Temporary move abroad: rent or sell home?

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daave
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Temporary move abroad: rent or sell home?

Post by daave »

Hi everyone,
I'm looking for advice on financial issues I may not have considered, as well as insights/experiences from anyone who's "been-there done-that".

Later this year, my family is planning to move abroad (to Australia) for an indefinite time period but probably in the range of 18-24 months.
We know this will be a financial set back (30% pay-cut in USD terms, increased cost of housing, increased taxes, flights & moving expenses), but we are keen to do it for the sake of getting to spend time with grandparents, and to give our kids a taste of the culture.

My employer is happy for me to transfer to the office there for an open-ended amount of time. DW & kids are US Citizens; I'm a green card holder. No visa issues moving there, but we'll still need to file US taxes.

We have a mortgage on the house we now live in, in the Seattle area. Approx 25% equity in a $1.2M house. It's in a neighborhood we like a great deal, close to this side of the family and a short commute to work (I expect to return to the same job when we return from abroad). On the other hand, we don't particularly love the house itself, and it needs some substantial maintenance/upgrades, so even if we do come back to this house, at some stage down the line we'd want to do some major remodeling.

We don't have any long-term desire to be landlords, but are considering renting our the house rather than selling it before our move. Potential benefits:
- Avoid transaction costs involved in selling and potentially buying again after 18-24 months.
- Keep low-rate mortgage (3.25%)
- Guaranteed to have a place in the neighborhood we like when it's time to come back.
- Rent it out as a furnished house, so less has to be held in storage.
- Less complexity around timing our move to coincide with when a house sale closes.

Some obvious downsides:
- Ongoing cost of maintenance, insurance, property taxes (we expect rent would approximately cover P+I when not vacant)
- Risk of vacancy: would need a pretty serious emergency fund to mitigate this
- Forex risk: if my new AUD salary loses nominal USD value, mortgage payments will become more expensive (again increasing the e-fund requirements)
- Costs to have the property managed (since we'll be abroad, we won't be able to handle day-to-day interactions with the tenants ourselves)
- Wear & tear on furniture we leave in the house for the tenant

Besides running the numbers more carefully to see how much it'll cost us to hold on to the house, anything else to consider?
Thanks for your thoughts.
aristotelian
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Re: Temporary move abroad: rent or sell home?

Post by aristotelian »

If you were sure it was temporary and that you wanted to come back to that house, I would just rent it out. "Indefinite" is a red flag though. If there is any chance that you might want to stay and/or come back to a different location, then I would just get rid of it.
Topic Author
daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

aristotelian wrote: Sat Feb 08, 2020 10:19 pm If you were sure it was temporary and that you wanted to come back to that house, I would just rent it out. "Indefinite" is a red flag though. If there is any chance that you might want to stay and/or come back to a different location, then I would just get rid of it.

DW's extended family is here, so it's unlikely this is a permanent move - we've been discussing/planning a trip of no more than 2 years - but there's a small possibility she falls in love with the place and we decide to stay permanently. I'd guesstimate less than a 10% chance of this happening, and less than a 20% chance we'd stay more than 2 years.
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ResearchMed
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Re: Temporary move abroad: rent or sell home?

Post by ResearchMed »

Enjoy the overseas stay. (I spent one year abroad, and it was one of the best years ever.)

But you don't love the house. And it needs/might need "maintenance". Over time, this could REALLY add up, and no one else will take the same care to deal with this the way you would have. Ditto ongoing care of home (and furnishing).
And don't underestimate ongoing costs other than mortgage/insurance/taxes/etc. Maintenance alone may surprise you. Especially if no one "notices" problems until they'll cost more to fix (or might worry you'll blame them, etc.).

And don't assume minimal turnover empty time. Hard to predict. Likewise, how well renters will care for things.

You might plan to rent for a year when you return, while you look for a new place to purchase.
Or, since you do know the area, with just one or two visits, you may be able to purchase before returning.

Just expect that these costs may be higher than you are currently expecting. Better to be pleasantly surprised, than the opposite...

RM
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Watty
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Re: Temporary move abroad: rent or sell home?

Post by Watty »

One thing to consider is that you might lose the homeowners capital gains tax exclusion.
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willthrill81
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Re: Temporary move abroad: rent or sell home?

