Renting out your house when relocating abroad or travelling the world sounds like a passive income dream come true. However, being a long-distance landlord that lives on the other side of the world has its own set of unique challenges. Here is how I manage my rental properties remotely and some of the issues I’ve had to deal with.
Earning passive income by renting out your house
As a property owner, what could be better than earning some extra income by renting out your house, sitting back and automatically collecting passive rental income every month while you zigzag the globe or relocate abroad?
Then when you’re ready to move back in (if you move back in), your tenant happily agrees to move out, leaving your home in perfect condition because they looked after it as though it were their own.
Unfortunately, Renting out your house to generate an extra monthly cash flow and managing it from afar rarely lives up to the easy passive income dreams you imagined. There are always tasks and unforeseen or unplanned issues involved in managing a rental property.
In other words, it’s not a purely passive income endeavour.
I’m a long-distance landlord and manage my US properties while living abroad in France!
I’ve been a
Before moving to France, I owned a single-family home in San Jose, California, which I rented out and managed myself entirely. Managing that one single-family home while working full time was relatively easy because I had a good tenant and lived less than a 45-minute drive away.
- If there was a leak, I arranged to get it fixed and met the plumber.
- New roof, no problem. I’ll drive down and pick out the new tiles myself and check in on the progress.
- Random checks were easy. Every few months, I would drive by to make sure the yard was being well looked after.
- If my tenant moved out, I created the ad, reviewed every rental application, conducted tenant screening, ran credit reports, and showed the rental property to a prospective renter myself.
After the great recession of 2007-2009, we moved 3000 miles away to Montreal to live with my family for a year, followed by another 3000-mile move to France.
The transition was smooth because I had existing tenants in my house. However, relocating 6000 miles away made certain aspects of managing my rental property more challenging and complicated, but I made it work.
Flash forward five years, I took advantage of the real estate boom and sold my California rental property with the help of a realtor.
To avoid capital gains tax, I reinvested the proceeds to purchase two new investment properties in two different emerging real estate markets located in different states, also remotely.
- I purchased one single-family home in Arizona.
- I also purchased a big old Victorian home on the East Coast that was converted into a multi-unit 4-plex apartment.
This is how I manage my real estate rental properties and some of the struggles and challenges I have to deal with as a long-distance landlord. My methods may not be perfect, but it works for me.
Do your research first!
Every rental situation is different.
If you’re a property owner and considering renting out the home you bought as your primary residence while you work or live abroad, make sure to do your research.
These are just some of the issues you’ll need to look into.
- Decide how much rent you will charge by researching rental price values in the area. (Start by looking at Zillow rental prices)
- How much security deposit will you charge?
- Are you willing to let a renter have pets?
- Get familiar with landlord-tenant law and fair housing laws, which can differ by location.
- Check with your mortgage lender and your insurance agent to see if they have any objections.
- Get up to speed with liability coverage such as renters insurance and landlord insurance.
- Renting out your house also comes with its own set of income tax considerations, technically considered taxable income tax. It’s important to talk with a tax advisor as you start the process.
- Does your City Have annual rental Inspections? If so, you’ll have to register your home and pay an annual fee, usually to the code enforcement division. During the inspection, the city inspector will walk through the home with a checklist looking to make sure you’re house is up to date and not a slum.
- Once you have tenants living in your house, how will you deal with a bad rental situation and other issues that need to be dealt with: A broken furnace, leaky roof, clogged toilet, collecting each month’s rent etc.
How NOT to collect the rent
Ask your potential tenant if they are willing to pay their rent online electronically and not with a physical check, especially if you live in another country.
It will make your life so much easier if tenants do.
When we moved to France, my existing tenant couldn’t or wouldn’t pay his rent electronically online, either because he didn’t have a bank account or didn’t believe in online banking. Either way, I had no choice but to continue accepting a physical check because landlords in California can’t force tenants to pay rent online or use electronic billing.
That’s where the unanticipated challenges began.
Problems receiving a rent check mailed abroad via snail mail:
Every month was an agonizing waiting game.
My tenant’s rent checks would take weeks to reach me in France and got lost on several occasions. Then we moved from Marseille, France, to a small town in Provence, and my tenant forgot to use our new address on two separate occasions.
