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Brit_in_usa_77's questions about property in the UK

Brit_in_usa_77's questions about property in the UK

Old Jan 15th 2024, 3:25 pm
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Default Brit_in_usa_77's questions about property in the UK

Did you find any more details on your question here? I'm looking at doing something similar so hunting around for information.
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Old Jan 15th 2024, 4:43 pm
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Default Brit_in_usa_77's questions about property in the UK

Originally Posted by Brit_in_usa_77
Did you find any more details on your question here? I'm looking at doing something similar so hunting around for information.
Owning and managing a home in another country, especially if you're planning to rent it out, is not for the faint of heart, as there are numerous financial and practical issues. If you can afford to buy without needing the rental income then that greatly reduces the practical problems, but if you can afford to buy a home and have it stand empty most of the time (which BTW will create a potentially problematic insurance issue), then you would likely be better off investing the cost of a property in mutual funds, and using the income to stay in a hotel when back in the UK, especially if you factor in the savings in property tax, insurance, utilities, repairs and maintenance.

You should be able to invest $250,000 (£200,000) in equity mutual funds and get income of $4,000pa (£3,200) after tax, then add in the cost (prop tax, ins, maintenance) savings of say $2,500 (£2,000), so $6,500 (£5,200) should get you a couple of weeks in a nice hotel, or twice as long in a guest house. ... And no headaches over tenants/ guests, or property management.
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Old Jan 15th 2024, 5:45 pm
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Default Brit_in_usa_77's questions about property in the UK

Originally Posted by Pulaski
You should be able to invest $250,000 (£200,000) in equity mutual funds and get income of $4,000pa (£3,200) after tax, then add in the cost (prop tax, ins, maintenance) savings of say $2,500 (£2,000), so $6,500 (£5,200) should get you a couple of weeks in a nice hotel, or twice as long in a guest house. ... And no headaches over tenants/ guests, or property management.
Income of only $4k a year, do you mean a month? And the $2500 figure, is that monthly or yearly?
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Old Jan 15th 2024, 6:00 pm
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Default Brit_in_usa_77's questions about property in the UK

Owning and managing a home in another country, especially if you're planning to rent it out, is not for the faint of heart, as there are numerous financial and practical issues.
​​​​​​​Thank you Pulaski for that thinking. Short term rentals does sound like a hassle as you point out but I wonder if long term rental could still work? I'm worried I'm not on the property ladder for when I do want to return. That would mean no "bolt hole" as was the original question but being in the market might be good.
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Old Jan 15th 2024, 6:20 pm
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Default Brit_in_usa_77's questions about property in the UK

Originally Posted by Brit_in_usa_77
Thank you Pulaski for that thinking. Short term rentals does sound like a hassle as you point out but I wonder if long term rental could still work? I'm worried I'm not on the property ladder for when I do want to return. That would mean no "bolt hole" as was the original question but being in the market might be good.
I think I'm misunderstanding Pulaki's figures somewhere - costs would be much higher than £2000 a year, but then even putting £200k in an instant access savings account would give £10k a year back in interest, so his £3200 income figure must be a month I'm guessing for the equity mutual funds.

You could get £3200 income per month after all expenses on one property (assuming no mortgage of course), but do also factor in the capital growth as well. Granted the UK property market isn't great at the moment, but still worth factoring in.

Do you have somebody you know and trust that could take care of things for you? We have short term we let out on AirBnB for 2 nights or more with a co-host, short term that we rent out for a minimum of a week to holidaymakers with a full management service, and long term rentals that we have AST's on that we set up and manage ourselves, with the help of my brother-in-law who's at the end of the phone for any emergency. We couldn't do it without good people we trust, obviously there's a big difference in what we pay for each service, the full management for the holiday properties is a high rate, but we don't have anybody that lives near there that we trust so have no option but to pay them to take care of everything. Whereas my brother-in-law requires nothing more than a nice meal occasionally and a crate of beer as a thanks on the rare occasion he's had to go and do something.

One thing that is potentially a big difference for us is that we don't plan to stay in the US long term though, and have no plans to sell any of the properties either at any point - you'll need to factor that in and get good advice on that side of things i.e. US capital gains tax etc as well.

Best of luck.

Edit: just realised this is a 5 year old thread! So I'll split your question & responses off in to a new thread.