Post by willthrill81 »

Will the rent be enough to cover your mortgage, property taxes, interest, maintenance, 1 month of vacancy per year, and the property manager? In Seattle, I would suspect that there's a good possibility that it won't. You might be willing to bear renting at a loss in order to hang on to a property that you really like, but I wouldn't suggest doing it for long.
Watty wrote: Sat Feb 08, 2020 11:12 pm One thing to consider is that you might lose the homeowners capital gains tax exclusion.
Good point.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
nanciT
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Re: Temporary move abroad: rent or sell home?

Post by nanciT »

I think it depends on your current home and the market. If it's a home you love and prices are increasing, you may want to rent it and have an agency oversee it.
Just my own personal experience ( I was a teen then!). We moved from LA to Holland while I was in high school. My parents sold the house with no regret. We moved back to the states and this time it was Northern CA. Once again my Dad was transferred this time to Melbourne. They kept the house at first but decided to sell, I am not sure why. They did regret that sale , they could not touch a house in the area after returning 3 years later. Something to keep in mind.
Financologist
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Re: Temporary move abroad: rent or sell home?

Post by Financologist »

If you sell, it will likely cost you in the neighborhood of 30% of your equity (between commissions, prep etc..)

Good luck.
rich126
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Re: Temporary move abroad: rent or sell home?

Post by rich126 »

I’d look for an excellent property manager and discuss rental prospects with them. They would know the market, what you might have to do before renting the home, etc. A PM can make or break the rental experience. I was lucky to find an excellent one. A furnished place make it a different kind of rental. Most families would have their own furniture. It might make it harder to rent, or I suppose easier.

Selling means paying a lot towards RE commissions, settlement taxes, etc. And you’d have to figure out what to do with your stuff. Might end up costing you $100K.

Without knowing more it is hard to say.
TedSwippet
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Re: Temporary move abroad: rent or sell home?

Post by TedSwippet »

daave wrote: Sat Feb 08, 2020 10:17 pmLater this year, my family is planning to move abroad (to Australia) for an indefinite time period but probably in the range of 18-24 months. ... DW & kids are US Citizens; I'm a green card holder. No visa issues moving there, but we'll still need to file US taxes.
You might already know about this, but just in case not ... be sure that you obtain a 'reentry permit' before leaving the US:
A lawful permanent resident (LPR) normally may travel outside the United States and return; however, there are some limitations. A reentry permit can help prevent two types of problems:
• Your Permanent Resident Card becomes technically invalid for reentry into the United States if you are absent from the United States for 1 year or more.
• Your U.S. permanent residence may be considered as abandoned for absences shorter than 1 year if you take up residence in another country.
A reentry permit establishes that you did not intend to abandon status, and it allows you to apply for admission to the United States after traveling abroad for up to 2 years without having to obtain a returning resident visa. Reentry permits are normally valid for 2 years from the date of issuance.
Extending your stay beyond two years while still retaining the green card may be difficult. As the spouse of a US citizen, though, you are on slightly more solid ground than the average green card holder.
StealthRabbit
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Re: Temporary move abroad: rent or sell home?

Post by StealthRabbit »

As a WA resident who did 5 international work / living assignments... Unless you just gotta keep this place (for some reason), I would SELL a Seattle home while the market is hot, (tho you could have a problem re-entering upon return). Hopefully the market will correct or you can find a less expensive option when you return. If you want to keep in the RE market in WA... Sell the house and buy a Multifamily place that cash flows well. Then you can get depreciation and business trips back to manage it. I'm all for putting RE $ in the best investment (which typically is NOT a primary residence in a HCOL area).

My rule of thumb... $1m house must rent for $10,000 / month. (1% of capital cost in rents every month)
If not... find a RE investment that does cash flow to this level (tough to do on the left coast).
I moved 50% of my investment RE OUT of PNW to another income tax free state that has better Cap Rates.
My Seattle kids, I recommend renting a home, and buying a commercial property that cash flows. (They don't listen to me...)

Alternatively... consider investing in AU! or Hawaii (halfway) . (tho flights are probably higher costs to HI)
Topic Author
daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

Thanks for all the replies!
willthrill81 wrote: Sat Feb 08, 2020 11:20 pm Will the rent be enough to cover your mortgage, property taxes, interest, maintenance, 1 month of vacancy per year, and the property manager?
Based on comps in the area, I think we could rent for ~$4500/month
To be on the safe side, I'll assume 2 months vacancy/year, so $45,000 income/year from the rental, average $3750/month.

