Updating post from Reddit.
I spent a year travelling a long time ago and met couples who had rented out their UK property and continued to travel. Its an idea that appeals to me somewhat.
I have a 2 bed London flat with £150k left on the mortgage. It would rent out for £1600 PCM. I'd have to pay agency fees, insurance, change the mortgage to BTL (I have 50% equity) and ensure my taxes were paid.
I calculated the income to be £1600PCM x 12 = £19,200. While earning under £50k I guess my taxes and costs would be around 40% of the gross income but that would still leave me with £1k per month as a return. If I wasnt working at all then I have my £12k personal tax allowance so it would be even higher.
I've only toyed around with the numbers so far and it does seem like there's a return.
I also have the option of working remotely as I work in finance. The money wont be great by UK standards but it would be enough to get by in LOCL countries.
I just wondered if anyone else has achieved this themselves and if so how is it working out for you?
Just an idea, it worked out cheaper for me to get a consent to let agreement on my residential mortgage than convert the mortgage to a BTL. I had that for 10 years with no problem.
I was going to write this!
Check with your current bank. I got a permission to let without any change to the terms of the mortgage.
My first property I bought on a normal mortgage. (Wouldn’t get BTL due to it needing a lot of renovation) the. Just got consent to let but that only lasted 2 years. I moved from HSBC to NatWest on a BTL and just used the equity for the 25% deposit.
I paid 60k for it renovated it for about 10k (did most of the work myself) then did BTL for 100k and released a bit of equity to purchase another
What’s BTL?
Buy to let.
Buy-to-Let (BTL) is a term often used to reffer to the mortgage required to enable you to rent out a property. Standard mortgages that homeowners get do not permit renting, so you have to either get a BTL Mortgage, or, get consent-to-let (CTL) from your existing mortage lender.
Didn't you have to renew the consent when your existing fixed expired? (Assuming you had a fix at some point) and if so, did the tenants have to vacate before you renewed?
Yes, done this couple of times, no issues. Might have to remortgage to buy to let eventually but interim can get consent to let from your mortgage provider. With regards to taxes you can also expense some portion of your interest payment but definitely still will give you few quid every month net.
I would also add, there are strict rules on where data can go particularly in finance, I consult for financial institutions. So make sure you are in countries where you are able to access the data and work from and etc
In my case ive got 10% of the mortgage overpayment money in the bank so I can rely on that if I didnt need to work, plus any rental income on top would just add to that. I know there are rules about visa and data although some companies dont seem to know or care about those from other people I know.
I did spent a year travelling which I loved and always wanted to get back to it at some point but the mortgage held me back. Now that Ive got 50% equity and the rents in this area of London are high, its made it realistic for me to earn enough to travel without working, although working is an option. Im just having a bit of a flight of fancy with the idea at the moment but just wanted to know how others have managed it and how its working out for them.
I met a couple who had done this 10yrs ago and its sustained their travels throughout all that time.
How often have you travelled and did you manage to just sustain yourself and keep the mortgage paid?
I could stay in the UK for 5 more years and I will have the entire mortgage paid off. Excluding inflation and rent rises in general, at today's rates I'd be earning £1600 PCM, I'd have agency fees, insurance etc, but if I wasnt working I'd have a £12k personal allowance.
That to me seems like quite a considerable net income especially if I was travelling in a LCOL country for a while. The only downside would be that I'd be 50 so I feel I'd be getting on a bit. Essentially I would could retire and be sustained quite well with just the rental income. I have savings too. In fact, if worked an extra year or two then that would definitely cement my savings pot.
I'm quite happy that I have option but I wanted to hear about other people's journeys and adventures!
Left after Brexit and kept my London property.
If this is your only UK income, you most likely won’t pay any tax in the UK as you are still eligible to the tax free allowance as an overseas landlord and can deduct interest, fees, service charge, etc.
You still have to declare it of course. I also declare it where I live now (EU) and although it is not taxed as per the tax treaty with the UK to avoid double taxation it does increase my overall taxable income and consequently my marginal tax rate, so there is no free lunch.
My plan is to keep the property forever and have it fully paid by my retirement.
The only annoying thing is the mortgage rate uncertainty every time your fixed deal ends. I usually stay with the same lender, it makes remortgaging as a non resident a lot easier.
Right now, accounting for everything, I don’t make or lose any money on this on a cash basis, but I have a very low rate.
