prairiechicken

Just wondering if anyone can share their experience on still owning a home in the UK and renting it out.

We are now onto working out costs of all sorts of things and whether we think we can afford to live in Canada and have a decent lifestyle. My husband in particular is worried about selling up here a) in case we don't like it and want to come back, and b) in case the market here is going to go up and the market in Canada is going to pick up.

Hanging on to our home in Scotland and renting it out (to long term tenants, NOT holiday lets) is a possibility, but I just wondered if anyone would mind letting me have the benefit of their experience doing this.....

Are there tax advantages, for example? Or costs we might not have thought of?

dbd33

Someone I, er, see often has a house in the UK that's rented out to reliable long term tenants. I'm peripheral to the proceedings but I gather that some issues are:

- the rent covers the mortgage but not quite the cost of ownership so the owner is at risk if the exchange rate shifts. Having to send an increasing amount home wouldn't be good.

- the tenant may choose not to renew the arrangement one year causing a panic to find another, the new tenant might not be so good

- the reasonabliity and cost of repairs is determined by the management company, this one seems really good but perhaps that's not always true

- even though the house is looked after, it's not looked after as if the owner lived there. It can be dispiriting to think that the tenants park on what were once prized begonias. (Marylandned, please note that this is an example, I don't know that real begonias actually grow in the garden of the specific house in question, nor do I know whether or not the tenants drive).

- if they knew the full story the bank would not continue the residential mortgage but would want a premium "absentee landlord" type of mortgage at a higher cost

- the rent is income in the UK and then it's income in Canada, lots of forms and possibly some tax is involved but, at the same time, Canadian banks don't want to know about foreign rental income in considering loans and mortgages in Canada

I think that landlord's view might be summarised as wishing to be rid of the worry, receptive to any reasonable offer. otoh, I know someone who emigrated in the early 80s renting out his house in the Chalfonts, he could probably retire on the value of it now.

London-England-Lads

When we first came to Canada we rented both houses out. Hopefully after tomorrow (one is due to sell) it will be one flat as a bolt hold.

As far as cost benefits analysis.

Once you have covered all the basics, that you are responsible for (very little in fact).

Mortgages
Loans against the house
Setting up fees to make it rentable
Agency commission (Check whether it is monthly or a lump sum or bit of both)
Also putting an amount away for each month for repairs you are just about set up.

You should also apply for a landlord exemption form from Customs, you can also download it , think it is a P85 - this gives you a tax cut. Takes 4 weeks for revenue to process.

Also we have an accountant here in Toronto, as there is a tax arrangement between the UK and Canada. I think also you can claim a certain amount for wear and tear ( he deals with that so am not sure).

I would def get a proper agency to manage it for you - being in a different country has its own problems.

As for changing the type of mortgage you have - you either tell the bank or not, you call. Your bank gave us 5 years at the current rate and the 2nd property is on a buy to let mortgage.

R

R

JB0591

We kept our house and we are trying to sell it at the moment.

Our experience in renting it out was not good, we initially had a good tenant and a reasonable letting agency. But once the first tenant moved out then had issues. The letting agency also showed it's true colours.

From a tax point of view the profit from renting is taxable:

With HMRC you can get the rent paid to you without tax being deducted (apply via the P85 form mentioned already) BUT that is not a tax break. It only defers the tax, in that, at end of UK tax year you will do a self assessment and declare the profit made on the property. Profit made is rental income - mortgage interest - repairs - other costs. HRMC will give you the personal allowance so you will hear a lot of people saying they pay no tax, yep that just means they were below the personal allowance.

With CRA you will declare all worldwide income including UK rental profit. If you pay any tax in UK then you get a tax break with CRA. E.g. the bilateral tax agreement means you dont pay tax twice for same income.

You need to be prepared to keep making the mortgage payments until you sold it should renting not work out for you...this can be hard when setting up your life in Canada. It can take time to recover financially from the move.

When you do sell the house it could be liable to capital gains tax in UK and/or Canada:

In UK there is a window when it is still classed as your principle residence (assume you only have one house) which i believe is 3 years but then after 5 years of being non-resident you are not liable for capital gains.

In Canada the capital gains will be based on difference between the house price on the day you landed and when you sold it. If you make a profit then it is liable to capital gains tax.