Monthly Expenses:
Mortgage P&I: $4,200
HOA: $176
Taxes: $794
Insurance: $100
Property Manager: $825 (Assuming 10% of the rent, plus 1 month's rent for setting up a new tenant once/year)
Maintenance: $800 (Estimate based on last year's monthly-average, we had 2 significant plumbing incidents. There could be some big-ticket items like roof or septic system replacement coming up)

Total Expenses: $6895

Net monthly loss: $3145

Looks pretty bad!
Financologist wrote: Sun Feb 09, 2020 12:39 am If you sell, it will likely cost you in the neighborhood of 30% of your equity (between commissions, prep etc..)
Based on this 30% rule-of-thumb, we stand to lose $93,750 if we sell.

If all the assumptions above hold true, break-even point for selling is at 29 months - we should rent if we'll only be gone 18-24 months.
TedSwippet wrote: Sun Feb 09, 2020 4:25 am You might already know about this, but just in case not ... be sure that you obtain a 'reentry permit' before leaving the US
... <snip> ...
Extending your stay beyond two years while still retaining the green card may be difficult. As the spouse of a US citizen, though, you are on slightly more solid ground than the average green card holder.
Thanks for the reminder, it had been on my list to look into all those details.
I'm hopeful that I'll get US Citizenship before our trip (applied 14 months ago).
If citizenship doesn't come through in time, it may justify postponing our trip a year or so to avoid dealing with re-entry issues.
jminv
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Re: Temporary move abroad: rent or sell home?

Post by jminv »

daave wrote: Sun Feb 09, 2020 9:50 am Thanks for all the replies!
willthrill81 wrote: Sat Feb 08, 2020 11:20 pm Will the rent be enough to cover your mortgage, property taxes, interest, maintenance, 1 month of vacancy per year, and the property manager?
Based on comps in the area, I think we could rent for ~$4500/month
To be on the safe side, I'll assume 2 months vacancy/year, so $45,000 income/year from the rental, average $3750/month.

Monthly Expenses:
Mortgage P&I: $4,200
HOA: $176
Taxes: $794
Insurance: $100
Property Manager: $825 (Assuming 10% of the rent, plus 1 month's rent for setting up a new tenant once/year)
Maintenance: $800 (Estimate based on last year's monthly-average, we had 2 significant plumbing incidents. There could be some big-ticket items like roof or septic system replacement coming up)

Total Expenses: $6895

Net monthly loss: $3145

Looks pretty bad!
Financologist wrote: Sun Feb 09, 2020 12:39 am If you sell, it will likely cost you in the neighborhood of 30% of your equity (between commissions, prep etc..)
Based on this 30% rule-of-thumb, we stand to lose $93,750 if we sell.

If all the assumptions above hold true, break-even point for selling is at 29 months - we should rent if we'll only be gone 18-24 months.
TedSwippet wrote: Sun Feb 09, 2020 4:25 am You might already know about this, but just in case not ... be sure that you obtain a 'reentry permit' before leaving the US
... <snip> ...
Extending your stay beyond two years while still retaining the green card may be difficult. As the spouse of a US citizen, though, you are on slightly more solid ground than the average green card holder.
Thanks for the reminder, it had been on my list to look into all those details.
I'm hopeful that I'll get US Citizenship before our trip (applied 14 months ago).
If citizenship doesn't come through in time, it may justify postponing our trip a year or so to avoid dealing with re-entry issues.
Good you're getting citizenship and know about the re-entry permit. People sometimes make a mistake here and massively complicate their return to the states a few years later. Your kids also have their Australian passports, right?

I'd sell the house since it's a money loser and it sounds like you might not come back or at least not for awhile. Who really knows if it'll be a return to the same place, anyway. Lots can change in the meantime. If you stay gone for awhile, you could also lose the capital gains exemption.

Your house also has a history of high maintenance expenses with more big ticket items you know are coming up. A tenant will not take care of your house better than you will. Sometimes 'perfect tenants' that never bother you can actually let your home go to ruin. Selling it removes a source of worry in another country.
Topic Author
daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

jminv wrote: Sun Feb 09, 2020 10:11 am Good you're getting citizenship and know about the re-entry permit. People sometimes make a mistake here and massively complicate their return to the states a few years later. Your kids also have their Australian passports, right?
Kids have Australian citizenship, one still needs to get a passport (which I'll have to apply for at the consulate in San Francisco).

DW will need to apply for an Australian Partner visa (Subclasses 309 and 100). I'm not worried about eligibility, but the processing timeline is another complicating factor.

