Tazzy

I've been reading that thread about best piece of advice etc.....and picked up a thought about renting your own house out.
Emailed hubby whilst at work today about renting our house out and he said it could be a good idea but we need some questions answering first.
So, to all those who are renting out their U.K. house whilst they are making a life for themselves in OZ or NZ, would you be so kind and put answers to a few of the following questions; (Will understand if these are a wee bit personal and nobody wants to answer)

Q1) How much money ( ready cash in bank account) did you go out with? Was it enough to put a down payment on a mortgage?
Selling a house though, would normally give you that start, wouldn't it?

Q2) Are you thinking of coming back to the U.K.? Is that why you are keeping hold of the property? Or maybe a security blanket if things don't work out?

Q3) How much per month would we get for a 3 bed detatched in Bolton, GT Manchester? ( I suppose I can find that one out myself) Will it be enough to cover a mortgage for a house in Oz (Looking at something worth $250,000 if we sold our house)

Q4) How much does an agent take from your rent, if they are looking after the place for you?

Q5) Is there some kind of tax on this money, before we get it in our bank account in Oz?

Q6) Can it be more hassle than its worth?

Q7) Have i forgotten anything about renting out this house which you could also help me with?

Thank you for taking the time to answer my questions, any advice will be much appreciated.

Tazzy

I'm still going whatever the family thinks!!!!!

seang

keeping as security blanket.


was wondering why everyone was selling straight away

koala_mac

Hi there - I am thinking of hanging onto my flat (as per that thread you mentioned). There are definitely some adverse tax implications regarding the rental income, and also capital gains if you ever do sell. There are tax advisors who can help, and I will be seeking their advice when we get to that stage. I hear Alan Collett at GoMatilda knows his stuff.

I would, of course, be glad to hear if anyone else knows more!

K_M

sjn2003

Tazzy

Long list of questions - so I'll just ramble on and try and cover some of them.

If you are asking how much rent you can get for your place in lovely Bolton to cover a Oz mortgage I assume you have no UK mortgage to pay - that should make it easier. I would feel uneasy having possibly to cover a largeish UK mortgage and an Oz one if tenants vanished, so will sell our place as we have little cash.

Agent will take approx 15% of rent and 22% basic rate tax - you can get rent before tax but will have to settle UK tax yourself through tax returns, so probably easier. Income is also taxable in Oz as you are taxed on global assets but you can deduct UK tax paid so you only pay tax once.

You do not have to worry about capital gains tax as it is your main residence although from when you start renting and rise in value you will end up getting taxed on when you sell.

I've bored myself now so that's enough international tax for one day !!!!!!

Think more about whether you have enough cash for support in Oz if jobs etc are not quick - as everyone here says it could take time and be a real arse ache to sell your house from Oz !!

At least it doesn't drizzle as much in Oz !!!

Shaz&Phil

Hi Tazzy
This is all down to how you view risk/assesment?
We hope to get our visa in the next couple of months.
Regional sponsered
:scared:
We have a flat we bought 18 months ago. We didn't know if we would get our visa( still waiting ) but we viewed it as an investment.
If we go to oz we hope to keep the flat for the forseeable.

We know you can't rely on rental income 12 months a year so we have to consider if we can afford to cover the cost from oz???
The main factor is the size of morgage and getting a good buy to rent morgage package.

The income is dependant on where it is.
Good tip passed on to me

Talk to a FEW LETTING AGENCIES. The good ones will give you straight advice about the desirability of your property to rent out.
They will freely give you this info ie for nothing

Tragically there is tax to pay either here or in oz. I haven't got all the details but i believe you can quite easily arrange to get your rental income tax free in uk. fill form etc.
The income is then taxable in oz.
I don't know which is better oz or uk Tax
There is maintenance that you've got to trust the agency to sort plus they take 15%.

It may be that the pound (rental income)would be worth more drip feeding from the uk rather than selling it

Of course you might make a fortune on the house by selling it.
That would be so useful setting up.

It may be that a family member staying in uk could look after the finances?

I'm led to believe that 20% is a good deposit in oz therefore
$50 000 is required. It can be less but it seems there are extra costs with a smaller deposit. I'm sure there are loads on this site who know more details.

To sum up i like the challenge of renting and if we're still in oz when /if i retire it may be an income. Who knows it could all go belly up but we'll give it a fair go.
Sorry to have gone on a bit, hope this is of some use.
Cheers
Philip

Tazzy

Thanks everyone for the above postings. Need to do some number crunching me thinks.
I got dizzy with all the different kinds of Tax mentioned.

How come everyone wants a cut of MY money?

They can all jolly well buggar off what, what ,what!!!:lecture:

Tazzy

markeh

Hi Tazzy,
it was a long list of questions and I think that most were answered.

I was just wondering on whether you had to pay tax on the rental income pre morguage payment or post.

I suppose it all depends on the morguage and how much the property is worth.
Can anyone answer this one?

Bye
Markeh

WheelsOfSteel

Q1) How much money ( ready cash in bank account) did you go out with? Was it enough to put a down payment on a mortgage?
Selling a house though, would normally give you that start, wouldn't it?

About $100,000 NZD which once I had decided where I wanted to live put as a down payment. I found you need more as without the credit history in NZ you can't get as much mortgage %.

