Should You Sell Your Home If You Move Overseas?
Living abroad opens up a world of possibilities, but it also requires some big decisions. One of the most important is “Should I sell my home if I move overseas?” Answering this question requires a hard look at your personal finances, future plans, and long-term goals. To help you make the best choice, we’ll walk you through the key factors to consider before deciding whether to hold onto your home or put it on the market.
Selling vs. Renting Your Home
When planning an international move, property owners have three choices: keep, rent, or sell. Realistically, renting or selling are the only feasible options for most people. Homeowners who keep their homes are still responsible for taxes, insurance, mortgage payments, HOA fees, and maintenance costs regardless of where they live. In addition to these types of ongoing expenses, vacant homes also attract vagrants, squatters, and vandals ‒ an ongoing concern that’s difficult to manage from another country.
Hiring a property manager mitigates some of these problems, but unless you own the house outright and live in a state with historically low property taxes, the cash drain is likely unsustainable in the long-term. Therefore, for anyone planning an international move, the real question is: are you better off selling your home or renting it out?
Pros and Cons of Selling Your Home
Selling your home provides a large sum of money to help you start your life abroad. Securing a mortgage in a foreign country is difficult. Paying cash simplifies the process and expands your options, making it easier to purchase a home in the city and neighborhood of your choice. It also relieves you from a lot of recurring costs, such as repairs, maintenance, interest payments, and property taxes, in the United States.
Because real estate appreciates in value, home sales are considered long-term capital gains, as long as you’ve owned the property for more than a year. Capital gains are generally taxed at a lower rate than standard income, so you keep most of the profits from the sale of your home ‒ good news for homeowners.
Furthermore, if the house was your primary residence, meaning you live in it for more than six months out of the year, the government lets you set aside a significant portion of the sales revenue, up to $250,000 for a single individual and $500,000 for married couples, completely tax free. Consult a tax professional before making your final decision. They’lll walk you through the details and explain how much you can earn by selling your home. Depending on where you choose to settle, it may be enough to cover all your moving and housing expenses!
On the other hand, selling your house limits your options. Besides depriving you of a potential income source, it also leaves you with nothing to fall back on if things don’t work out in your new country. Since homes appreciate over time, you won’t benefit from the value that would have accrued while you were abroad either.
Is Selling Your Home the Right Choice?
While selling your home is a great way to fund your move, it does require some effort. Besides filling out paperwork, you’ll also have to consult a realtor, stage your house, and handle transaction costs. Buyers may even request repairs and upgrades before closing. While none of these are serious obstacles, they are an additional complication, so before deciding to sell, ask yourself the following questions:
- How much income do I have to support myself overseas?
- Is it possible I may eventually decide to return to the United States?
- If I do return, am I happy living where I am or would I prefer someplace else?
- What’s the state of the real estate market? Are houses selling for above or below listing price?
- Would I like to pass the property on to my children or relatives one day?
- Can I hire someone or do I know anyone who can look after the property while I’m gone?
People who are relocating long-term, with no plans to return to the United States, normally sell their homes, especially if they already have enough money to live comfortably in their chosen country. While most expats don’t completely sever their connection to America, having fewer stateside assets makes it easier to manage your finances and build a new life abroad.
Pros and Cons of Renting Your Home
Renting your home provides you with an additional income stream to help cover expenses in your new country. Depending on your situation, it may be enough to support you entirely! In some cases, renting can even help you secure a visa. Several countries bar immigrants unless they have a clear revenue source ‒ to ensure they won’t compete for jobs with native citizens.
If you put your home up for rent, you’ll have to decide whether to offer it as a short-term or long-term rental. Short term rentals normally generate more income, but also entail higher maintenance costs. Since they operate like hotels, you can’t vet your tenants as closely so there’s more risk of damage. Long-term rentals pay less, but are more stable. Because people are more inclined to treat them like home, maintenance and repair costs are comparatively low.
Rental income is taxed at the normal rate, but the IRS allows you to deduct certain expenses if you rent the property out for more than fifteen days. These include insurance, cleaning costs, utilities, HOA fees, and maintenance. If you advertise your property, you can deduct those costs as well. You can even claim depreciation against your rental income ‒ so keeping the property in good condition normally isn’t an issue.
Tenant issues are normally the biggest drawback. A bad tenant can cause serious damage and evicting them can be a headache that stretches on for weeks or months. Arranging repairs from another country is also a challenge. However, a property management company can alleviate both issues. For a small fee (typically eight to ten percent of monthly rent), they’ll screen tenants, clean the property, and carry out repairs on your behalf.
Is Renting the Right Choice?
Renting is a great way to generate income, but it’s not a viable option for every homeowner. In places where demand is high, such as California, renting your home can generate substantial revenue. However, in places like West Virginia, where demand is low, renting may be more trouble than it’s worth. Before searching for tenants, ask yourself:
- What is the average rent in my neighborhood?
- Is the area popular with tourists? Families? Students? Professionals?
- Does my home require major repairs? Are the appliances up-to-date?
- How much do I spend each month on taxes, mortgage payments, and HOA fees?
- Are the landlord-tenant laws strict? What protections do they provide me during the eviction process?
- Would I like to return periodically to visit friends and family?
For people who plan on flying back to America, renting short-term ensures you have a place to stay. It’s a common practice among expats who want to stay in touch with loved ones but don’t want to pay taxes in two countries. Some rent their homes out to family members, in order to avoid the issues that come with renting to strangers and the costs that come with hiring a property manager.
Keep in mind that if renting the property turns out to be too much of a hassle, you can always sell later on down the road. Lots of investors purchase homes with existing renters. Some expats rent with the intention of selling later, when the real estate market picks up, allowing them to take advantage of rising prices.
Remember that when you move overseas, your home becomes an asset. The real question isn’t whether to rent or sell, but how you can use your house to pursue your dream of living abroad.
International Moving Services
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