Another option would be for her to come on a tourist visa, which is cheaper and faster to get, but then she wouldn't be eligible for Medicare or employment (she probably won't work over there anyway, but it'd be nice to have the flexibility).
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willthrill81
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Re: Temporary move abroad: rent or sell home?

Post by willthrill81 »

daave wrote: Sun Feb 09, 2020 9:50 am Thanks for all the replies!
willthrill81 wrote: Sat Feb 08, 2020 11:20 pm Will the rent be enough to cover your mortgage, property taxes, interest, maintenance, 1 month of vacancy per year, and the property manager?
Based on comps in the area, I think we could rent for ~$4500/month
To be on the safe side, I'll assume 2 months vacancy/year, so $45,000 income/year from the rental, average $3750/month.

Monthly Expenses:
Mortgage P&I: $4,200
HOA: $176
Taxes: $794
Insurance: $100
Property Manager: $825 (Assuming 10% of the rent, plus 1 month's rent for setting up a new tenant once/year)
Maintenance: $800 (Estimate based on last year's monthly-average, we had 2 significant plumbing incidents. There could be some big-ticket items like roof or septic system replacement coming up)

Total Expenses: $6895

Net monthly loss: $3145

Looks pretty bad!
Financologist wrote: Sun Feb 09, 2020 12:39 am If you sell, it will likely cost you in the neighborhood of 30% of your equity (between commissions, prep etc..)
Based on this 30% rule-of-thumb, we stand to lose $93,750 if we sell.

If all the assumptions above hold true, break-even point for selling is at 29 months - we should rent if we'll only be gone 18-24 months.
Losing >$3k per month is terrible, especially when you add in the fact that you'll be exposed to currency risk and with a lower income during the time away.

Do you think that it would cost you $20k to get the house into sell-ready condition? Real estate commissions would be about $72k (6% of $1.2M), unless you did a for-sale-by-owner, which we did very easily with our last home.

I would lean toward selling it before you leave the country. The downside risk of doing so seems to be less than hanging on to it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Watty
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Re: Temporary move abroad: rent or sell home?

Post by Watty »

One other thing I thought of was that if you rent it you will likely need to sign a one year lease with the renters.

If you return and want to move back into the house then you would need to time that around when the lease ends which would complicate your return.
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unclescrooge
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Re: Temporary move abroad: rent or sell home?

Post by unclescrooge »

daave wrote: Sun Feb 09, 2020 9:50 am Thanks for all the replies!
willthrill81 wrote: Sat Feb 08, 2020 11:20 pm Will the rent be enough to cover your mortgage, property taxes, interest, maintenance, 1 month of vacancy per year, and the property manager?
Based on comps in the area, I think we could rent for ~$4500/month
To be on the safe side, I'll assume 2 months vacancy/year, so $45,000 income/year from the rental, average $3750/month.

Monthly Expenses:
Mortgage P&I: $4,200
HOA: $176
Taxes: $794
Insurance: $100
Property Manager: $825 (Assuming 10% of the rent, plus 1 month's rent for setting up a new tenant once/year)
Maintenance: $800 (Estimate based on last year's monthly-average, we had 2 significant plumbing incidents. There could be some big-ticket items like roof or septic system replacement coming up)

Total Expenses: $6895

Net monthly loss: $3145

Looks pretty bad!
Financologist wrote: Sun Feb 09, 2020 12:39 am If you sell, it will likely cost you in the neighborhood of 30% of your equity (between commissions, prep etc..)
Based on this 30% rule-of-thumb, we stand to lose $93,750 if we sell.

If all the assumptions above hold true, break-even point for selling is at 29 months - we should rent if we'll only be gone 18-24 months.
TedSwippet wrote: Sun Feb 09, 2020 4:25 am You might already know about this, but just in case not ... be sure that you obtain a 'reentry permit' before leaving the US
... <snip> ...
Extending your stay beyond two years while still retaining the green card may be difficult. As the spouse of a US citizen, though, you are on slightly more solid ground than the average green card holder.
Thanks for the reminder, it had been on my list to look into all those details.
I'm hopeful that I'll get US Citizenship before our trip (applied 14 months ago).
If citizenship doesn't come through in time, it may justify postponing our trip a year or so to avoid dealing with re-entry issues.
Have you looked into Airbnb rentals?

I don't think you'll pay 6% to list a house anymore. Usually more like 3.5% to 4%. You're overall cost to sell should be 6%. Plus whatever you spend on prepping the house for sale.

I would wait until your US citizenship came through before leaving.
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BolderBoy
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Re: Temporary move abroad: rent or sell home?

