Renting out US home while living in the UK?

Given the current housing market in the US (and the current exchange rate), we're considering renting out our house instead of selling it when we move to the UK. We'd have a management company take care of things, but I still feel very uncomfortable about the possible issues that might arise while we're 3000+ miles away.

We've started to investigate the legal aspects, and I understand that we'd have to pay 40%-ish of all proceeds when we decide to sell (since we'd be living overseas). By our calculations, this seems worth it because of the awful market now and low price we'd get at the moment. We'd probably look to hold on to it for some time.

Has anyone done this? We're planning an indefinite move back to the UK, but really like the idea of having an investment still in the US.

Any advice/stories would be greatly appreciated!

I haven't done that because I'm still in the US and I rent anyway.

My parents own a condo in Florida and rent that out. They manage some bookings and have a management company rent it out as well. This is in Kissimee, so people usually rent it for their theme park vacations. They've done fairly well with it. They have had some problems with the cleaning company not always showing up and the renters don't always tell them about it. My parents ended up finding out about it when they visited.

I live in MA and a lot of people who have summer homes here rent them out during the off-season. Those are more rentals where people can live there for 9 months.

I'd recommend taking anything important to you, but it's definitely doable if you want it!

We're doing it... so far successfully!

Our tenants this past year have been British expats, which has been fabulous in a million ways... they're lovely, they treat our house as if it were their own, and we can completely relate to each other.  We hear from them very rarely -- only when things go wrong with the house (as they inevitably will)... otherwise, the rent just magically appears in our US checking account each month  .  We've actually not needed a management company... most issues we can handle directly with the tenant (i.e. she emails to say the washing machine isn't working, I email her the name and phone number of our preferred repair guy, she calls him directly to set up an appointment and then runs the costs by me before he fixes it).  For the larger house maintenance stuff, our real estate agent has been fabulous about stopping by occasionally, assessing the regular upkeep needs and farming them out to a local handyman.

Our tenants are leaving in September and we had a few months of anxiety as we searched for new ones, but we've just signed a lease again this week, this time with a young family who can't yet afford to buy in our community but wants to make it home.  We're hopeful that things will go as smoothly with them.

In our case, we *do* intend to move back (probably in another year) and like the idea that our home will be there waiting for us.  There is a possibility that we'll decide to sell it and start over when we get back, but that depends on the market, which is currently the pits.  But either way, I think renting's been a good way to hedge our bets.  We're making a monthly profit on our house while the market flounders.... never a bad thing in my opinion! 

I've read somewhere recently that if you own a property in the UK, but you're living outside of the country, you're not required to pay the 40% taxes on any profit you make by renting (meaning, anything above and beyond the cost of your mortgage).  I wonder if the reverse is true for property you own in the US while living in the UK?  Worth taking a look at....

remarkreb: Your story certainly makes me think it's doable, but it's imperative to have the right tenants. We live in a very transitional area (DC suburbs) where the turnover of property is quite high. How did you find your tenants?

usuk2004: Thanks for that. We got our information from a knowledgeable source here (that we *would* have to pay the 40%) but I'd be interested to see the laws on the other side. I'll look into it.

Hi there,

It's definitley possible to rent out your/a place in the USA and live here in the UK. Thousands of people do this already with other countries - most popular of course (for Brits) being Spain. There's lots of other familiar places and many many new and upcoming ones as well.

Good thing with US and UK is that both markets are mature, stable, easier to manage in the long term etc. Language is much easier to communicate with as your investment is so far away plus other benefits.

The double taxation treaty exists so you'll need to research more into that depending on your individual circumstances - the Tax section of this website will give you ideas and the posters Guya and Lizzit will be able to answer queires im sure. I'm a little vague on my tax stuff now, but I'm sure you'll only pay tax once but may have to show it on UK and US tax forms respectively.

I'm thinking of doing this as well, looking to buy over there, rent it out whilst living here and fingers crossed, eventually living there as well.

Hope this helps a bit!

Cheers! DtM! West London & Slough UK!

