The process of purchasing and managing a buy-to-let property can be difficult, especially if you’re an expat or foreign national. However, it can also be an incredibly lucrative investment that pays dividends throughout your working life, into your retirement and even through the lifetime of your children to whom you may leave an inheritance.
If you’re interested in becoming a UK expat or foreign national landlord, this quick start guide will help you to understand some of the things you need to consider before getting started with your investment journey.
What Kind of Returns Can I Expect as a UK Expat or Foreign National Landlord?
The income that you make from your rental property will depend on many factors, including your expenses, mortgage repayments and taxes. However, you also stand to make capital gains on a property, provided that you own it for a relatively long time. ‘Our advice is not to get too caught up in how much you’re making month to month through rental income’ says Stuart Marshall. ‘Chances are, you’ll still be bringing in some profit. But your focus should be more on paying off the property so that you can profit from the property and its capital growth when you eventually come to sell it. It’s a great way of building your wealth as, in effect, the mortgage is ‘paid off’ by tenants with sometimes little or no top up required by the landlord. If you manage to pay off the outstanding mortgage on a property, you will also make more from the month-to-month income on the rent as you will no longer have mortgage payments to cover.’
Assessing Your Investment.
Before undertaking the task of buying an investment property, you need to calculate a few things. One is the rental yield. This figure is one of the most important figures to be aware of when purchasing an investment property. It is the amount you will earn per year in rental income expressed as a percentage of the total value of the property. For example, a rental yield of 10% on a property that cost £150,000 would be £15,000 per year. The higher the rental yield, the better for investors as you’ll earn back the money you’ve invested more quickly. Typically, any rental yield between 5% – 10% is a positive sign.
Another figure you’ll need to be aware of as a UK expat or foreign national investor is the ‘capitalisation rate’. This is the figure used to estimate your return on an investment. To calculate this figure, you need to divide the annual net income of the investment property by the current market value of the property. This figure is important because it will help you to find the right property when buying – by looking for a property with a high capitalisation rate – and it will also help you to determine the right time to sell – by selling when there is a low capitalisation rate so that you are not missing out on potential profits.
Your Role as a UK Expat or Foreign National Landlord.
‘An investment property can be hands-on or hands-off’ continues Stuart. ‘You can either manage the day-to-day running of the property yourself or you can hand things over to a management agency who can handle things on your behalf. This decision will largely depend on whether or not you have time to manage the investment. Regardless, you need to be aware of your duties as a landlord before diving into an investment.’
In general, you will need to be able to liaise easily and efficiently with your property’s tenants. You will need to arrange sufficient insurance coverage (including fire, floods and, depending on whether you choose to furnish the property or not, contents). Relatedly, any provided furniture or appliances must be well maintained. You are also responsible to maintain the property, ensure repairs are done and to make sure your property is ‘up to code’. Of course, you will also have to make sure that all your paperwork is in order. Many of these responsibilities can be deferred to a lettings agent or management company if you opt for that route but, regardless, it’s important to be aware of these responsibilities so that you can decide which option best suits your needs and availability.
Getting a Mortgage as a UK Expat or Foreign National.
‘Getting a buy-to-let mortgage on a UK property as a UK expat or foreign national has historically been quite difficult. However, the world isn’t the same place it used to be. The advent of specialist lenders and brokers has made it far easier for UK expats and foreign nationals to get a UK mortgage. Speaking to an expert can really pay dividends when it comes to this task. They can help to navigate some of the typical issues, such as a lack of a recent UK credit history or having your salary paid in a foreign currency. Liquid Expat Mortgages is a specialist expat broker with over 13 years’ experience. With a panel of over 50 lenders, ranging from internationally renowned High St Banks to specialist boutique lenders, it’s the easiest way to get a UK mortgage as a UK expat or foreign national. As always, it’s best to speak with a specialist expat mortgage broker as they will be able to consider your specific requirements and expectations. By taking into consideration all these factors, the customer should be paired with the best product for their needs.’
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
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