If I hadn’t received my check after three weeks, only then could I contact my tenant because I was never sure if the check was lost, delayed by the post office, or because my tenant wrote the wrong address.
Problems depositing a foreign check in a local bank account
Once I received my tenant’s rent check in the mail, I then had to deposit it in my bank account.
My French bank told me that any foreign check I deposited into my French Euro bank account would automatically be converted to Euros which I didn’t want. I needed my rental income to stay in US dollars to pay for US expenses associated with my rental property; property
My French bank also charged a fee for depositing a foreign currency check, which took up to two weeks to clear.
At that time, the only way for me to deposit my check into my US bank account was to sign the back of the check and mail it to my bank in the US with a deposit slip. This extra step added another week or two before the funds cleared my account.
Workaround: If you have a family member willing to deposit your rent checks for you, you’ll need to give them a stack of deposit slips and ask them to write “for deposit only” on the back of the check. Not all banks will accept a check without an endorsed signature but some do.
Luckily, a couple of years later, technological advances made depositing rent checks remotely possible using my bank’s phone app.
Depositing checks in a US bank account while abroad using my bank’s phone app
Once my bank finally had a bank app for depositing checks, things got easier.
All I had to do was take a picture of the rent check- front and back and hit the deposit button. The funds usually cleared my account instantly or within one day.
How tenants can pay their rent to you online
Technology has gotten so much better since 2011, and paying rent online seems to be more normalized, or people are less fearful of paying rent online than before.
Thankfully, all 5 of my current tenants agreed to pay their rent online electronically. It’s almost an instant transaction, and there’s no check, so nothing gets lost in the mail.
If I don’t see a deposit in my account by the fifth of each month, I know that tenants haven’t paid their rent. Before, with a physical check mailed to me, I was never sure if the check was delayed or lost in the mail.
There are so many different ways your tenant can pay their rent online now. Most are free and let tenants conveniently set up recurring rent payments online.
Some payment sites are made explicitly for landlords and tenants. Other online payment sites like Venmo, Paypal and Zelle, aren’t solely for paying rent and require both parties to create an account or download an app to transfer funds electronically between accounts.
Here are some of the more well-known services.
DIRECT DEPOSIT: Using Landlord Property Management website portals
The following property management software platforms are specifically designed for landlords, each with strengths and weaknesses.
I’ll only be talking about rental payments, but property management website portals usually offer a whole suite of services specifically for landlords, including:
Collecting rent, setting up automated payments, due-date reminders, late-fee enforcement, listing units, screening tenants, managing maintenance requests and more, all from your computer or phone.
Cozy now Apartments.com Rental Manager (free)
I used Cozy for years (now part of Apartments.com) and was extremely happy with them. Your tenants can pay their rent to you via their checking account for free.
If they pay with a debit or credit card, the tenant must pay a 2.75% fee. The choice is theirs, but there’s no extra cost for you either way! It takes about three business days for the funds to clear.
Zillow Rental Manager (free)
With Zillow online rent payments, tenants can pay rent directly from their bank account for free.
If tenants choose to pay with their credit card, they will have to pay a 2.95% fee and, when using a debit card, a $9.95 convenience fee. The cost is free for you either way. It takes 3 to 5 business days for the money to get deposited into your account.
Avail landlord software (free and low-cost option)
With avail, tenants can connect their bank account and schedule payments for a nominal $2.50 fee per payment.
If a tenant uses a credit or debit card, they’re charged a 3.5% convenience fee. No service fees are ever deducted from the amount funded to landlords, and funds usually clear within 3 to 5 business days.
Landlords can upgrade to the unlimited plus plan for $5.00 per month to receive funds faster; the next day. The ACH fee is also waived for your tenants if you subscribe to this plan.
DIRECT DEPOSIT: Using general money transfer apps for rent payments
The following are direct deposit money transfer apps to send and receive money for any reason, not just for sending rent.
Paypal (Too expensive: I don’t recommend Paypal to collect rent)
Paypal needs no introduction. If you use Paypal to collect rent, you’ll need a business account to avoid any conflict with their terms and conditions. With a business account, the landlord will pay fees on all rental income you receive. This is why I don’t recommend Paypal for collecting rent.
- Because you’ll need a business account, you will have to pay a fee on the rental income you receive. For example, if your rent is $2,000, you, as the landlord receiving funds, will have to pay 2.9% +.30= $58.30. Ouch!
- Also, when your tenant pays their rent, the money goes into your PayPal account, not directly into a bank account. You then have to initiate a transfer from your Paypal account to the account you wish to receive the funds, which can take an additional 3 to 5 business days.
- PayPal is known for heavily favouring buyers (in this case, tenants) should a dispute occur. When issues do arise, PayPal can hold the funds, making them unavailable to you.
One of the issues with the following direct deposit apps is you can’t enforce full rent payments. A tenant can send you a portion of the rent due, and you can’t cancel or refuse the payment. This is dangerous and not ideal if you ever get into a situation where you need to evict someone because accepting a payment of just 1 dollar can stop the eviction process.
Zelle Pay (Free)
Zelle isn’t just for sending and receiving rent. You can use it to send and receive money for any reason.
I use the Zelle App through my bank to instantly collect rent payments for my single-family home, and it’s free for both my tenant and me.
To use Zelle, both parties must have banks that support Zelle, a US mobile number or an email address. Landlords can request rent payments, but tenants cannot set up recurring payments if their associated bank doesn’t support it.
- If your tenant’s bank doesn’t support Zelle pay, they can still download and use the Zelle app, but I don’t recommend this because the weekly send limit is reduced to $500.
- You can’t turn off or stop payments, so tenants can make partial payments. A workaround is to register for a Zelle account using a new email account. If you need to evict a tenant or refuse a rent payment, remove your registered email from the Zelle account, and tenants won’t be able to send you payments through Zelle anymore.
Venmo (Free but not recommended)
Like Zelle, Venmo isn’t just for sending rent. Anyone can send and receive money through their app to people on their contact list for free. You can connect to people through social media or use their email or phone number like Zelle if they already have a Venmo account. If not, they’ll have to create an account first.
Unfortunately, collecting rent is not free because it’s considered a business transaction. (see cons below)
- To use Venmo to collect your tenant’s monthly rent payment online, you’ll need to become an authorized merchant with an approved Venmo business account, which comes with a 3% fee that you, the landlord, need to pay. On 2000 a month rental property, that’s 40 in fees. Ouch again.
- If your tenant accidentally sends money to the wrong person, Venmo won’t refund the money or redirect it to the landlord.
- There’s also no option for recurring, automatic payments or late fees.
- Like Zelle, one of the most dangerous parts of these automatic payments is you can’t stop payment if you are in the process of evicting someone.
There are many more services you can try.
Should I hire a property manager to manage and rent out my house while living or working abroad?
One of the biggest decisions you’ll make as a landlord is whether you should hire a property management company.
If you only have one single-family home to rent out, finding a prospective tenant and managing that single property yourself without the help of a property manager is doable, provided you have a good tenant who is flexible.
When I say flexible, I mean a tenant who can handle the little things, like calling the plumber if there’s a leak. As a landlord, it’s still your responsibility to fix these types of issues. But having a tenant who’s willing to handle them on your behalf is a considerable time and cost savings.
Even if you think you can handle all the ins and outs of managing your rental property remotely, legally, you may be required to hire someone.
Most states have specific landlord tenant laws regarding being a
- Some states legally require you to hire a property management company if you live out of state or more than X miles from the rental property.
- Some states only require you to hire a property management company if you have a multi-unit home, but not for a single-family home.
- Some states require property management companies have a license; others don’t.
- If your rental property is within a gated community, the HOA may require you to hire someone to manage your investment property, even if the state does not require it.
Issues that are difficult to handle remotely without a property manager
Sometimes landlords need more help or want to be more of a hands-off landlord rather than dealing with the day-to-day issues that may occur. That’s when hiring a qualified and effective property manager could be a worthwhile investment.
For my multi-unit apartment, I was legally required to hire a licensed property management company. I’m glad because it would be too challenging to deal with all the little things that come up daily, weekly and monthly, making my multi-unit rental a truly passive investment.
While hiring a property manager can be a time-saver, it does mean giving up some control over the daily operations. For instance, I’ve never actually spoken to the tenants living in my multi-unit property and have never dealt with them directly. They also send their rent payment to my property manager, who forwards the funds to my account.
