Being an expat landlord can be a money-spinner or a headache - Top Tips

Alastair Mullen, the UK lettings manager for Hamptons International, pointed out: “Having to manage contractors from a distance is tricky, and your visits to the property itself to check on the tenants and the property will be limited.”

Mullen, who is an expat landlord himself, living in Hong Kong, added: “In most cases DIY landlords will have to use an agent or a website to find a tenant, which will still cost them. The only reason I am able to work on this basis is having good friends and family living near my property who help out with checking the property and organising maintenance."

Costs to factor in

For those deciding the agency route is best, be prepared to pay combined letting and management fees ranging from about 12 per cent to 15 per cent.

You must tell your current insurers that you plan to let out your home, and factor in the additional cost of a landlord insurance policy. This is important in order to protect you against accidental damage, tenants defaulting on their payments and legal costs associated with contract disputes or repossessing the property.

How to choose an agent

Before instructing a lettings agent, check that they are willing to deliver and collect keys on your behalf and carry out an inspection of the property to check all is in order.

Ask the agent if they can arrange furniture and installation, should you need this service, as it is unwise to leave valuable items in your home when renting it out.

Mortgage matters

Bear in mind that you will need to inform your mortgage lender of your plan to let out your home and obtain their consent, otherwise you could breach the terms and conditions of your loan.

Many expats use their salaries when based overseas to buy further property in the UK, seeing this as a safe investment or as a potential home should they eventually repatriate.

One advantage of holding on to your existing UK home before you move is that it may make it easier to secure a buy-to-let mortgage once you’re away. It can also make it easier to obtain a mortgage when you return home.

Nigel Bedford, senior partner at largemortgageloans.com, said: “Some lenders want new borrowers to have a UK mortgage track record so that they can see a satisfactory payment history, while others base their lending on overall affordability and any mortgage anywhere in the world.”

Mortgage brokers advise someone who has the option of paying off a UK mortgage to pay it down to a very small amount and continue to make tiny monthly payments, however small.

Bedford added: “This will maintain the payment history while having little effect on overall affordability. If push comes to shove, such a small mortgage could always be totally repaid if it was necessary to meet the requirements of a lender and possibly secure the best rates.”

Currency transfers

While the rental income is likely to be paid in sterling to a UK account, expat landlords may need to transfer the money into their local currency each month. Many opt for currency specialists who can offer contracts that protect them from sometimes volatile fluctuations in currencies from month to month.

James Bennett, managing director of expat financial adviser Aston Wealth Management, said: "When you consider that in the last 10 years the rate between the US dollar and the pound alone has had a 55 per cent variance, it can become near impossible to calculate and budget for such huge adjustments and adapt these into a lifestyle."

He added: "Sometimes you will be on the winning side of this equation but at others, you can be left holding what is effectively an income that is losing value month on month."

One option would be to take a forward position – buying the right to purchase your local currency at today's rates for a predetermined time frame in the future; attractive given the recent strengthening of the pound against major currencies.

Having a bank account in the UK will also help avoid international transfer fees.

Tax issues

While tax depends on your personal situation, there are general considerations affecting all UK property landlords. Income tax will be charged on any rental income above the personal allowance. The personal allowance amounts to £10,000 from April 5 2014, but this tax break for non-residents is under review by the Government.

Mhairi Trayes, a Singapore-based tax adviser at the Fry Group, said: "Individuals can choose to complete the non-resident landlord form to receive their rental income gross. This means that the letting agent does not need to withhold basic rate tax from the rental income before distributing it to the overseas landlord. The gross income is declared on the self-assessment tax return."

Currently a non-resident Briton is exempt from capital gains tax, based on them achieving five consecutive UK tax years of non-resident status. However, new rules are due to be implemented from 5 April 2015, which will look to tax all future gains made by non-residents on the sale of residential real estate in the UK. Full details have yet to be announced.

Source:  Telegraph