THINGS TO CONSIDER BEFORE THE MOVE
Canada seems to be a popular destination for UK citizens looking to start a new, more fulfilling life.
Over the past few years I’ve known 3 or 4 different couples who’ve taken the plunge and made the tough decision to leave their life in the UK behind and start a new one living in Canada.
As a former mortgage advisor some of those friends have questioned me regarding the biggest dilemma they face, after hiring an international moving company as they organize the big move to Canada, ‘What Should I Do With My House?’ Should I sell or rent out my house?
If you’re a homeowner the decision of whether to sell or rent out your house has likely been plaguing you as you progress toward emigrating. In this article we’ll take a closer look at the option of renting and hopefully it will help you decide if becoming a landlord is the right option for you.
Emigrating Is No Ordinary Move
As you’re going to be moving to the other side of the world to live in Canada, renting out your home becomes more complicated than it would ordinarily be.
Unless you can arrange for a family member to regularly check on your property, you will likely have to leave it in the hands of a rental agent to deal with all aspects of property rental.
Using a rental agent means you’ll have more fees to pay and less control over the quality of tenant you will allow to rent your home.
What About Your Mortgage?
If you have an outstanding mortgage on your property, could you afford to pay the mortgage if the property is unoccupied for a lengthy period of time or if the tenant decides to stop paying the rent? It’s possible to insure against these eventualities but again this will lead to even more fees and less rental income.
You’ll also need to talk to your current mortgage lender and find out where you stand in regards to renting, make sure you get firm answers to the following questions.
- Will your mortgage lender allow you to rent out your property on your current mortgage deal?
- Will they only allow you to rent out your property for a certain period of time?
- Will they want to increase the interest rate payable if you do decide to rent?
- Will you have to switch the property to a buy to let mortgage?
If your mortgage lender won’t allow you to rent out your home, you’ll have to look for a buy to let mortgage. Buy to let mortgages often require large deposits so you’ll need to have sufficient equity in your property to qualify for a buy to let mortgage.
Investment potential
I don’t only want to point out the negative aspects of property rental because there are also some positives.
If after considering the potential problems outlined above, you still feel you’re in a position to rent out your house rather than sell it, this could well prove to be a good long term investment.
The UK housing market is really suffering at the moment. Although house prices haven’t dropped as much as many might have expected, the reality is that if you want to sell your UK home in this market, you’ll probably have to accept an offer substantially below previous or even current market valuations.
If you can afford to hold on to your house and rent it out for a while, it could prove to be a nice little investment for future years.
Mental Impact
One final thing that shouldn’t be underestimated is the mental impact of your decision.
You may want to rent out your UK home so that you’ll have something to come back to if things don’t work out as you’d hoped in Canada.
In theory keeping a safety net is a wise course of action. On the other hand when you’ve made the decision to start your life over in a new country, your UK home might prove to be as much of a stumbling block as a safety net.
Emigrating to Canada is never going to be easy and some people would argue that it’s best to have a clean break and fully commit to your new life.
What Do You Think? Is It Better To Have A Clean Break When Emigrating Or Should You Have Something To Fall Back On?
Editor’s Note: When I moved to Canada I sold my house and almost everything in it. Life in Ontario, Canada is amazing, I love it here and all the opportunities that it has given me as well as a loving wife.
I had and still have no desire to move back and I’m glad I did sell as the mental impact would have been too much with all that I had going on here. Since then the house has dropped in value so I’m happy I didn’t hang on to it.
One last thing I would say is, don’t procrastinate, embrace the changes and go with the flow. It’s never going to be an easy move, always have a “Plan B”, mine was just cold hard cash. Although I’ll be back to visit the UK I’ll be shacking up with the relatives.
Guest Post By: Adam is the voice behind the blog Money Bulldog UK where he blogs about finance and more.
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Jake Richards says
Emigrating is tough that’s for sure. We moved to Canada a couple of years ago and I have to say we were pretty lucky to have my wife’s sister looking after the property and taking care of everything else. Otherwise it would have been expensive and very difficult.