Last edited by christmasoompa; Jan 16th 2024 at 1:46 am.
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Old Jan 15th 2024, 9:56 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Do you have somebody you know and trust that could take care of things for you?
Yes I do but also see the benefit of a manager handling things. I guess I need to do some further research on taxes especially. thank you for your comments.
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Old Jan 16th 2024, 1:45 am
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Default Re: Brit_in_usa_77's questions about property in the UK

I rented out my property in the UK for quite a few years, for similar reasons to you. I had a property management company rent out on a standard 6 month rental agreement that could be renewed whenever both parties agreed to do so. The property management company took 15% and handled everything from finding tenants to repairs (although of course I had to pay for repairs). I had minimal involvement other than the right to approve a new renter, and had no real issues. I was also able to sell the property remotely at the prevailing market rate without much effort or having to return to the UK. So, overall a good experience with little effort.

Any rental income has to be reported to the IRS in a similar way to renting a property in the US. The only real difference is the amount of time over which the property is depreciated, but a regular tax preparer would be able to handle all of that that easily. You also have to report to the UK who I think have the first right to collect taxes on that income. You will get credit from the IRS for taxes paid to the UK so you won’t be double taxed, but will have to pay tax on all rental income even if it is tax free in the UK if underneath the personal allowance. Capital gains taxes will be payable in the US upon sale using the same rules applicable to a domestic house sale

Whether buying a property in the UK or retaining one you already own, you have to consider the anticipated return on investment on a UK property versus investing in stocks, shares or funds, or procuring rental property over here. Each has its own pros and cons. I reinvested my proceeds in rental property over here and could buy back the property I sold over there at today’s rates and still have a very healthy amount left over, so perhaps consider investing in property here.
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Old Jan 16th 2024, 1:36 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Glasgow Girl That's great info, thank you very much for sharing your story. It seems, like always, one needs to mainly look for where you think the best opportunity for growth of investment lies. I tend to think in more emotional terms when it comes to property which holds me back. Your story helps me see things more clearly than usual.
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Old Jan 16th 2024, 2:28 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by christmasoompa
I think I'm misunderstanding Pulaki's figures somewhere - costs would be much higher than £2000. ....
I was going for the lowest numbers for a small cottage in Cornwall (or similar remote rural area), to avoid the criticism for using excessive/ London-centric numbers, and used £1,000 tax and £1,000 for insurance, but I totally agree that in reality the numbers would be much higher.
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Old Jan 16th 2024, 2:36 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by Glasgow Girl
.... I reinvested my proceeds ..... over here and could buy back the property I sold over there at today’s rates and still have a very healthy amount left over, so perhaps consider investing in property here.
Same here. The house I sold in London now has a market value of over three times what I sold it for, but I could easily buy it back today without even needing a mortgage, by selling the investments I made with the proceeds I received from selling it when I left the UK. It was a conscious decision on my part to only use part of the proceeds for the down-payment on a home and to invest the rest.
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Old Jan 16th 2024, 6:19 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by Pulaski
I was going for the lowest numbers for a small cottage in Cornwall (or similar remote rural area), to avoid the criticism for using excessive/ London-centric numbers, and used £1,000 tax and £1,000 for insurance, but I totally agree that in reality the numbers would be much higher.
Ah, I see. Insurance would be much lower than that, but taxes should be much higher.

And the £3200 profit you mentioned was per month? I'm not familiar with equity mutual funds at all so wasn't sure. That would probably be similar to a holiday rental profit in the UK then so result in about the same income as a very rough guess.
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Old Jan 16th 2024, 6:29 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by Brit_in_usa_77
Yes I do but also see the benefit of a manager handling things. I guess I need to do some further research on taxes especially. thank you for your comments.
If you have people you trust that would be happy to be your point of contact there in exchange for a small sum each month, or just your everlasting gratitude, then that is ideal. A holiday management company will take a big cut, but the benefit of that is that you don't need to worry at all and you know it's in good hands with people who have a good network of trusted tradesmen to sort any issues. It's the easiest way to do it, but also the least profitable, so depends on what you value more really. If you just want somewhere hassle free that will bring you in an income but also give you somewhere to stay when you're in the UK, then I'd go with the full management company.