Post by BolderBoy »

daave wrote: Sat Feb 08, 2020 10:17 pmLater this year, my family is planning to move abroad (to Australia) for an indefinite time period but probably in the range of 18-24 months.
We know this will be a financial set back (30% pay-cut in USD terms, increased cost of housing, increased taxes, flights & moving expenses), but we are keen to do it for the sake of getting to spend time with grandparents, and to give our kids a taste of the culture.
Considering the rest of your posting, this is a colossally bad financial decision. BUT, if you are sold on the benefits to the kids of immersion in a different culture, go for it. Just accept that it is a pretty high price to pay for cultural diversity.

Disclaimer: I was born in the USA and grew up in Japan & Europe.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
mmegu
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Re: Temporary move abroad: rent or sell home?

Post by mmegu »

Be VERY CAREFUL about renting your house in the Seattle area.

There have been many new anti-landlord laws that have been enacted the past few years. It is very easy for you to find yourself in a tough predicament and you do not want to deal with that from abroad.

ex. You must rent to the first person that applies and meets your minimum criteria; you can not do criminal background checks, you must offer to let them pay the security deposit over six months.

To add on to this craziness there are two new laws being voted on tomorrow. 1. The Seattle city council will ban winter evictions for five months a year. 2. The WA legislature will ban fixed term leases. So, it will be near impossible to get rid of a tenant.

There is also another recently passed law starting on 7/1/20 that will let a tenant bring in as many family members as they want to live on the property. A landlord cannot deny the family member from living there. If the original tenant leaves, the landlord can not force the family member to leave. The term family member is so broad that it would included somebody you dated in the past. It is all just insanity.

Be very careful about becoming a landlord in Seattle.
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BolderBoy
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Re: Temporary move abroad: rent or sell home?

Post by BolderBoy »

mmegu wrote: Sun Feb 09, 2020 11:58 am Be VERY CAREFUL about renting your house in the Seattle area.

There have been many new anti-landlord laws that have been enacted the past few years. It is very easy for you to find yourself in a tough predicament and you do not want to deal with that from abroad.

ex. You must rent to the first person that applies and meets your minimum criteria; you can not do criminal background checks, you must offer to let them pay the security deposit over six months.

To add on to this craziness there are two new laws being voted on tomorrow. 1. The Seattle city council will ban winter evictions for five months a year. 2. The WA legislature will ban fixed term leases. So, it will be near impossible to get rid of a tenant.

There is also another recently passed law starting on 7/1/20 that will let a tenant bring in as many family members as they want to live on the property. A landlord cannot deny the family member from living there. If the original tenant leaves, the landlord can not force the family member to leave. The term family member is so broad that it would included somebody you dated in the past. It is all just insanity.

Be very careful about becoming a landlord in Seattle.
So in effect, the substance of the movie, "Pacific Heights", may soon come true in Seattle (and Washington state)?
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Carefreeap
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Re: Temporary move abroad: rent or sell home?

Post by Carefreeap »

Check with property managers but I think you'll severely limit your prospective rental market by keeping the house furnished. Most longer term lessees (1yr or more) have and want to keep their own stuff. The exception would be if you're close to a university which might have a visiting professor type set up. They typically do 6 month stints.

FWIW we rented out our Bay Area home for 9 years; 6 to relocate to AZ and another 3 years when we lived in Germany (6/03-7/12). I'm glad we kept the house and we were lucky enough to have the same tenants for the whole 9 nine years. I wasn't aggressive about raising the rent; thought it was more important for them to take care of the house than to squeeze every dollar I could. That said three kids for 9 years did take it's toll on the house. It wasn't trashed but well worn. Also the year before we retuned the husband wound up filing for BK (and didn't tell us) and the yards were a mess because they weren't watering the yards. We've spent a lot of money fixing the place up since returning in 2012.

From an investment point of view, the numbers probably didn't make sense but we do love our location. We've got a beautiful ocean view on nearly 1/2 acre. Although the house price did a perfect parabola from 2003-2012 I doubt we could have found a similar property. Houses in our little infill development come up for sale about once every ten years. Also by keeping the house we preserved our Prop 13 tax base from when we bought in 1995.

You don't have to make this all or nothing. You could try renting it out for a year and see if you like it. The homeowner cap gain rule is two our of the last 5 years so you could rent it out for 3 years.

Good luck with whatever decision you make.
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halfnine
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Re: Temporary move abroad: rent or sell home?

