Renting out a property is a great way to earn money.
It comes with several challenges though, too.
And these are even more pronounced if you are living overseas.
So, why do people rent out a house while living abroad? And what are the challenges involved?
Let’s take a look…
Renting in the UK from abroad
Each year, about 80,000 British citizens emigrate abroad.
Many maintain close personal and financial connections with the country, including renting out property.
They are categorised as a non-resident landlord. This means someone letting out a property in the UK while not living there as their primary residence.
As you can imagine, plenty of challenges come with this situation (SEE BELOW).
How common is renting out property in the UK from abroad?
Roughly 5% of UK homes are owned by overseas landlords. And this number is even higher in London, at around 11%.
This shows that it represents a large market size, although it is not dominant.
You’ll often find people doing this in the later years of their life. Perhaps they want to enjoy their retirement in a sunnier country.
Main reasons to rent in the UK from abroad
Reliable income
The UK has a strong economy.
Its rental market provides relatively good returns compared to most countries worldwide. And it has relatively lax laws for foreign investors.
These factors attract a lot of domestic and foreign investment.
You plan to return someday
Owning property in the UK is an excellent investment if you plan to return there someday.
The house remains in your ownership, for when you need it. If you want to move back, things are relatively straightforward.
UK housing market’s great track record
When you own a property, you don’t only benefit from the monthly rental income. You can also help if the overall market becomes more valuable.
As your house increases in value, you can cash in when/if you sell.
And if you don’t, a loved one who inherits the house may be able to.
Tax benefits
A qualified tax accountant can offer more insights on this.
For example, local housing taxes may be lower in foreign countries, meaning you don’t have to pay the ones in the UK.
You may also be able to offset rental expenses, or capitalise on income tax loopholes.
Optionality
Renting out a rental property from abroad gives you options. After all, you can – as mentioned – return to the UK.
And you can always sell the property with tenants in situ if you want, too.
What documents must I have to rent in the UK from abroad?
Most of the documentation is the same for landlords in this position.
You’ll need an Energy Performance Certificate (EPC) and a tenancy contract.
You’ll also need a gas safety and electrical safety certificate. You should also ensure that everyone you let out your house to has the ‘right to rent’.
Furthermore, you must comply with all tax obligations. When your income is generated in the UK, you pay taxes in the UK.
Challenges involved with renting in the UK from abroad
Control and communication
Some landlords feel that they lose control by living abroad.
You can’t meet all professionals and tenants in-person. Requests for aesthetic changes can’t be checked in-person by you.
There are also communication challenges.
For example, if you live in a vastly different time zone, this represents a problem.
And if you don’t pick the right property management company (where applicable), things can worsen.
You might end up with problem tenants and damage to your property.
Finding reliable professionals
It helps if you already have a strong network of professionals before you leave the UK.
This should include:
- Plumbers
- Estate agents
- Property managers
- Electricians.
And more.
Otherwise, building relationships and finding trustworthy ones from abroad cannot be easy.
Tax obligations and laws
When you go down this route, you must follow the law. This includes tax obligations in the UK, such as compliance with the Non-resident Landlords Scheme (NRLS).
And the country you’re living in will have property and income laws you must consider, too.
Educating yourself on these and always following the correct procedure is tricky.
Currency fluctuations
Currency conversions are a challenging subject.
When currencies fluctuate, it can push your profit margin up or down. And if it goes down, you may need to pivot accordingly by adjusting rent rates.
Getting to grips with the local market(s)
It’s difficult to become familiar with a local property market in the UK, if you’re not living there.
Even if you used to live there, things could change quite quickly.
Having someone on the ground giving you accurate, independent feedback might be helpful.
Hiring a property management company
Most landlords in this position choose to hire a property manager. This can make your life much easier.
They may request about 10% of your rental income as payment. But in return, you won’t have to handle all repairs, contracts and rent collection yourself.
If you want to relax while abroad and focus on other things – a property management company can make this possible!
Just do thorough research to ensure they’re trustworthy. Check what past customers have said, too.
