Skip Navigation Links

Renting Out/Letting Property

Many people who buy a property abroad will want to rent it out (let it). Some will be buying purely as an investment. They will be looking for the maximum rental return and hoping for growth in the capital value of the property. Others will be buying a holiday home which they want to let out for the part of the year when they are not using it so as to recover some or all of the cost of running the property.

Am I allowed to rent out my property?

Generally, yes. There are, almost always, certain legal formalities with which you will have to comply but, subject to doing that, you are usually allowed to rent out the property. However, please note that in some countries and/or for some types of property this renting might not be allowed at all. If this is an important part of your plan, make sure you check the position before you commit yourself to buying the property.

What type of property rents out best?

There is no simple answer to this question. It varies from place to place and, in some places, even from one time of the year to another.

Very often there will be several 'best buys'.

The most important thing is that you identify a target audience (e.g. families with young children visiting on holiday or visiting medical staff on year long secondment) and you buy and equip a property to meet their specific needs.

Of course, to be successful, the property will need to be in the right location.

There has been a lot of research that indicates that if you are more than one hour from an airport at either end of your journey 25% of potential tourists will decide not to travel. If you are more than one and a half hours away from an airport that increases to 50%. So, if you are targeting the tourist market, you should be looking for property within reasonable distance of an airport that is serviced by as many overseas destinations as possible so that your visitors will not have to travel too far at their end.

How do I find tenants?

There are a number of ways.

There are professional property letting and property management agencies in most countries. They will offer differing levels of service at differing cost. Some are very good and some truly awful. The lawyer members of The International Law Partnership Ltd. will often be able to introduce you to a suitable letting agency.

Some people choose not to use a property letting agent. They resent paying the agent's charges and they feel that they can generate enough lets themselves. Some of our clients who make the most profit from renting property work in this way but, equally, most of our clients who make the least money also work in this way. If you are thinking of doing this you need to be quite clear that you have the time, the skill set and the appetite for doing this work. Do not underestimate the amount of time involved. In these days of the internet you may find that you have lots of enquiries to process, but that they lead to relatively few lettings.

How do I choose a letting agent?

The best indicator is personal recommendation, either from satisfied customers who (like you) live overseas or from your lawyer or other professional advisor.

Even if the service has been recommended, you should make some checks about the company and the service it provides.

  • Take up 2 or 3 references. Speaking to the person over the phone will usually be enough.
  • Insist on inspecting a couple of properties that they have under management. Are they clean? Do they look well maintained? Would you want to stay in them? If they are dirty then yours will also be dirty and it either will not let or you will get complaints and will have to make refunds.
  • Inspect their office and talk to their staff. Is this a place where, as a potential tenant, you would be happy to do business?
  • Inspect the document pack that they send out to people enquiring about renting a property. Is it impressive? Would you sign up with them?
  • The internet is now, probably, the most important marketing tool for property rentals. Check out their website. Does it do the business?

Make sure you have a written contract. A contract that you understand and which sets out clearly both your rights and your obligations. Make sure, in particular, that it is clear about how the agent accounts to you for the monies received, when you will receive payment and the total amount of the agent's charges.

This contract should lead to you receiving many thousands of pounds/euros/dollars, so it is worth getting it checked by your lawyer. It will not take long, it will not cost a lot of money.

Make sure that the agent is operating legally. Do they have all the necessary and qualifications to operate in this field?

How many weeks will I be able to let the property?

This, obviously, depends upon the strength of demand in the place where your property is located.

An attractive property on the coast might rent out for 16-20 weeks a year. A property inland might rent out for only 6. Your letting agent should be able to give you an indication as to both the number of weeks for which they should be able to let the property and the likely amount that you will receive from doing so. You can cross check by looking a booking on the internet.

You can do a lot to increase the number of weeks during which you let the property.

