Who are overseas landlords?
When thinking about overseas landlords, the image is often of investors acquiring property portfolios in foreign markets to maximise return on investment. Although this does happen, most of the non-UK based landlords that we work with have lived in Edinburgh and chosen to rent their home, either temporarily or permanently, when they moved abroad.
Reasons for choosing to find tenants, rather than sell a property, include:
- Unsure if the move will be permanent. Moving abroad is a big decision, some landlords want to keep their property, so they have somewhere to return to if they do decide to move back. Similarly, if you know in advance the move is going to be for a year or so, it may make more sense to keep the property, rather than begin house hunting when you return.
- Increasing property prices. As house prices continue to increase, there is a risk of selling and then being priced out of the market on your return. Finding tenants to rent your property while you are away can be a good solution, generating an income and helping to maintain the property.
If you are considering moving abroad and renting your Edinburgh home, some key points to consider include:
If you have a mortgage on the property it is important that you contact your mortgage provider in the first instance to let them know what your intentions are; do not assume that you will be able to rent your property without changing your mortgage. If you don’t inform your mortgage provider, and renting is in breach of your mortgage agreement, your home could be repossessed. Your mortgage provider will provide information on all of the options available to you.
As a non-resident landlord – anyone who rents out a property in the UK but lives abroad for 6 months or more of the year – you must comply with HMRCs Non-Resident Landlords Scheme.
Find out more: Non-Resident Landlords: Tax
Currency and foreign exchange
As your property is in the UK, all rent payments will be made in Sterling. Currency fluctuations could mean that your rental income varies month to month, depending upon the strength of the pound. This should be considered by landlords who rely on a certain rental income to cover their mortgage payments. Having a bank account in the UK avoids paying international transfer fees, and there are money transfer services available to help manage fluctuating currencies.
Property management agent
Although it is possible to manage the property yourself whilst living abroad, this can be stressful and time-consuming, especially if you live in a different time zone. Unless you have friends or family who live close by and are willing (and able) to manage the property for you, it is best to appoint a local property management agent.
It is important to find an agent that you trust to maintain your home in your absence. Check online reviews to get in insight into the experience of current landlords and tenants. Prepare a list of questions, as an overseas landlord it is important to have an understanding of:
- Process for selecting tenants. As you will not be there to meet tenants yourself, you will have to rely on your agent for guidance.
- How often the property will be inspected. At Clan Gordon, we inspect every property within the first 3 months, followed by 6 monthly inspections and send the landlord a photographic report after each, but this can vary from agent to agent.
- Property maintenance process. Being based overseas will make it difficult to deal with contractors directly, using a property management agent with a team of local contractors will alleviate a lot of stress.
Of course, there are costs involved with using a property management agent that would have to be factored in. Find out more: Frist time landlord costs.
Plan for void periods
Although the rental market in Edinburgh is buoyant, there is no guarantee that your property will be rented out continuously; this is especially true for larger family homes. You should budget for void periods in between tenancies, having a contingency fund in place is a good idea.
Using the property/ moving home
Some overseas landlords choose to keep and rent their property so that they can use it themselves when they return for short periods. This used to be fairly straightforward as a Short Assured Tenancy (SAT) – the most common type of residential tenancy agreement prior to 1st December 2017 – would either end, or two months’ notice could be given, after the initial fixed term. Landlords with SATs could plan tenancies around when they required use of the property, which worked particularly well with student tenants who tend not to want the property for the whole year.
The introduction of the Private Residential Tenancy (PRT), however, has changed things slightly. PRTs do not have an initial fixed term, so tenants have more rights to remain in the property. Landlords can still use the property when it is vacant, but without a fixed term it is less predictable. However, even under the PRT, landlords still have the right to serve notice to move back into the property themselves.
Find out more: The Private Residential Tenancy: No minimum term
Related blog posts: