IFA with USA / UK expertise to decide: buy to rent in US, or repay mortgage and invest in UK

sasha1504

Hello, my wife is dual US/UK citizen while I'm British and we permanently live in England. She inherited two properties in the US to a total value of her share of about £280,000.

We're looking for an IFA with expertise in both US and UK investments and taxes to help us decide what to do.

Any recommendations please?

The essence of the matter is to decide between these two courses of action (or a combination of  them):

1. Buy a duplex property in the US (in Las Vegas, Nevada) with all the money and rent it out. Our real estate broker / rental agent - who proved to be honest in the past 2 years (helped us to renovate and sell both properties) - promises a good deal on purchase and net pre-tax 8-10% yearly return from renting. Then use the rental income to repay our mortgage in the UK and invest into my S&S ISA after. 

2. Repay our remaining mortgage of about £120,000 in England (currently at about 5.5% interest) and invest the rest into my S&S ISA here and forget about buying to rent in the US. This second solution feels safer and close to home.
 

Any suggestions / opinions are welcome.

Thank you 

Sasha

tacpot12

Haven't used them, but have been aware of BlackTower Financial Management for some time. They offer themselves as experts in the expat market. I expect they will have access to the knowledge of the US tax code and be able to advise on what is likely to be the best.

You should factor in the uncertainty that Trump's election as President will cause, especially as he is unlikely to provide any federal support for anything that hints that climate change might be real, e.g. addressing reducing water flow in the Colorado River.  

jimjames

Option 1 leaves you constantly with a US tax and currency reporting situation. I think if you're dual national you'll still need to do US tax returns and ISA might not be tax free(?) but at least with option 2 you aren't constantly subject to currency transfer and fluctuations let alone a distant property to maintain.

sasha1504

tacpot12 said:

Haven't used them, but have been aware of BlackTower Financial Management for some time. They offer themselves as experts in the expat market. I expect they will have access to the knowledge of the US tax code and be able to advise on what is likely to be the best.

You should factor in the uncertainty that Trump's election as President will cause, especially as he is unlikely to provide any federal support for anything that hints that climate change might be real, e.g. addressing reducing water flow in the Colorado River.  

Thank you, we will certainly check out BlackTower Financial Management.

And yes, our family in the US is warning us against buying a property there now due to the Trump factor.  

sasha1504

jimjames said:

Option 1 leaves you constantly with a US tax and currency reporting situation. I think if you're dual national you'll still need to do US tax returns and ISA might not be tax free(?) but at least with option 2 you aren't constantly subject to currency transfer and fluctuations let alone a distant property to maintain.

Thank you for your answer. My wife is a dual national, whereas I don't have a US nationality, so the ISA would be mine to ensure we don't pay US tax on it. She still needs to do US taxes, but having a rental property would add complexity to tax reporting for sure. 

sasha1504

An update: 

I looked up BlackTower Financial Management and other companies / IFAs with US/UK expertise. 

My wife and I had a free consultation with Lawrie Chandler from Edale this morning and got lots of value out of it.

In essense, the US buy-to-let would have to have an incredible rate of return to justify all uncertainties, risks and extra accounting and stress that goes with it. We were advised to maximise our pension capabilities (severely underused as transpires) and to look into having an offset mortgage while we are thinking of what to do with the money, and then invest the rest. 

PRAISETHESUN

Can't really comment much except to say that dual tax residency is a pain and I'd recommend avoiding it at all costs. As a non-US national, you'll only have to worry about US taxes if you have US income, which would happen if you go down option 1. Additionally, putting all your eggs in one basket WRT to a single property, let alone a foreign one, seems fairly risky to me even without the shake up coming in January.

As for ISA accounts and how they are perceived by foreign tax authorities, my experience is that if your ISA income is declarable to the foreign tax authority (eg. you are dual tax resident and the US asks you to declare and pay tax on "foreign" (as they see it) income), then it can be taxable.

sasha1504

PRAISETHESUN said:

Can't really comment much except to say that dual tax residency is a pain and I'd recommend avoiding it at all costs. As a non-US national, you'll only have to worry about US taxes if you have US income, which would happen if you go down option 1. Additionally, putting all your eggs in one basket WRT to a single property, let alone a foreign one, seems fairly risky to me even without the shake up coming in January.

As for ISA accounts and how they are perceived by foreign tax authorities, my experience is that if your ISA income is declarable to the foreign tax authority (eg. you are dual tax resident and the US asks you to declare and pay tax on "foreign" (as they see it) income), then it can be taxable.

Thank you, it makes sense regarding putting all eggs in one basket, in particular a foregin one, being a very risky proposition. As I'm non-US national, the money gifted to me by my wife that will go into my ISA is non-declarable to the US IRS unless I'm mistaken.