Post by halfnine »

Carefreeap wrote: Sun Feb 09, 2020 12:17 pm...
You don't have to make this all or nothing. You could try renting it out for a year and see if you like it. The homeowner cap gain rule is two our of the last 5 years so you could rent it out for 3 years....
They may still be residents of Australia at that point and their worldwide income will be subject to taxation so while they won't see a US tax bill on capital gains they will get one in Australia (OTOH it will be prorated base on years living in it versus total time owned). Additionally, their cost basis might be subject to the currency rates at the time of purchase. As the AUD is hovering at its lower range from the last 10 years it is quite likely the AUD gains on the property would be inflated.
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Re: Temporary move abroad: rent or sell home?

Post by halfnine »

daave wrote: Sun Feb 09, 2020 10:22 am ...Another option would be for her to come on a tourist visa, which is cheaper and faster to get, but then she wouldn't be eligible for Medicare or employment (she probably won't work over there anyway, but it'd be nice to have the flexibility)...
This is heavily frowned upon. A friend of mine was exploiting this with trips to New Zealand, but has now officially been barred from entry back into Australia. With an Australian wife and kids this made life very complicated. Get the correct visas and do it right the first time.
palanzo
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Re: Temporary move abroad: rent or sell home?

Post by palanzo »

daave wrote: Sun Feb 09, 2020 10:22 am
jminv wrote: Sun Feb 09, 2020 10:11 am Good you're getting citizenship and know about the re-entry permit. People sometimes make a mistake here and massively complicate their return to the states a few years later. Your kids also have their Australian passports, right?
Kids have Australian citizenship, one still needs to get a passport (which I'll have to apply for at the consulate in San Francisco).

DW will need to apply for an Australian Partner visa (Subclasses 309 and 100). I'm not worried about eligibility, but the processing timeline is another complicating factor.

Another option would be for her to come on a tourist visa, which is cheaper and faster to get, but then she wouldn't be eligible for Medicare or employment (she probably won't work over there anyway, but it'd be nice to have the flexibility).
On a tourist visa she can't stay longer than 90 days at a time.
palanzo
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Re: Temporary move abroad: rent or sell home?

Post by palanzo »

StealthRabbit wrote: Sun Feb 09, 2020 4:28 am As a WA resident who did 5 international work / living assignments... Unless you just gotta keep this place (for some reason), I would SELL a Seattle home while the market is hot, (tho you could have a problem re-entering upon return). Hopefully the market will correct or you can find a less expensive option when you return. If you want to keep in the RE market in WA... Sell the house and buy a Multifamily place that cash flows well. Then you can get depreciation and business trips back to manage it. I'm all for putting RE $ in the best investment (which typically is NOT a primary residence in a HCOL area).

My rule of thumb... $1m house must rent for $10,000 / month. (1% of capital cost in rents every month)
If not... find a RE investment that does cash flow to this level (tough to do on the left coast).
I moved 50% of my investment RE OUT of PNW to another income tax free state that has better Cap Rates.
My Seattle kids, I recommend renting a home, and buying a commercial property that cash flows. (They don't listen to me...)

Alternatively... consider investing in AU! or Hawaii (halfway) . (tho flights are probably higher costs to HI)
Can you say more about a 1% cap rate? Is this how one should look at renting versus selling?

I can't imagine a M$1 house renting for $10,000 anywhere on the West coast.
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galving
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Re: Temporary move abroad: rent or sell home?

Post by galving »

Personal experience was that renting the US house was a significant economic 'win' even after factoring in the management & wear/tear repair costs.

That said it was a huge pain in the ass. The # of time zones away, is directly proportional to the probability of misunderstanding.
It was clear that although I emailed a single individual email, different individuals were reading/processing the information.

It was inefficient. Lots of re-work and frustration. "Please read the previous 3 emails that contain the answers to your questions."
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willthrill81
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Re: Temporary move abroad: rent or sell home?

Post by willthrill81 »

mmegu wrote: Sun Feb 09, 2020 11:58 am Be VERY CAREFUL about renting your house in the Seattle area.

There have been many new anti-landlord laws that have been enacted the past few years. It is very easy for you to find yourself in a tough predicament and you do not want to deal with that from abroad.

ex. You must rent to the first person that applies and meets your minimum criteria; you can not do criminal background checks, you must offer to let them pay the security deposit over six months.

