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Owning a home abroad can be a great investment, but allowing a foreign property to remain vacant for months or even years at a time is costly. Many foreign property owners choose to rent out their second home abroad, but are faced with deciding whether to hire a property manager to handle the details.
Here are some considerations for individuals to take into account when deciding between hiring a property manager and renting out a second home abroad by one's self.
Bill Endsley, secretary general of the International Real Estate Federation-U.S. Chapter (FIABCI-USA), says foreign property owners often underestimate how different tenancy laws can be in other countries.
— Bill Endsley, secretary general of the International Real Estate Federation-U.S. Chapter
"Australia, Canada, New Zealand and the U.K. - the Commonwealth countries - they generally have non-judicial processes where tenants can be evicted without court procedures," Endsley says.
But in many other countries, the property laws are in favor of the tenant and not the property owner, which means the tenant may end up staying without paying rent for a much longer period of time. For example, in France it is illegal to evict someone before the end of his or her lease unless the condition of the building puts the tenant in immediate danger. Even then, the landlord must tell the tenant six months prior to the end of the lease that they do not wish the tenant to stay. "Even if you go to court or have a legal process," Endsley says, "if the laws or the courts favor the tenant, then you are stuck with someone who is not paying their rent."
When property laws and cultural norms are difficult to understand, Endsley says it is smart to hire a local property manager who has the knowledge to navigate any legal problems that arise. When vetting a property manager, ask for specific examples of previous legal problems with tenants and how the manager dealt with these problems.
On the other hand, if the foreign property owner wants to handle these issues on his or her own, it would be wise to consult with a local attorney or find relevant information about tenant laws using the local government's website.
If the owner lives close to his or her second home and is willing to make repairs, a property manager may not be necessary. On the other hand, if the owner lives far away and doesn't want to hire a property manager, the tenant would likely need to call the repairman, plumber, etc. to make the repair. In these cases, the owner should ask for receipts in order to reimburse the tenant for the home maintenance costs. (Using a trusted online foreign exchange service is a convenient way to speed up the process of money transfers and reimbursing tenants.) If possible, it is also helpful for the owner to use a handyman or repairman that he or she trusts to fix the problem, or at least verify the cost of repairs.
A property such as a condominium will most likely have a facility manager who performs routine maintenance, makes repairs and checks up on the property, so a separate property manager may not be needed. However, if the owner is going to be away for long periods of time, Endsley says it is important to develop a personal relationship with the facility manager and "know who he is and that you can trust him."
In addition to ensuring that the foreign property is well maintained, property owners need to consider how one-time or ongoing tenant payments will be collected. A property manager will be able to handle the collection of funds, and then send those funds in one batch via a trusted online foreign exchange service. Sending several tenants' international payments at once may help to reduce the fees associated with a foreign exchange money transfer.
However, property owners can receive international payments directly from individual tenants using a trusted online foreign exchange service. Once a tenant has entered the property owner's bank account details, the online foreign exchange service automatically stores the information. When a tenant's next rent payment is due, he or she only needs to click on the owner's name, and the payment fields are automatically populated. And tenants can access this service from their laptops, tablets or mobile devices.
In an unfamiliar country, finding suitable tenants can be challenging. If the property owner. wants to rent the property to a stranger, a property manager can be a valuable resource, Endsley says. Most local real estate brokerages operate their own listing systems, and can market and advertise available units and help select a desirable candidate.
Whether going it alone or enlisting the services of a local property manager, foreign property owners should consider the time they want to spend navigating legal, maintenance and vacancy issues. Thinking through these issues up front can help property owners save time and money down the road.
Example: 1USD = xx INR
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