London opens several opportunities to build wealth.

Of course, there are other options after you have inherited a property. You can move into the property, saving on rental payments. Selling an inherited property is also a great option, especially if the property still has an outstanding mortgage. You can choose to sell and use the money to pay off the mortgage and keep the rest.

However, renting out an inherited property comes with additional benefits. Apart from adding the property’s equity to your net worth, renting provides another source of income.

In this article, you’ll learn more about how to rent out an inherited flat. You’ll discover the tax and legal implications, how you can start renting the property and tips to maximise the rental income you’ll get from it. Once you gain a better understanding of your options, you can make the most of your inherited property.

How to Rent Out an Inherited Flat?

Just because you inherited a property, that doesn’t mean you can immediately do anything with it, especially if you’re thinking about renting it out. There are tax implications, safety certificates (e.g. gas and electrical checks), tenancy agreement details and many more.

Managing a rental property entails several responsibilities, including both legal and financial obligations. Learning how to rent out an inherited flat is the best way to avoid feeling overwhelmed.

Before proceeding, ensure that the property’s ownership is clear and undisputed. Inheriting it with other people (e.g., siblings) would mean you would have to obtain their approval before renting out the property. You can also choose a company structure (e.g., a limited company or a limited liability partnership/LLP) that provides the most tax-efficient method for rental properties.

Once you’ve settled the ownership, there are four essential things to consider before renting out a property.

Check your tax obligations and allowances

Inherited properties come with special tax obligations. It all depends on what you plan to do with it. To start, you need to pay inheritance tax before the property is transferred to you. If you decide to sell a property, you have to pay capital gains tax. An estate agent can help you with the details and other requirements before selling the property.

But if you choose to rent out a property instead, your rental earnings will be subject to income tax. You’ll need to complete a self-assessment tax return for this.

Being a landlord will also qualify you to get certain tax benefits and allowances. For instance, mortgage interest and property repairs or replacements can reduce your income tax payments.

You can check with an accountant to ensure you’re paying the right taxes and staying compliant.

Know all the permission requirements

If the inherited flat is still tied to a mortgage, you’ll have to get permission from the lender before renting out the property. This is referred to as a consent to let. They’ll probably ask you to remortgage the property and obtain a buy-to-let mortgage.

You’ll also need a landlord’s insurance because rental properties require special coverage that’s not included in standard home insurance. Make sure you can claim damages caused by tenants.

If you opt for short-term letting, you’ll need to research the specific rules and laws that regulate it. For instance, the 90-day limit is a London rule that states you can only shortlet a property for a maximum of 90 days per year. In case you want to go beyond that, you’ll have to get planning permission.

Ensure licensing, safety and compliance

Residential properties, in general, should be fully compliant with building codes and undergo various health and safety inspections. This includes obtaining an Energy Performance Certificate, a Gas Safety check, a Portable Appliance Test and a Fire Risk Assessment, among other requirements. Rental properties need to take that one step further.

For one, you need to determine the letting strategy you’ll use. Different rules regulate long-term tenancies compared to short-term rentals. If your inherited property is in a building, you’ll also have to check the community guidelines so you can include it in your house rules. This ensures you won’t get complaints from the neighbours.

You should also consider heating, ventilation, insulation, lighting, and sanitation. Rental properties should deal with damp and mould issues promptly, if any.

Staying compliant is very important when you’re renting an inherited flat. Continuously monitor the rules and regulations governing the letting property market, as they are subject to frequent changes.

Consider property management options

Managing a rental property involves several tasks and responsibilities. You can manage the property on your own, but you must be familiar with the operational details, especially if you decide to shortlet your flat. If you don’t have the time or expertise to meet these requirements, you might end up compromising your property’s rental income potential.

There are property management companies that offer a comprehensive package of services. Long-term letting services include drafting a tenancy agreement, vetting and communicating with tenants, scheduling repairs and maintenance, and other related tasks.

Short-term letting services include marketing the property on platforms like Airbnb, updating property listings, communicating with guests, implementing dynamic pricing strategies, managing booking calendars, scheduling housekeeping and maintenance, and other tasks.

Property management companies stay up-to-date on various laws and closely monitor properties to ensure complete compliance with all applicable regulations.

How to Start Renting Out Your Inherited Flat

Now that you know more about how to rent out an inherited flat, the next question is how to get started. Here are important points to remember.

• Do adequate market research. Examine the local rental market, paying attention to various property types, pricing strategies, and key features. This will help you determine what you need to get your property to stand out.
• Think about compliance. If you need to renovate, repair, or upgrade your inherited flat, make the necessary changes so that your property meets the required standards.
• Transform your property to make it visually appealing, especially if you plan to rent it short-term. Get a designer to make the living space appealing. Invest in professional photography to create the marketing materials that effectively promote your property.
• Set up the operations side. Consider how you’ll take care of tenant vetting, housekeeping and maintenance. Set the rules and mark the calendar for any renewals that need to be done. Also, consider the financial aspects, such as how to collect rent and pay taxes.
• Market the property. Choose the right letting platforms to find responsible tenants. Getting the right tenant will minimise the risk of problems and disputes in the future.

Tips to Maximise Rental Earnings

After you’ve prepared your inherited property, it’s time to learn how to make it profitable. Here are tips you can use to increase your property’s rental income potential.

• Set a competitive rental price. Have a dynamic pricing strategy so you can adjust your rental rates to maximise income while staying competitive.

• Opt for flexible letting. Due to London’s 90-day rule, your property will be more profitable if you use more than one letting strategy. Utilise a mix of short, mid, and long-term letting to capitalise on peak and off-peak seasons.

• Stay on top of maintenance and safety. Ensure that all maintenance, repairs, and safety checks are scheduled proactively. Well-maintained properties have a higher chance of getting responsible tenants.

• Use professional property managers. While you can manage rental properties on your own, it would require a significant amount of your time and effort. Working with experienced property managers can help alleviate the stress of being a landlord. They can schedule viewings, arrange for cleaning and maintenance, collect rent, and provide support to tenants and guests.

Take the Stress Out of Managing Your Inherited Flat

While the circumstances of inheriting a property have a negative emotion attached to it, you have an incredible opportunity to turn it into a sustainable income.

Knowing how to rent out an inherited flat will help you set up the property to gain maximum income potential. As long as you conduct adequate market research, commit to compliance, have a proper tenant selection process and partner with the right professionals, you can transform your newly acquired property into an income-generating asset all year round.

Are you ready to find out more about your inherited property’s potential? Get a free rent estimate and find out how City Relay can make your property management journey easier and profitable.