Insert standard caveats about not being a lawyer, accountant, real estate person, etc. I did rent my US house out for 2 years, though, after moving to the UK.
1. If we leave the country to move to the UK what happens to the mortgage? Do the mortgage company care that we're moved as long as they continue to be paid on time?
It depends on your mortgage terms. My mortgage company didn't care (and then, completely unrelated, sold my mortgage on to another company, who also didn't care). Some mortgages are offered only on the condition that it remain a primary residence, though.
You will need to shop around for different homeowner's insurance (which your current company may offer). My insurance went up a bit as a landlord (since they assume a tenant won't take care of the place as well as an owner will).
2. We're having a friend across the street be our property manager. He already manages 7 of his own rentals and is also an attorney so we're totally comfortable with him (plus we've known him for 10 years). We want to leave cash in an account for him to pay for things like minor repairs and cross-over periods between tenants where the house is empty. Should we plan on leaving the equivalent of about 3-months rent? More? Less?
I'd have to look up exact numbers, but I think I spent about 1/2 a month's rent on repairs during the 2 years of renting out the house. In order to prep it for sale, though, I spent $5k getting it repainted/fresh carpet (which, arguably, I would've had to do for a new tenant even if I didn't sell it), and another $3-4k doing general repairs that came up on the homeowner's inspection I did pre-sale. (The recommendation I've heard, and meant to follow but forgot to, was to get an inspection done every 18 months to keep on top of any building issues so that if/when you sell the house, you don't have a giant repair list/bill.) So repairs may not cost that much (though it'd be a good idea to set aside a certain amount anyway even if nothing's cropping up so that when the furnace breaks or a pipe bursts, you have the money available immediately). Cleaning/prepping for a new tenant can be expensive, though.
3. What are the tax implications for USA taxes and also UK taxes? Our mortgage and property tax payments will likely be a few hundred dollars higher a month than the rent we are able to get for the house... at least initially for the first year or two. If the rental fees (income) and the mortgage/property tax payment and property management fees (outflows) end up to be a wash, are there other tax worries we'll have to deal with?
I rented out at a loss, but if I recall correctly, the UK tax side counts your mortgage interest payments and your property management/repair fees, but not your property taxes (because no such thing exists here as council tax is based on residence, not ownership). So if you end up in the black (accounting wise) in the UK, you may have to pay extra taxes on that, even if the US counts you as operating at a loss.
4. Say in 10 year's time we are able to sell, what will we need to worry about in terms of capital gains tax (USA or UK)? Is there anything we should do ahead of time to minimize tax issues?
I've only just sold my house, so I'm not sure how this works. However, from what my accountant said, it works similar to the US. You only get taxed on whatever profit you make on selling the house, and I think I've read about getting credit for any taxes you'd pay to the US first.
Hope that helps.