To add on to this craziness there are two new laws being voted on tomorrow. 1. The Seattle city council will ban winter evictions for five months a year. 2. The WA legislature will ban fixed term leases. So, it will be near impossible to get rid of a tenant.

There is also another recently passed law starting on 7/1/20 that will let a tenant bring in as many family members as they want to live on the property. A landlord cannot deny the family member from living there. If the original tenant leaves, the landlord can not force the family member to leave. The term family member is so broad that it would included somebody you dated in the past. It is all just insanity.

Be very careful about becoming a landlord in Seattle.
Yikes. :shock:

No way in heck would I remotely consider renting under those conditions.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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willthrill81
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Re: Temporary move abroad: rent or sell home?

Post by willthrill81 »

palanzo wrote: Sun Feb 09, 2020 3:58 pm
StealthRabbit wrote: Sun Feb 09, 2020 4:28 am As a WA resident who did 5 international work / living assignments... Unless you just gotta keep this place (for some reason), I would SELL a Seattle home while the market is hot, (tho you could have a problem re-entering upon return). Hopefully the market will correct or you can find a less expensive option when you return. If you want to keep in the RE market in WA... Sell the house and buy a Multifamily place that cash flows well. Then you can get depreciation and business trips back to manage it. I'm all for putting RE $ in the best investment (which typically is NOT a primary residence in a HCOL area).

My rule of thumb... $1m house must rent for $10,000 / month. (1% of capital cost in rents every month)
If not... find a RE investment that does cash flow to this level (tough to do on the left coast).
I moved 50% of my investment RE OUT of PNW to another income tax free state that has better Cap Rates.
My Seattle kids, I recommend renting a home, and buying a commercial property that cash flows. (They don't listen to me...)

Alternatively... consider investing in AU! or Hawaii (halfway) . (tho flights are probably higher costs to HI)
Can you say more about a 1% cap rate? Is this how one should look at renting versus selling?
Generally, a 12% annual cap rate (i.e. 1% monthly cap rate) is the minimum threshold used by many, though certainly not all, rental property investors. This means that a $100k property would have to rent for at least $1k/month.

When considering selling a property, you have to evaluate the anticipated cash flow of the property vs. your other options.
palanzo wrote: Sun Feb 09, 2020 3:58 pmI can't imagine a M$1 house renting for $10,000 anywhere on the West coast.
Basically, yes. In the 100 largest U.S. cities in terms of population, which includes most of the coastal cities in the east and west, rental properties are not very good investments because rents just aren't high enough to cover the costs of a mortgage, insurance, maintenance, etc. This is precisely the situation that the OP is facing; rents would need to be at least 70% greater than they are just to break-even. That being said, many landlords have gotten lucky in that they have experienced significant property appreciation, but most seasoned landlords agree that betting on a property appreciating is just that: a bet. The far more secure means of evaluating a property is in terms of its cash flow.

Thinking of this in terms of a bond might be helpful. When you buy a bond (or a bond fund), you should not be betting on interest rates falling so as to increase the principal value of your bond. By the same token, when you a rental property, you should not be betting on property appreciation increasing the value of your investment.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

palanzo wrote: Sun Feb 09, 2020 3:56 pm On a tourist visa she can't stay longer than 90 days at a time.
You might be thinking of an ETA (Electronic Travel Authority aka "visa waiver"), this allows US citizens to visit for up to 90 days at a time without a visa.
A proper tourist visa (Visitor Visa Subclass 600) allows you to say for up to 12 months.

halfnine wrote: Sun Feb 09, 2020 3:43 pm This is heavily frowned upon. A friend of mine was exploiting this with trips to New Zealand, but has now officially been barred from entry back into Australia. With an Australian wife and kids this made life very complicated. Get the correct visas and do it right the first time.
Was this friend travelling on an ETA? The Visitor Visa specifically lists visiting family members (for up to a year) as one of the legitimate use cases for this visa.

I'm mostly thinking of this from the perspective of her going to Australia on a Subclass 600 visa - which is cheap and quick to process, then applying for a Partner Visa (Subclass 820) from within Australia - which is expensive and can take a long time.
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Re: Temporary move abroad: rent or sell home?

Post by palanzo »

daave wrote: Sun Feb 09, 2020 4:24 pm
palanzo wrote: Sun Feb 09, 2020 3:56 pm On a tourist visa she can't stay longer than 90 days at a time.
You might be thinking of an ETA (Electronic Travel Authority aka "visa waiver"), this allows US citizens to visit for up to 90 days at a time without a visa.
A proper tourist visa (Visitor Visa Subclass 600) allows you to say for up to 12 months.
Yes I was referring to an ETA. The 600 could take a month or so to process.
halfnine
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Re: Temporary move abroad: rent or sell home?