However efficient the letting agent maybe, they will only have access to a limited number of potential tenants. Your profits will increase substantially if you can find more tenants. It is suprisingly simple to do this, especially if you have a nice property in an interesting place. Your family and friends will be interested in visting. You may be able to persuade you neighbours, the people you work with the people at your childrens school or your church or golf club that they should take a trip to, say, Turkey. Every person that you recruit in this way significantly increases your income and if you can find 6 or 7 each year to add to the people found by your agency you will see a big difference in the financial performance of the investment.

Make sure that everything operates to a high standard. This way you will generate repeat bookings and bookings from people who have been recommended by other people who have visited the property.

Over the first 2 or 3 years of letting the property you should see a steady increase in the volume of business as all of these steps take effect.

How much am I likely to generate from renting out my property?

Once again, this will depend upon the type of property and its location but, as a very rough rule of thumb, we would expect you to generate a rental yield of about 3 - 5% of the value of the property. This is the yield net of operating costs but not taking into account any tax liabilties.

This figure pre-supposes that the property is in a good location, that it is being properly and efficiently managed and that you are doing everything you can to generate rental demand from your family, friends, work mates etc.

What contracts do I need to let (rent out) the property?

Contract with Letting Agency

First of all, you need a contract with the agency that is going to let the property on your behalf. Do not skimp on this.

Contracts with Tenants

It is likely that that agency will have it's own contract for use by the people who are renting the property. Certainly, such a contract is needed.

If you are renting out the property yourself - without the use of an agency - then you will need to prepare a rental contract. If you do not have a contract there is a much bigger danger of problems arising with the tenancy and you either being unable to evict the tenants or being unable to recover compensation for any damage that they might have caused.

Insurance

If you are going to let your property you will need to have suitable insurance to protect you against claims made by the tenant. You will also need to notify your property insurance company that you are letting the property as this may change the terms upon which they will do business with you.

You may wish to insure yourself against tenants who do not pay, tenants who cause damage etc. and against the risk of legal expenses involved in connection with your letting the property.

Speak to the lawyer member of The International Law Partnership Ltd. They will be able to tell you what products are available and, in some cases, introduce you to a relevant insurance company.

Taxes

If you let your property you will almost certainly have to pay some tax on the income that you generate.

How much you have to pay and in which country depends entirely upon your personal circumstances. However, as a general guide you can expect the following:

Taxes in the country where the property located

You will, in most countries, have to complete a tax form in the country and pay the government of that country the tax on the rental income you generate from letting the property. Note that this tax is, usually, due whether you receive the rent in that country or overseas - for example in the country where you live.

There are a number of ways in which the tax due in the country can be calculated.

Generally (but not aleays), you will be able to deduct from your income all of the direct expenses assocated with letting the property. These will include your agent's fees; the cost of water, electricity etc.; the cost of insurance, the cost of repairing any damage caused and certain professional fees.

You are, in most cases, also able to deduct a proportion of the interest charges that you incur in relation to any mortgage that you have taken out in that country to help you buy the property. You will not, however, usually be able to deduct anything in relation to any mortgage interest on a loan that you took out secured against your main home in the U.K./Ireland/U.S. or wherever else you may live.

The profit that is left over (if any) after deducting all of these expenses will bear tax (for most people) at, typically, 25% - though, of course, this figure varies substantia\lly from country to country. See our country specific tax guides for more information.

When you sell the property you may also have to pay tax on any increase in the value of the property since you have bought it. See our Guide to Selling a Property and any country specific supplement for more details.

Taxes in the country where you live

These will, obvously, depend upon the country where you live.

In most countries as a resident you are liable to tax on your worldwide income and worldwide capital gains. As a result, you will have to declare the income that you have recieved from renting out your property overseas to the tax authorties in your own country.

You will usually be able to deduct any tax you have paid on that income in the country where the property is located, so you don't end up paying the same tax twice.

The same basic rule applies to capital gains.

Please note that there is increasing international cooperation between tax authorities around the world. You cannot any longer get away with simply not telling anybody about the money you have received. If you try to do so and you get caught you will regret it!

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 8th February 2010.

P  Please think of the environment. Do you need to print this page?