MDiligent

Hello all
I am currently working/living abroad and enjoy it to an extent but don't feel 'settled'. The job is pretty good but don't have any life plans as such even though I'm nearing 40 and am single. I will hopefully in the next year or two have enough to buy a flat in a nice part of my home town in north England. I have been thinking that it might help me psychologically to have that and rent it out for some extra income. I guess the money is better in property than sat in the bank or premium bonds. What do others think? Have you been in a similar situation? Thanks for any helpful thoughts.
Cheers.

scot47

Renting out can be a pain. If you go that route get a competent agent to do it and say frequent prayers that you get good tenants.

Pulaski

I would not recommend that anyone become a remote landlord (living in another country from the property). Tenants are often a PITA, and if you're in another country you will be entirely dependant on the agent.

Don't get me wrong, many people do rent out UK property while living overseas, but being a landlord is not a certain path to riches, and can expose you to substantial unexpected costs - what happens if your tenant does substantial damage to the property then moves out? You can't rent it out again until you have spent several £000's on repairs.

You will also be walking into a tax minefield, and it is also extraordinarily difficult to find a lender willing to give a buy-to-let mortgage to someone living overseas.

MDiligent

Thanks for those responses. I am no way rich, it's a small modern flat (mill conversion) but would hope to buy it up front without a mortgage. Is this not better though than having the money sat in a bank/premium bonds? In terms of damage wouldn't I be covered by insurance? I am not doubting your advice btw, it's just something I am not experienced with. Cheers.

Pulaski

Insurance doesn't cover wilful damage by a tenant. If they damaged the plumbing the water damage might be covered, but the deliberate destruction of plumbing wouldn't be covered. In either case you wouldn't be getting rent while the repairs were being made.

It is the smaller dings and scrapes that over time are irritating and need constant minor repairs - marks and scrapes on the walls or floor, spills and stains on the carpets, all take time and money to fix between tenants.

I agree money in the bank isn't being well used. But while the time might not be perfect to dump a large sum into mutual invesment funds, you would be better served over the medium-long term with a portfolio of unit trusts/ OEICs than having all your eggs in one rental property. Any significant slide in the stock market would be an opportunity to invest some of your cash, and then start a regular savings program to build up your investments.

michali

We have obviously been very lucky! We had two London flats on rent before we came back to the UK. We had one or two tenancies which were a little problematic but the agents were very good and most of our tenants were well behaved and paid the rent on time. I do think it has a lot to do with the agents and the checks they do before starting a tenancy. So I would not be put off too hastily. Our rents were not very high and repairs, service charges and agents fees minimized our profits so, with the personal allowance, we never had to pay tax when our tax returns were processed. Funnily enough, we never thought we would come back to the UK to live but, once we did decide to do so, we had a place to live and an income from the other property which helps towards our living expenses.

MDiligent

Thanks again for the helpful responses. I could also buy a flat here where I am abroad, it'd be half the price of back home and would save me paying rent. I only have a 2 year contract though where I work now; might be better to wait to see if it gets renewed for significantly longer I guess. Cheers

Editha

We bought a house in the UK while we were still living in Canada, then rented it out for a year before we returned.

We did have problems, though more with our agent than the tenant. But, the pluses added up to more than the minuses:

Firstly, we saved a bomb on insurance. Insurance on a rented property is far less than on an empty one, which tells you something about how insurance companies view the relative risks.

Secondly there was the profit from the rent. I've been a landlord before, and frankly it is the easiest way to make money I know.

Pulaski says it is a tax minefield. He is not completely wrong. When we moved back to the UK, I discovered that we had to pay Canadian CGT on our 'gains' over the year we'd owned the house, not because it had gone up in value, but because the exchange rate had changed.

Nevertheless, we were still in profit overall.

But, you should consider the exchange rates. We bought when the pound was relatively weak, meaning our Canadian dollars bought more, but sterling has been strengthening ever since.

nun

Owning rental property can be a great investment, but it would not be my first choice as an investment. I would only consider it once I had a year's living expenses in a savings account an a portfolio of low cost tracker equity and fixed income funds in retirement and regular accounts. Once that was set up ID look at property, but before I bought I'd look at all the costs and find a professional agent if I was not in the UK.

feelbritish

We rented one of houses out when we left, best decision we ever made because if we had taken the cash we had available to pay off the mortgage and invested in stocks equities or bank, in 2008 we would have lost a good third of our nett worth! We got a good agent to take care of it and the value has more than doubled. Yes we had to pay capital gains on it here in Canada when we leave but was small price compared to gain. We are now moving back into it and glad we have that option. If you are only going to be somewhere for 2 years I would not buy there. I have always believed property to be good investment and it has worked very well for me over the years. Itis how we have been able to accumulate cash for our retirement.

Editha

+1

Property has been my best life-time investment too. I have never lost money on a property investment, but I have on equities, even in retirement funds.

Nor have I ever kept a year's living expenses in a savings account; I follow the more usual advice of keeping 3 months.

MDiligent

Thanks all for the advice. The whole investing thing is a bit new to me and have never heard of 'low cot tracker equity' or 'unit trusts' before - so thanks for suggesting things like these - something to read up on. Coincidentally today an investment broker visited my office out of the blue and mentioned unit trusts etc., so maybe it is timely. Will also consider property but yeah putting all my savings into one flat might not be a good idea and might see how long I stay here before buying.
Thanks again all. Best wishes!

nun

That was then! Stock markets have surged since 2008. You missed out on a lot of capital gains and reinvested dividends

Why are you paying capital gains in Canada. did you sell the property. If you mean you are paying income tax in the rent then there's another good argument for stock type invesementa that often get better tax treatment.

I'm not saying rental property is a poor investment, just that it requires thought, management and an appreciation if the risks as well as the rewards. It's possible to lose a lot if money in property and it can be difficult to liquidate so I would only pursue it once I had a good foundation of other investments and I would never put more than 25% of my assets into it.

Pulaski

Very wise. I know a few people who have done very well out of real estate investing, but I know or have met many many people who either tried owning rental property, or have a family member who did, and they bailed out after deciding it wasn't for them. This includes a good friend who is an estate agent and whose husband is a self-employed handyman, and even they couldn't make a go of owning rental housing. To be a success it needs hard work, a certain amount of luck, and most likley both.

Pulaski

Getting out of the market in 2008-2009 and staying out, IMO, rates as one of the worst investment decisions of all time. Even a moderately performing portfolio will have doubled in value between 2009 and 2015, a good portfolio could easily have trebled in value. My 401k (private pension) portfolio is worth four times what it was worth in the spring of 2009! (admittedly with on-going steady additional contributions, exactly as I was doing before the crash).