And if you're looking at Cornwall (not sure if you are, that was the OP of the other thread, and you said you were in a similar situation so I'm guessing maybe you are?) then make sure you buy somewhere with really good potential occupancy rates (40 weeks +) and choose your area very wisely.

And definitely get good tax advice. I'd also ask any advisor about putting your property in to a Ltd company instead of buying it in your own name. May not be worth it for just one property, but it's worth running the numbers on.

Best of luck.

Last edited by christmasoompa; Jan 16th 2024 at 6:40 pm.
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Old Jan 17th 2024, 3:09 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by christmasoompa
Ah, I see. Insurance would be much lower than that, but taxes should be much higher.

And the £3200 profit you mentioned was per month? I'm not familiar with equity mutual funds at all so wasn't sure. .....
No, per year, after tax, and invested in equities (equity unit trusts/ mutual funds), so would be expected to increase roughly in line with inflation, .... unlike your suggestion of bank interest (or similar investment in bonds), which would be much higher in the short term, but would stay level (except to the extent that interest rates fluctuate), so over time you would have much less spending power from your income.
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Old Jan 17th 2024, 3:21 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by christmasoompa
.... make sure you buy somewhere with really good potential occupancy rates (40 weeks +) and choose your area very wisely.

And definitely get good tax advice. ....
You'll definitely need good tax advice, especially if you have a property with the potential to rent out for over 26 weeks per year, as there is a different tax treatment* for "furnished holiday lets" that are rented out for not more than 26 weeks. So depending on how you arrange your investment and taxes, you might want to withdraw your property from the market once you have 26 weeks occupancy during the April 6 - April 5 tax year.

* I don't remember all the details, but income from short term holiday lets is taxed as income from a trade, not as income from rents/ land. One of the benefits to it being trading income, is that you can use the income as the basis for funding a personal pension (tax deductible contributions). So definitely have a conversation with an accountant familiar with taxation on furnished holiday lets before making a decision. There is nothing wrong with renting out for more than half the year, grabbing all the income you can, and that is likely a valid business strategy, but the tax treatment will be different.
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Old Jan 17th 2024, 3:45 pm
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Default Re: Brit_in_usa_77's questions about property in the UK

Originally Posted by Pulaski
No, per year, after tax, and invested in equities (equity unit trusts/ mutual funds), so would be expected to increase roughly in line with inflation, .... unlike your suggestion of bank interest (or similar investment in bonds), which would be much higher in the short term, but would stay level (except to the extent that interest rates fluctuate), so over time you would have much less spending power from your income.
Ah, ok. So a property should give the OP a much higher rate of return then, that's very low. FWIW, I'm not suggesting the OP puts his money in savings, it was just an example of why I assumed that figure was per month. With £200k to invest, a 'normal' instant access savings account would be the last thing I'd do, even if it did give £10k a year in interest.

Originally Posted by Pulaski
You'll definitely need good tax advice, especially if you have a property with the potential to rent out for over 26 weeks per year, as there is a different tax treatment* for "furnished holiday lets" that are rented out for not more than 26 weeks. So depending on how you arrange your investment and taxes, you might want to withdraw your property from the market once you have 26 weeks occupancy during the April 6 - April 5 tax year.

* I don't remember all the details, but income from short term holiday lets is taxed as income from a trade, not as income from rents/ land. One of the benefits to it being trading income, is that you can use the income as the basis for funding a personal pension (tax deductible contributions). So definitely have a conversation with an accountant familiar with taxation on furnished holiday lets before making a decision. There is nothing wrong with renting out for more than half the year, grabbing all the income you can, and that is likely a valid business strategy, but the tax treatment will be different.
It must be *available* for 30 weeks but only has to rent for 15 weeks to qualify IIRC. I'm not sure why anybody would want to withdraw the property before hitting that threshold though! We would do everything in our power to avoid that with our holiday rentals, and reduce prices like crazy if that were to ever be at risk of happening, as we'd have to pay much more tax, as well as losing tens of thousands in income. A furnished holiday let is more hassle, but the tax treatment is generally much more beneficial, although the OP wouldn't benefit from one major advantage of a FHL if he's buying without a mortgage (being able to claim mortgage interest as an expense). But as above, the OP should speak to a good financial advisor and work out all the details, and hopefully will come up with a profitable plan that works for his circumstances.

Last edited by christmasoompa; Jan 17th 2024 at 3:48 pm.
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