Q2) Are you thinking of coming back to the U.K.? Is that why you are keeping hold of the property? Or maybe a security blanket if things don't work out?

Both, I never plan more than a few months down the line. Primarily, the property is for investment reasons but as I have lived in both of my properties as a full time address I have various CGT breaks I wouldn't get had I just brough and never lived at them. My intention is to remortgage when the exchange rate GBP/NZD becomes more favourable and pay off my mortgage here in NZ and keep the flats for Capital Gains income/investment. Provided I am non-resident from the UK (make sure you fill in your P85 on leaving the UK), I won't be subject to any capital gains in the uk upon selling. Howeverm I have no intention of selling, just re-mortgaging ever now and again to minimise my income which is taxed. By offsetting the income from tennants against maintenace. mortgage you shouldn't have any tax liability on your tax return.

Q3) How much per month would we get for a 3 bed detatched in Bolton, GT Manchester? ( I suppose I can find that one out myself) Will it be enough to cover a mortgage for a house in Oz (Looking at something worth $250,000 if we sold our house)

No, idea. Both my flats are in the London area. One is let at 750 GBP the other at 1,100 GBP per month.

Q4) How much does an agent take from your rent, if they are looking after the place for you?

Both mine are fully managed and percentage of 12.5 is deducted. Other agents wanted to charge up to 14, so shop around.

Q5) Is there some kind of tax on this money, before we get it in our bank account in Oz?

Yes, if you are resident in the UK. No, if you are not. When you leave the UK make sure the agent is aware of this and get them to file the necessaries with the IR to say you are non-resident. You will then get your money in full (minus agent fees).

Q6) Can it be more hassle than its worth?

Depends on your disposition. I consider it a business and run it as such. There are periods when it can play on your mind re-tennants, etc but that why you have the agent. They will vet the tennant before anything goes ahead and get mony retainers should they damage anything that isn't insured. My property is only let to professional people and so you would hope they don't screw it up. However, you have a retainer and insprections are done, so you have to just go with it and do what you can to minimise it.

When you consider the capital value you can acrue with investment property (In the right area) you have a potentially very geared investment.

There's different ways to approach it. If you own the property out right (No mortgage) then it can give you income indefinately, but no Capital Gains that you realise as such. Basically, if property prices increase by say 5% per anum (one would hope to do better than that though) them you make 5% of YOUR money only, Say 200,000 GBP. However, if you have the property mortgaged then say for that 200,000GBP property 40,000GBP is yours and the remaining 160,000GBP is borrowed, then you make 5% per anum on 200,000GBP on a 40GBP investment.

I don't meant o be patranising, but thats what people mean by gearing and thats basically the name of the game. Bit like a futures contract... But thats another story. Very fun.

So what I am getting at is why not make the Capitral Gains on the property and take out (re-mortgage) so you can pay outright or near enough on your new home in Australasia somewhere?

For in vestment reasons you really only want to Capital gains as unless you are retired you will get stung on income tax anyway on the rental income. It also makes more sence to re-invest that money in your own property and make you life alot easier here.

Obviously, theres more risk involved as you need to have it rented or you have to pay the mortgage in the UK, hence the right area is important. But in the long term you set yourself up for a nice retirement package which currently in NZ is CGT free.

Q7) Have i forgotten anything about renting out this house which you could also help me with?

Tried to cover most things in the Q6.

I did ramble a bit there but I have been doing this for a while and it work for us. I may go back to the UK but not to live in the properties. They are investments now.

One final thing. The normal way to do thi is get a buy to let mortgage. This is just a normal mortgage but with higher lending rates. If you are leaving the UK. Don't switch or from a residential. If you are taking out a mortgage don't tell then you are going to rent it out long term as if this is your only mortgage in the UK, you can make it residential and pay less interest.

Hope all this helps...

seang

WOW brillant post wheelsofsteel

Tazzy

Now that Wheelsofsteel was an answer!!!!!!!!!!!

Can you be my financial advisor please?

Tazzy

WheelsOfSteel

Everyone has there price.

markeh

WheelsOfSteel.

this is a big WOW

Thanks for all the info.
I figured that if the morguage repayment accounted for most of the income, leaving me below the UK tax limit then I wouldn't pay taz in the Income.

I like the idea of having the property as an investment for the future. I don't think my company pensions will be there when I come to retire.

Thanks
Markeh

WheelsOfSteel

>>I figured that if the morguage repayment accounted for most of the income, leaving me below the UK tax limit then I wouldn't pay taz in the Income.

Thats right. However, in most countries you are taxed on your world -wide income and therefore you should declare it where you are living if outside the UK. It wil then be accrued with any other income and a net figure used for tax purposes.

Also, most countries have 'double-taxation' treaties where by provided you are paying tax or declaring it somewhere the other country will waiver your liability.

Also, depends how long you are out the country!

Big point to remember here is that the financial year will play a big part in your finances. This runs from April to April in the UK so you have to be out the country by the end of march to benefit from non-residance status for tax purposes. If you leave in say, May, you will need to be out the country for 1yr 11months. Big thing to consider. I made it out by the 28th of March this year ; -)

WheelsOfSteel

Bet nobody thought NZ was a tax Haven? Take advantage of it!!!!

Shaz&Phil

Hi Markeh
You pay tax On the "profit", after interest payment on your morgage, expenses and agents fee is deductible too.
Cheers
Philip