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How expats can invest in UK property

As an expat, finding new ways to generate a reliable return on your investment to fund your lifestyle and retirement is always welcome. Property investment is a popular choice, with many expats investing in properties both in their country of origin and their new country of residence. Why? Sinking money into property is much less volatile than other investments like hedge funds and limited partnerships, and offers the potential for lifelong returns.

If you’ve decided on property investment, be sure to give consideration to the UK. Their proportion of renters has doubled in the past twenty years, and with millennials struggling to afford a deposit to buy their own home, the majority are turning to the rental market. More than 30% of under 40s rent, with the market seeing an average increase of 1.2% this year.

Need more reasons? Property prices continue to climb year on year, particularly in sought after areas such as the South East of England, and a strong rental demand means that investors can expect a return of between 5% and 15% per annum. What’s more, the crash of the pound following the UK’s decision to leave the European Union means it’s cheaper than ever to invest in property - both because of better currency exchange and lower purchasing activity amongst UK homeowners, who are holding off on buying in these uncertain times.

Below, we’ve put together some of the things you should consider when investing in property as an expat, offering advice to help you generate the maximum return on your investment…


See also: Should you rent out your home in the UK as an expat?


Decide on a budget

Before you head to the UK to invest in property, think about your budget and remember that you’ll need a cash deposit of around 10-25% to access optimum mortgage rates. On top, you’ll need to factor in stamp duty, your legal fees, and potential exchange rate fluctuations to determine how much you’re able to spend - and err on the side of caution in respect to the pound. Though it’s performing poorly right now, anything can happen in today’s economy.


Choose a location

Location is everything. Though property investors tend to gravitate towards major cities such as London, properties in such locations are often too expensive for first-time investors and demand may not necessarily be as high as you’d expect. Instead, look for opportunities with a better return on investment - Leeds, Birmingham, Newcastle, and Dundee are rising stars, but you may find your own diamond in the rough. Take into account local unemployment rates, demographics, investments, and the state of regional rental markets before you buy.


Get support

Finding a legal representative in the UK before investing in property is essential, especially if you don’t originate from the UK or understand the nuances of the market. Leasehold and freehold properties, for example, offer significantly different investment opportunities, whilst stamp duty and capital gains tax should also be considered. Consult with a solicitor and/or an accountant to ensure you’re putting your money in the right places, and avoid specialist expat buy-to-let advisors as they may have a bias towards a particular development and may not have your best interests at heart. Go local and do your research to verify claims.


Reserve a property

Once you’ve found a property you’d like to invest in, make a reservation with the developer or solicitor. You’ll need to provide proof of earnings and jump through money laundering checks which can take several weeks. Once you’ve done that, engage a mortgage broker to find a buy-to-let mortgage from a provider that supports non-UK residents. Shop around for the best deal, and weigh up the pros and cons of investing without a mortgage if you can.


Think about currency

Unless you’re purchasing the property from an overseas developer, the chances are that you’ll need to exchange your currency into GBP. Because of this, currency exchange rates will likely impact you, so consider both the exchange rate fluctuation and any transaction fees from your bank or solicitor - both can vary anywhere from 0.5% to 5% depending on your provider. Again, you may need to shop around to find the best exchange rate for your money, and opening a UK bank account is advisable so you can hold proceeds from your property to pay your mortgage and other fees, rather than exchanging currency every month.


Read also: How to make safe investments as an expat


Exchange contracts

Once the necessary legalities have been sorted and you’ve surveyed your property, you’ll be able to exchange contracts and pay a deposit for your property, which can be as much as 25%. You should note that paying a deposit means you are legally committing to purchasing a property. If you decide not to proceed, you’ll lose your deposit and may even be subject to penalty charges, so ensure you’re happy before signing paperwork or handing over money.


Completing your purchase

Once the contracts have been exchanged and payments transferred, you’ll be able to get the keys to your property. If your property is still being built, then keys and completion will likely follow at a future agreed date, which you should ask for in writing for your own protection. At this point, you own the property and can begin the process of putting it on the rental market.


Choosing a letting agent

Unless you’re going to be living in the United Kingdom, you’ll need to instruct a letting agent to manage tenants on your behalf. They’ll provide contract assistance, find a tenant for your property, and assist with the day-to-day management, including maintenance and tenant support. Shop around to find a letting agent with the best reputation and reasonable fees. An average property management firm will charge between 10% and 25% of your rental income but may offer services such as guaranteed rent, even if your property is temporarily vacant.


Find an insurance company

Although tenants are expected to insure their possessions, landlords are legally responsible for covering their mortgage and insuring their property. You may decide to add life insurance into the mix to increase your chances of securing a competitive mortgage and to protect your assets should the worst happen, but consult with your lawyer and your family beforehand.


Think about taxes 

Even if you’re not a UK resident, your income is subject to UK tax rules, meaning you’ll need to pay income tax on your rental income. What’s more, when you come to sell or dispose of your property, you’ll be subject to capital gains tax. However, you can offset your costs (such as letting agent fees, furnishings, general upkeep and insurance) against your income to reduce your tax bill, so speak with an accountant who can ensure you’re operating within the law. It’s also important to note that you may need to declare income in your current country of residence and pay taxes again, though double tax treaties could help you overcome this.


There’s no denying that the UK property market is exciting, but you should tread carefully to ensure investing in a property makes sense for your circumstances. Don’t assume you can make money overnight on a property - a good landlord is strategic and invests in the right properties in the right locations. Whatever you decide to do, we wish you the best of luck!


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