Owning your own business and enjoying passive income is doubling down on the American dream. However, the idea of “owning your own business” has evolved over the years, largely thanks to technology making it easier than ever to turn freelancing into a serious gig. There are now professional, full-time sole proprietors who specialize in web design, hosting or writing SEO-rich material. Business ownership isn’t (always) what it used to be.
Some people have discovered that they can make a great passive income by renting out properties in the US even when they don’t live in the country. Want to kick back and watch those rental checks roll in while you snooze on a beach in Costa Rica? It’s not as easy as you may think. Here are a few items to get in check first:
1. Understand the tax implications
There’s no escaping from Uncle Sam, even if you get away with it for a few years. Work with a CPA who specializes in foreign/international clients to make sure you’re playing by the rules but still getting all the breaks you can. You can’t enjoy a totally tax-free income, but you may quality for foreign income tax exemption (which means you pay less in taxes, but not zero).
2. It’s not exactly passive
As a landlord, you’re legally required to provide a safe and maintained space for your renters. This can include handyman repairs and at times taking care of landscaping (it depends on your lease and where the property is located). If that’s too much of a hassle, hiring a property management company can save the day. Of course they’ll charge a fee, so you need to include that in your budgeting.
3. You won’t be able to “check in”
A property management company can keep on eye on the property for you, but if you don’t go that route than you’re taking a gamble. How can you be certain that tenants are doing their part to maintain the property? What about abiding by the no pets law? Are you up for a nasty surprise when you get back to the US?
4. You still need to deal with taxes
You can work with a lawyer or CPA to take care of this for you, but you might have property taxes and local taxes to contend with. For those in high property tax areas, that annual bill might be so staggering that is makes a serious dent in that passive income.