With all tax, if it co-owned then the liable tax and profit is split between each owner.

From mortgage point of view you need to tell your provider as there is probably a clause in the mortgage about not renting it out. Most providers charge for adding a renting clause. Whilst you can stay on your current deal, at the end of that deal (should you be on one) then you will probably find you wont get a decent deal. This is because you are none-resident and the mortgage is now classed as buy-to-let (even if they didnt say it when you added the rental clause).


In our experience we wished we had just sold up and not rented the house out. Whilst the feeling of having somewhere to go back to should you not like Canada is one we share with you, the feelings when renting goes wrong is harder to accept.

I have my fingers crossed that our sale goes through....although that is not going as smoothly as hoped. Maybe we are just having bad luck with the house.

London-England-Lads

With you there we have had so many issues - should have been a quick sale, we have been ready with our solicitors since the 4/4 to exchange.

Buyers solicitor crap - sat on file, then never told us our buyers were remortgaging. I have got an ulcer from the worry and grey hairs !

MillieF

I rented my house in London out for some years and it turned into a bit of a money pit. Whilst my mortgage payments were covered, I always seemed to be sending money to the UK for something. I think it is certainly a good idea to hang onto your home whilst you find out if you are going to like Canada or not, and maybe if you were to plan to do it for 18 months or so, it might give you the time you need to make your decision, whilst the wear and tear on your property shouldn't be too extensive in that time. These things are only going to be successful with a good management company and good tenants! I think that if you had a friend or family member close by and involved that would help too, I had nobody, and I'm sure that was why they all thought they could give me the run around! Best of luck!

dbd33

After 18 months the house will be worth less than at the time of leaving (assuming no leap in house prices generally and that the tenants bang it up slightly). I'd say it's better either to sell it before leaving or plan on keeping it until the next housing boom (if any).

MillieF

I agree with you about the house price, but what happens if the OP gets to Canada, and then hates it, it does happen. I let my house for years, and it was a mistake, as successive tenants really beat it up, and I had to do lots of work before I could sell it, and the managing agents were a saga from hell too. I ultimately felt happier when I came to Canada with no property elsewhere to worry about, but I had visited Canada a number of times so thought I might have a chance of the move being reasonably successful.

Reidies

Hi we have been here 3 yrs ( on Thursday!) and still rent out our house in the UK. For us it hasn't been a hassle - we have had good tennants and a great letting agent which I think is key. We lived there for nearly 20yrs but I can't imagine ever living in that house again even i moved back to the UK tomorrow, so have no emotional attachment.
It's a bit more form filling come Tax return time.
I think it depends on your circumstances - for us it's a no brainer - but that may all change with different tenants or letting agent.

JB0591

I hear you, our solicitor was on the ball but the buyers solicitor has cocked it all up. I am now pushing every two days via the estate agent to ensure the buyers side is actually progressing. I was away for 5 weeks and still not exchanged draft contracts....our side was sent 4 weeks ago......grrrrrr.

Mikeypm

We are thinking of getting our friends to manage our UK house. Our friends suggested it and we will give them a fee for doing it but they are our friends and have a vested interest in having good tennants for us and for them as they wont want awful neighbours. We have no choice but to rent we have had no viewings at all so its not going to sell anytime soon.

London-England-Lads

Well we finally completed today, very emotional !

Geordie Lass

My experiences are exactly the same as this poster.

We tried to sell but house prices have crashed that much we stood to lose a ton of our equity. We will keep it once the house market picks up and then sell it.

If you have plenty of equity on it and you go over to a buy to let mortgage then you can get a lump sum out. That's what we did - nice buffer and security for moving

feelbritish

Ditto for us. We have been here 12 years and keeping the house in UK has been the best investment for us. We may or may not go back to it one day but the rent pays a lot more than if we had deposited the money in an investment! We have an accountant doing our tax in UK. There is a reciprocal agreement between UK and Canada so you don't pay tax twice. We have a good long term tenant and a good agent to manage the property.

Personally I would keep your house until you know you will not go back but then for the first 10 years we never thought we would want to go back either! Do get a valuation before you leave from an Estate Agent on their letterhead so that you have a record of its valuation if the time comes for "capital gains" tax.

JAJ

Discussion at:
http://britishexpats.com/wiki/House_in_UK-Keep_or_Sell