I'm a success story on this as well. I have a friend managing my Baltimore city house, so that's been great. I don't hear about any problems, she takes care of everything. Rent checks are mailed to my parents who put them into my bank for me. My tenants last year were three female recent college graduates. They took excellent care of the house. The new tenants are three young professional/graduate school guys. Before I rented it out I was really apprehensive about having someone else living there, etc. I never would have rented to three guys on the first go around. But, I've surprised myself with how easily I was able to 'let go' with this re-rental. I rented the house each time by putting it on Craigs List and I got a great response.

The biggest hassle for me has been dealing with taxes and getting them straight. I'm still not sure I did, but oh well. I'm sure someone will let me know if they're wrong! 

usuk2004: Thanks for that. We got our information from a knowledgeable source here (that we *would* have to pay the 40%) but I'd be interested to see the laws on the other side. I'll look into it.

Not sure where you'd check - maybe the IRS website?  The UK equivalent is on the Inland Revenue site.  Posting a link to Dive into America - where I found the info - for anyone interested

http://forum.diveintoamerica.com/showthread.php?t=308

I have a friend managing my Baltimore city house, so that's been great. 
The biggest hassle for me has been dealing with taxes and getting them straight. I'm still not sure I did, but oh well. I'm sure someone will let me know if they're wrong! 

I'm also in Maryland. Where did you find the information about taxes? Would love to hear what you know!

usuk2004: thanks very much for that link.

I'm also in Maryland. Where did you find the information about taxes? Would love to hear what you know!

usuk2004: thanks very much for that link.

For Federal taxes start with "Publication 527 - Residential Rental Property" to give you some background.  It does become a lot of work tax-wise.  You will need to fill in "Schedule E - Supplimental Income" and "Form 4562 - Depreciation".

BIG CONSIDERATION:  Last I knew, you can sell a residential home and the capital gains (up to some maximum) are tax-free as long as you lived there for 2 of the last 5 years.  If you do decide to rent make sure you remember this in a few years, you may want to sell if you think you are never going to live there again before you lose the tax-free capital gain.

Another consideration - if you make a large salary you may be subject to alternative minimum taxes in which case you may not be able to claim a loss on renting the property.  If this is the case, make sure you don't claim too much depreciation on the house's value.

IRS Forms & Publications:
http://www.irs.gov/formspubs/index.html?portlet=3

As far as getting rent, I recommend they mail it to your bank.  I have my tenants mail to my bank's deposit address or make a counter deposit so I don't need to do anything.

I've had a relatively easy time renting out my place in Boston, I've been lucky enough to rent to friends for the last 4 years which gives me additional comfort.  I'm glad I still have it because it gives me a foot in the US real estate market should we decide to move back.

I used the version of Turbo Tax that you use if you have rental property. I also pay estimated tax (state and federal) on the rental income. Last year was tough because I also had work income....it got all weird. This year should be easier because my only income is from the house. I also paid the extra 30 bucks on Turbo Tax to cover me if I get audited. 

Another thing you should consider (though many don't) is that you will need to increase your homeowner's insurance if you have renters.  The liability issues, and the potential for damage can go up if someone is living there that doesn't treat it like a home but a rental.  In addition, you also want to watch out for the 'townhouse fire' event where your renter burns down not only your house but the neighbors as well (who sue you). 

Some realtors advise that you may also have a slightly lower property value when you do sell if the place has been used by renters instead of being used by a owner-occupier.  Your mileage may vary.

What happens with taxes if you aren't making any income from the rent?  I am thinking about renting my condo to a friend but for just enough to cover my mortgage.  So, I would not make any money.  In fact, I will be floating $100/month to cover the condo fee.  I don't think this would apply as income, would it?

As far as I know, it does count as income and I treat it as such by paying estimated taxes on it etc. You just happen to be using it to pay your mortgage (not fun stuff!), so to you it doesn't feel like it!

Oh, this isn't at all good news.  Does it all even out if I am working too and I make under that $80,000 a year mark?