Here, Sarah offers important pre-departure advice that assignees should consider.
For Sale or Rent?
The first step for any assignee is to consider their most valued asset which, in most cases, is their home. Then, there are three options; sell, let or leave vacant. For many, the thought of renting out the family home can be a daunting prospect, although if the longer term plan is to return, then selling might not appeal either. As with most things, there are advantages and disadvantages to all three but in our experience, certainly for the first year, renting is usually a far better option. If it looks likely you will return to the UK after a 2-3 year assignment, renting can provide much more flexibility enabling you to retain the benefit and security of having a UK property to return to as well as avoid any difficulties getting back onto the housing ladder.
Despite an improved sales market over the last year, the UK’s attitude to renting has taken on a much more European approach, meaning demand for well maintained properties in desirable locations remains high and, dependent on mortgage calculations, can potentially provide some additional positive cash flow. However, when you are already inundated with a host of other tasks to organise before departing the UK, and most likely with no experience of renting out a property, deciding to do so should come with in-depth research and thought for what is involved, some of which may require external support. This includes:-
Another consideration for expats is that rental income from letting a property is always liable to UK income tax. Being employed, many will never have had to fill in a self-assessment tax return, but as a new landlord, whether profit is made from the property or not, this will now become compulsory. HMRC has identified rental income as an area deserving of scrutiny, so it’s important that assignees understand the importance of having relevant information to back up figures. Tax offsetting opportunities are available to anyone who rents out their home, which is why it is advisable to get professional assistance to ensure all elements are covered. For example, mortgage interest, ground rent, service charge and repairs can be offset against tax. In addition, if assignees opt to let their property furnished, there is a 10% allowance for wear and tear on the furniture. So if annual rent is £10,000 a year, with a furnished let the tax would be £9,000 (prior to all other deductable costs). If you later decide to sell, it is advisable to seek the advice of an accountant who can discuss various tax breaks with regards to Capital Gains Tax.
If you do opt to rent out your property rather than sell, you could consider the use of a managing agent. This would not only solve the problem of taking care of the complexities involved in dealing with your property both prior to departure and during your absence, but the you can also offset the cost of the service against any rental tax liability. Managing agents can take over every element involved with the rental of a property.
In addition, having a property managed by a professional managing agent will provide you with one point of contact for anything relating to your UK residence and specialist managing agents will also provide secure web access so that you can monitor service levels and keep track of income and expenditure. Warning: a property let and managed through a local letting agent will only be taken care of for the life of that tenancy, meaning should a void period occur, the landlord/assignee will be left trying to re-let the property or arrange essential works from abroad. Vacant properties require management, someone to move the post, keep it clean, monitor utilities and attend to maintenance issues. Those that are not taken care of can often attract attention from unwanted visitors, namely vandals or squatters, therefore expats need a continuation of management and responsibility during these periods.
Not all assignees want to forfeit their UK base and opt to keep their property vacant. For those that don’t have family or friends who are able to regularly attend to their property, a managing agent would also manage the property vacant by arranging regular cleaning, gardening, maintenance, sourcing quotes and co-ordinating major refurbishment work as well as provide a ‘shop and turn-down service’ should you wish to return to the property for a weekend visit, for example.
Here are some of Rushbrook & Rathbone’s top DO’s and DON’Ts when it comes to letting your property.
DON’T think you can take care of a UK property from abroad. The time difference and distance can make it very difficult to deal with any issues
DON’T rely on friends and family. It may be ok at first, but can quickly become a burden on them and if something goes wrong you need to have someone you can hold accountable. You wouldn’t want this to be family or friends.
DON’T be too averse to changing things. If you decide to let your property, take on board the advice of professionals. You may like your pink bedroom, but having neutral walls will have far greater appeal. You must be prepared to be flexible and de-personalise your property.
DO put money aside to make these changes prior to letting the property and also during a tenancy for maintenance/repair. Most people underestimate the financial implications of letting such as getting EPCs, Gas certificates, professional cleaning and inventories.
DO give yourself plenty of time before you leave to research your options and discuss with someone who has experience so you can decide the best solution for your circumstances
DO get advice about what the market is like in your area. What is looked upon more favourably, furnished or unfurnished? Is it normal to provide a gardening service? What’s the average rental income for a like property? You need to meet the competition to knowledge is extremely important.
DON’T commit money you earn from letting your property to anything else. It’s not necessarily constant or guaranteed, you must take into account if the tenants are late with a payment or you have a void period. We always advise people to look at an income for 10 months of the year.
Sarah Rushbrook is the Managing Director of Rushbrook and Rathbone, specialists in property management and corporate relocation partners for organisations, families and individuals. Sarah started her business in 1988, initially providing property management services to outgoing expatriates.