Although I don’t have a property manager for my single-family home, I have someone on file who lives locally as an emergency contact if something happens. Most of the time, my tenant calls me directly, and I’ve been able to resolve the problems. I’m perfectly ok managing this property myself because tenants in single family homes tend to stay longer and require less work.
There’s more turnover for my multi-unit apartment, and it would be impossible for me to do many aspects of managing that property.
To collect rent and security deposit.
A property manager can collect the rent on your behalf. This ensures that your tenants pay on time and deals with the tenant if the rent is late.
Take care of minor repairs:
Things are going to break. A toilet, a garage door, a pipe. As the landlord, you are responsible for getting these things fixed, usually within 30 days.
For my single-family investment property, I’m fortunate because my tenant arranges for any minor repairs that I reimburse her for at the end of the month or deduct from their rent. But not all tenants may be willing to do this.
For my multi-unit apartment, my tenants don’t take care of any repairs. They call my property manager, who handles everything and bills me for the work completed.
To oversee big repairs:
When big things break or need to be repaired, or you have multiple properties which you are trying to manage, that’s when things get complicated.
One year, the roof started leaking on my single-family home. Remember, I was managing this single-family home myself. I looked up a roof repair guy and arranged for him to drive out to the property. It turned out that my house needed a new roof.
New roofs in California are not cheap, so I asked several roofing companies to go in and give me estimates. I had to coordinate with my tenant and the roofing company to get the work done.
It was kind of a living hell arranging all of this from France. Not only did I have to deal with the time difference, but I also had to choose the roof via photos. I couldn’t inspect the work myself, and my tenant had to be available for the roofer, which was a big inconvenience for him since he worked.
That’s just one house. What if you manage multiple homes, a duplex or triplex?
Ensuring certain things are not only repaired but maintained can save you money in the long term. If you don’t have eyes on the ground, it’s almost impossible to keep things in tip-top condition, which can cause problems down the road. Let’s say the fence around the house begins to fall, but your tenant never tells you. Then one day, it just collapses, and instead of a small repair job, you now have to replace the entire fence, which is much more expensive than just repairing it.
For a single-family home, the yard care usually falls on the tenant. For my multi-unit property, I am responsible for all yard care, snow ploughing, tree trimming etc. I couldn’t manage all this without the help of my property manager; who knows when it’s time to do what.
Imagine how complicated it would be if your tenant breaks the lease while you’re abroad. How will you evict them? There’s usually a tremendous amount of red tape for a lawful eviction. Then once they’re out, you have to find a new tenant, which brings me to my next point.
Find and screen new tenants to rent out your house
If you’re in the beginning stages of planning your travels, you can probably find a prospective tenant to rent out your house on your own.
But what if you’re already living abroad and need to find a new tenant to rent out your house?
A property manager can get the property in move-in condition, take pictures, put up an ad, make appointments to show the property, conduct tenant screening, do background checks and check credit scores.
Signing New leases
If you need to sign a new lease agreement for a new tenant or extend the lease agreement another year, the property manager will draw up all the documents and get all parties to sign the agreement online with e-signatures.
For my single-family home, I handle the lease myself; however, my property manager handles my multi-unit apartment. All I do is wait for him to send me the documents and sign them digitally. It’s so easy and hassle-free.
How will you keep an eye on your house?
No one will take care of your home as well as you do. It’s just a fact of life. But if you’re a long-distance landlord, how will you ensure that the tenants take good care of your house and yard?
Property managers can help keep an eye on your home. This ensures that there won’t be any surprises when they move out, like holes in the walls or other damages that need to get repaired.
The cost of hiring a property manager
Depending on where your property is located, costs and fee structures will vary.
For instance, some US property management companies will charge a percentage of the monthly rent amount, anywhere from 5 to 12 percent. That’s 75 to 180 per month on a rental income of 1500.
Some property management companies charge a flat monthly fee. For instance, my property management company charges 60 dollars per unit for my multi-unit property. Then he charges me by the hour or a flat fee for specific jobs, like replacing deadbolts, driveways etc.
Then there’s the cost of finding a new tenant. Some property management companies may charge one month’s rent, while others might charge a flat fee or a percentage of the first months’ rent.
Hiring a property manager can be a worthwhile investment in certain situations, especially if you own multiple rental properties, a multi-unit property, or if you find yourself overwhelmed with landlord responsibilities.