Canadianbudgetbinder says
That’s great that you have someone looking after your property that you know though. I bet it’s pricey, did you look into cost? What were they asking?
Club Thrifty (@ClubThrifty) says
I love having rentals, but there is no way I would keep a house if I was moving across the pond. It is way too far to keep an eye on it.
Melissa says
The other thing to consider is the huge tax consquences of not have a clean break. Canada will tax you on your worldwide income. So that rental income becomes income of Canada regardless of where it was earned. There might also be implications in Britain. And it will be harder to show that you are a dual resident if you still have a lot of ties to ‘home’
Money Bulldog says
Interesting point Melissa, I’ll look into that.
Edward says
I wouldn’t rent out a place if I lived more than maybe 30 minutes from it.
Money Bulldog says
I’d like to be keeping a close eye on such a big investment, many people do it though.
Plunged in Debt (@PlungedinDebt) says
I can’t imagine the stress I’d feel still being financially responsible for a house on another continent! For me it wouldn’t be worth it, i’d have to sell before a permanent move I think, either that or find long-term tenant to live in it, ideally a family i knew!
Money Bulldog says
Another thing that’s complicating things is that houses just aren’t selling over here in the UK, for some it’s a case of renting or the move is off. A family member would be ideal, as long as they didn’t let you down!
Christine Weadick says
Definately food for thought here… My grandparents on my Dad’s side emigrated to Canada back when, not sure exactly when, best guess is in the ’20’s as my Dad was born here in 1931. He’s the oldest of three, all born here. A number of family came here back then from both Grandma’s and Grandpa’s families. There is still family back in England so far as I know….around London I think…I’d have to ask Dad or my Uncle about that….. I was a kid when both died. I kind of remember they went back for a long visit when I was around 6 and were gone most of the summer. A super read!!
Money Bulldog says
Thanks Christine, I appreciate the feedback!
Kim@eyesonthedollar says
I love the idea of a rental, but with being so far away, I think I’d let it go. That’s too far to try and manage things from across the ocean.
Money Bulldog says
You can get some good rental agents but I agree, for me it would be too far.
Debt RoundUp (@DebtRoundUp) says
Nice post Adam. I would definitely sell the home because I don’t have any aspirations of being an landlord, at least not now. I don’t even want to rent out my current home in order to move into a more desirable location. No amount of money is worth the headache for me.
Money Bulldog says
It’s definately an extra hassle that’s not for everyone.
John S @ Frugal Rules says
Good post Adam! I’ve noticed the same thing that Canada seems to be a popular place for many British people to emigrate to. I think the housing situation would depend on your personal situation. I would think having the rental could be a good thing, though I am certain that would bring a lot of potential work.
Money Bulldog says
Thanks John, Yeah there are not many better long term investments than property when you consider the return with both capital & income. I think keeping your property would be hard work in the early years but get easier as time went on and the returns increased.
AverageJoe says
Great stuff. I especially like to part about a clean break. I’ve never met someone who said, “I wish I would have waited a while longer to make that big move I’d been thinking about….”
Money Bulldog says
Thanks Joe, as much as I know keeping the property would be a great long term investment, I think I’d struggle to fully commit knowing I had something to go home to.
Pauline says
I chose to keep my UK property because it was a great potential rental. Centrally located, next to a university and several big companies who hire young graduates, so I chose to rent each room separately. I was lucky so far, it has been 3 years and I have never had an empty room for more than a week. Rent is paid by standing order and all bills go out via Direct Debit. I would consider renting if I had negative equity on the mortgage, and if I wasn’t sure my move was permanent. Sometimes I have to wake up at 2am to call the tenants because the heater broke or something but other than this the passive income is pretty sweet.
Money Bulldog says
Sounds like you’re onto a winner there Pauline! My dad owns a rental property in Cornwall which he also lets out to students. He’s never had a problem with it being unoccupied but I know he’s had to stomach some expensive repairs at times.