Post by halfnine »

daave wrote: Sun Feb 09, 2020 4:24 pm
halfnine wrote: Sun Feb 09, 2020 3:43 pm This is heavily frowned upon. A friend of mine was exploiting this with trips to New Zealand, but has now officially been barred from entry back into Australia. With an Australian wife and kids this made life very complicated. Get the correct visas and do it right the first time.
Was this friend travelling on an ETA? The Visitor Visa specifically lists visiting family members (for up to a year) as one of the legitimate use cases for this visa.
He was most likely traveling on an ETA. This was many years back and the Subclass 600 visa is actually new to me although I see that it replaced the older 676.
daave wrote: Sun Feb 09, 2020 4:24 pm I'm mostly thinking of this from the perspective of her going to Australia on a Subclass 600 visa - which is cheap and quick to process, then applying for a Partner Visa (Subclass 820) from within Australia - which is expensive and can take a long time.
I think this is a viable approach. However, the fact that you will be working there may skew their reference frame as to the real expected duration of your spouse's stay. They might conclude your spouse intends to do more than just visit and the that the 309 visa is more appropriate. But, holy smokes, the 309 is up to 20 months processing period :shock: I'd pose your question on one of the immigration forums where you should be able to get some up to date information and a best path to proceed. I've done a similar process in a few countries now. You just want to get it right the first time.
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daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

halfnine wrote: Sun Feb 09, 2020 5:02 pmI think this is a viable approach. However, the fact that you will be working there may skew their reference frame as to the real expected duration of your spouse's stay. They might conclude your spouse intends to do more than just visit and the that the 309 visa is more appropriate. But, holy smokes, the 309 is up to 20 months processing period :shock: I'd pose your question on one of the immigration forums where you should be able to get some up to date information and a best path to proceed. I've done a similar process in a few countries now. You just want to get it right the first time.
The 309 also costs $7715 to apply for now :shock:

20 months is the 90th percentile, I believe there are per-country quotas and someone from a low-risk/low-applicant-volume country like the US, with a clear-cut case (married for several years, with kids, living together - low fraud probability), probably won't have to wait nearly as long.
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daave
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Re: Temporary move abroad: rent or sell home?

Post by daave »

BolderBoy wrote: Sun Feb 09, 2020 11:40 am
daave wrote: Sat Feb 08, 2020 10:17 pmLater this year, my family is planning to move abroad (to Australia) for an indefinite time period but probably in the range of 18-24 months.
We know this will be a financial set back (30% pay-cut in USD terms, increased cost of housing, increased taxes, flights & moving expenses), but we are keen to do it for the sake of getting to spend time with grandparents, and to give our kids a taste of the culture.
Considering the rest of your posting, this is a colossally bad financial decision. BUT, if you are sold on the benefits to the kids of immersion in a different culture, go for it. Just accept that it is a pretty high price to pay for cultural diversity.
Thanks for the perspective. We want to do this at some point so the kids get time with both sets of grandparents while they're still in reasonably good health. That said, it's important we go in with eyes wide open about what the financial costs really are. This thread is definitely helping me evaluate that more rigorously.
halfnine
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Re: Temporary move abroad: rent or sell home?

Post by halfnine »

daave wrote: Sun Feb 09, 2020 5:21 pm
halfnine wrote: Sun Feb 09, 2020 5:02 pmI think this is a viable approach. However, the fact that you will be working there may skew their reference frame as to the real expected duration of your spouse's stay. They might conclude your spouse intends to do more than just visit and the that the 309 visa is more appropriate. But, holy smokes, the 309 is up to 20 months processing period :shock: I'd pose your question on one of the immigration forums where you should be able to get some up to date information and a best path to proceed. I've done a similar process in a few countries now. You just want to get it right the first time.
The 309 also costs $7715 to apply for now :shock:

20 months is the 90th percentile, I believe there are per-country quotas and someone from a low-risk/low-applicant-volume country like the US, with a clear-cut case (married for several years, with kids, living together - low fraud probability), probably won't have to wait nearly as long.
:shock: :shock: For reference, I just looked at my notes from eons ago when it was 2 months to process and less than 1500.

FWIW, we've spent about 20K over the last 10 years for various residencies/citizenships around the globe. But, that much for a one-off :shock: :shock: :shock:
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