View all articles
High rental yields and long-term market stability make the UK one of the most popular places in the world for overseas property investment.
Managing rental properties can be complex enough when you live locally, let alone from halfway around the world. However, over 280,000 UK properties are estimated to be registered with overseas owners, so it is clearly achievable.
Where there is a will, there is a way! Or so goes the popular saying. With numerous overseas investors enjoying the benefits of UK property investment, solutions for managing properties from abroad certainly exist. In this article, we’ll learn more about how overseas investors effectively manage their UK properties, providing valuable advice and practical tips for hassle-free overseas property management.
Types of Overseas Landlords
There are many different circumstances and reasons for owning UK property while living abroad. These include:
- Non-UK residents – Those seeking financial gains from the UK’s robust property market.
- Emigrated UK residents – Those who have moved permanently to another country.
- Temporary or seasonal UK residents – UK citizens who live or work abroad temporarily or for part of the year.
You may wonder why emigrating UK residents wouldn’t save themselves some hassle and sell the property rather than renting it out. Holding onto their UK property provides some flexibility and security. If they’re unsure if their move will be permanent, continuing to own a property in the UK offers peace of mind that they can return easily if they want to. The continual rise of property prices in the UK also means they risk being priced out of the market if they sell the property and then want to return in the future. Retaining their UK property and renting it overseas acts as a safety net. Aside from providing security, UK rental properties can also be lucrative investments, providing a reliable source of income to those living overseas.
Challenges of Managing Property from Overseas
When you’re thousands of miles away from your rental property, managing its day-to-day running is somewhat of a challenge. Several aspects of managing a rental property require in-person attention, like showing potential tenants around and inspecting and cleaning the property. It can also be useful to meet potential tenants in person to properly vet them, although you may be able to do this during a video call if your time zones align. However, this can get a little complicated.
Unless you have a friend or a family member who lives near the property and is willing to handle these tasks, the best solution is to use the services of a property management company or letting agent.
What’s the Difference Between a Property Management Company and a Letting Agent?
When deciding whether to use a letting agent or property management company to help manage your investment property, it’s important to know their differences.
Property management companies usually offer full property management services on behalf of the landlord. This includes finding tenants, managing all day-to-day tenant enquiries, maintenance, complaints, evictions, rent collection, and more.
On the other hand, the primary role of a letting agent is usually to help landlords advertise their properties and find tenants. Some letting agents only deal with this aspect of the rental process, whilst others may also offer full property management services.
While many letting agents offer full property management services, not all do, so it’s important to always check what the service covers and whether there’s anything it doesn’t.
Should you use a Property Management Service for Managing Overseas Property?
Using a property management service or a letting agent is the obvious solution to the challenges faced by overseas property investors and landlords. The right property management service will handle every aspect of managing your investment property, including ensuring legal compliance, managing evictions, overseeing repairs, and handling all the day-to-day operations and tenant communications. They also bring local expertise to the table, providing advice on local market conditions and laws when required and offering you peace of mind that your investment property is in safe hands while you focus on your life overseas.
Of course, there are also cost implications to consider, which can impact your return on investment. The price of full property management services varies depending on the size of the property and its location. For example, a large HMO in London would cost considerably more to manage than a small two-bed in the North East of England.
Usually, letting agents and property management companies charge their fees as a percentage of the property’s monthly rent. According to MoneySupermarket, full property management fees in the UK typically cost around 10-15% of the monthly rent.
Whilst this is a significant investment, many overseas landlords feel it is a small price to pay for the expertise they receive and the stress and hassle it saves, particularly if they are a non-UK resident who is unfamiliar with the laws governing the UK rental market.
What Legal Responsibilities do Overseas Landlords with UK Properties Have?
UK landlords living overseas must still comply with all relevant UK landlord laws and regulations and ensure their property meets UK safety standards, including gas, electrical, and fire safety regulations. If you are a non-UK resident, you should ensure that you have a thorough understanding of the UK’s rental market and the laws that govern it before investing. To ensure compliance, a property management service can help you navigate these rules and regulations, particularly those surrounding tenant health and safety. Non-compliance with UK property laws and regulations can result in penalties or even legal action.
Tax Obligations for Overseas Landlords
Overseas landlords with property in the UK are subject to income tax on UK property income. This tax applies to any landlord who lives outside of the UK for over six months of the tax year. There are a couple of different methods for paying this tax:
Through the Letting Agent or Tenant
Landlords can choose to have the basic rate tax deducted from their rental income and submitted to HMRC by their letting agent or, in the absence of an agent, by the tenant. The agent or tenant must register with the Non-Resident Landlords (NRL) Scheme by completing an NRL6 form.
Through a Self-assessment Tax Return
Alternatively, the landlord can register themselves with HMRC’s Non-Resident Landlords (NRL) Scheme by completing an NRL1 form. This option allows them to receive their UK rental income without the deduction of UK tax at source. Landlords who take this route must then submit a Self-Assessment Tax Return to HMRC at the end of each tax year. This tax return is used to report their taxable profits and pay any due tax.
Top Tips and Advice for Overseas Landlords
Overseas property investment comes with unique challenges, especially regarding managing the property from such a distance. We’ve compiled our top tips and advice for overseas landlords.
- Provide a local contact address – According to Section 48 of the Landlord and Tenant Act, non-resident landlords must provide tenants with an address in England or Wales to service notices, including legal proceedings. This could be the address of your letting agent or a trusted friend or family member.
- Be aware of currency fluctuations – All rent payments made to you will be in Pounds Sterling. This means the amount you receive in monthly rental income may vary depending on exchange rate fluctuations and the pound’s strength.
- Inform your mortgage provider – If you’re moving overseas from the UK, it’s essential to inform your mortgage provider. You may need to change your mortgage type due to your move.
- Open a UK bank account – If you don’t already have a UK bank account, opening one to have rental income paid into offers several benefits, including reduced transfer fees, minimising the impact of the exchange rate, and faster transactions.
- Manage double taxation – If your rental income is subject to taxation in both the UK and your country of residence, speak to a tax expert to see if any double taxation agreements are available to reduce your overall tax liability.
Managing Property from Overseas Whilst on Holiday
Managing a rental property from overseas whilst on holiday requires thorough preparations to ensure everything runs smoothly in your absence. If you’re off on your jollies soon, then there are a few things you’ll need to do before you pack your suitcase.
- Notify tenants – First, you’ll need to notify your tenants of the dates you’ll be away, giving them as much notice as possible.
- Provide emergency contact information – Next, you’ll need to provide your tenants with the name and telephone number of a reliable, local emergency contact. This should be someone you trust, like a friend or family member. This person will handle any emergency queries or problems your tenants may have while you’re away.
- Equip your emergency contact – You’ll need to equip your emergency contact with everything they might need to handle any problems whilst you’re away. This could include all keys to the property, tenant contact details, emergency funds, a list of trusted contractors, and your overseas contact information.
- Remote access to documents – Make sure all of your important documents related to the property and tenancies are stored somewhere safe with remote access in case you need to refer to them whilst you’re away.
The property management industry has been transformed by the development of digital tools and online platforms that make it easier than ever to communicate with tenants and oversee financial transactions from any location. The UK is also home to a wealth of specialist property management companies and letting agents offering practical and comprehensive solutions to ensure your UK property investment remains profitable and well-maintained, even when you’re not physically there to oversee it. These advancements in services and technologies ensure that no matter where in the world your life takes you, you can still confidently invest in and profit from the UK property market.