Will you not have to pay CGT on the growth in value if you sell it when you retire ?
Keep forever doesn’t sound like selling is a plan?
Yep, my bad - Sunday morning hangover. :-)
Yes it’s an evergreen investment, so I don’t plan on selling - ever
Yes, I misread your original post. I've also moved to the EU but am selling to leave the money in govt bonds as it avoids the risk of tenants not paying and the hassle of managing the property remotely, so I wondered what tax regime you might be subject to.
It sounds like you have £150k in the flat based on £300k and 50% equity?
At £1600PCM, without a mortgage I would estimate about 70% profit. £1,120 a month. Now take off the mortgage. £540 at the moment. So on your invested £150k you are looking at just under £600 as long as nothing goes wrong with the property/tenant. £7,200 a year which is obviously nothing to write home about with that much invested.
It comes down to what you think happens with house prices really.
I thought I calculated around £1,000 a month if I was working. If Im not working, wouldnt the £12k personal allowance also kick in? The only costs i think id have are taxes, agency fees and maintenance costs.
I haven’t counted tax at all.
Can you break down your estimated costs on the £1,600 rent?
Monthly
Gross income £1600
Expenses £280
Management fees £160
Insurance £20
Repairs £100
Mortgage £150,000
Rate £4.99%
Annual Interest £7350
Gross Income £Nil/yr
Estimated Tax liability £2514/yr
Property income £15,840
Personal Allow. £12,570
Taxable inc £3,270
Less Landloard tax relief £654
Income tax liablility £2514
Yearly
Property Income £15,840
Tax liability £2514
net £13,326
Monthly £1110
I round that down to £1,000 per month
Sorry Im a total novice and Im using online BTL calculators. My other option is to pay off the balance over the next 5yrs and be mortgage free so Im not paying mortgage interest and if Im not working I have my £12k personal tax allowance
Yes. And I wouldn’t recommend it. It’s a pain to manage, it complicates my taxes, I’m exposed to currency movements, and it makes less money than I could get with government bonds. By the way, “overseas landlords” are not a popular crowd so I wouldn’t expect the tax treatment to get more favourable. I’ve thought about selling it but the pain of having to sell it remotely held me back for longer than it should have. Don’t be me
I think as others have suggested, I might eventually either move back in to avoid CGT or.... if I end up liking my new country and decide to settle there then I could then just sell it and take the hit on the CGT - its negative at the moment as I bought it in 2022 and prices have actually fallen, but even if they rose a little it would still be worth it because I'd be able to buy something for a lot else elsewhere ina LCOL country
Don’t live your life around CGT, particularly for UK property where prices haven’t moved much in a few years, and it’s not like you’re sitting on a big one. Hardly anyone ever leaves their home country intending not to come back. I thought I’d be gone for 6 months and it’s been a decade. Eventually you may decide you want to buy another house and then you have the extra hassle of selling a property that’s rented out. It’s not a liquid investment at all. Take the pain now and then never worry about it again 👍
I am sitting in a bar in Penang chatting to an Australian fells who had done exactly that. Not working, can't draw his pension yet so it's his only income- but he's only just getting by in Koh Samui. Obviously haven't asked how much it is but he implied the house in Sydney has a pretty good rental return
I miss Penang. Lucky fella. My plan was to move around SEA too. I think after taxes and cost I should be able to pull in £1k per month which should be plenty for SEA. The mortgage should be paid off in 5yrs if I stay in the UK or closer to 10yrs if I leave now.
Sydney rental prices are insane so he's probably sitting very pretty where he is. Even in my part of London they have doubled in the last 7yrs
If you can - ie nothing tying you and no dependents. Do it. Work out all the rest later. This is my exact plan but on a much bigger scale, ie more properties and higher passive income when my son flies the nest (while still loving and making the most of the time prior). Life is not a rehearsal.
Yep. No bother.
Get a good managememt company, so you don't have to Worry about the day to day.
Get a consent to let, no btl mortgage needed.
Don't worry about cgt. Only a problem if you sell and then it's dependant on years renting VS living in... And the rise during that time.
Enjoy!
Ive done it for it couple of years, it eventually became part of the portfolio of properties. I never had to worry about making the mortgage payment, the rent always covered it and more. I eventually found a job abroad which helped with the tax free allowance.