Author Topic: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?  (Read 4395 times)

JoJo

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Nomadic folks what did you do with any owned residences when you started traveling or retiring abroad?


My situation: I own a condo and have paid off the mortgage some time ago.  I plan on retiring in the first half of next year and am trying to decide what to do with my condo.  At minimum, Id like to travel for 2 years but maybe forever.  I should also mention Im single so theres some chance I might meet the love of my life in some other country.

For keeping the condo -

Pros
   Keep diversified investments/income  - keeping it means I have 45% stock, 21% real estate, 34% liquid.  After expenses and vacancies income will be about $1000 per month
   If I want to stop traveling for awhile, its a wonderful place to live.  Fantastic view & neighborhood. In a cute suburb of a great city.  Lots of volunteer and community activities.  Reasonable public transportation.  Hiking nearby.  And, I could likely Airbnb the spare bedroom when Im staying there to pay any fixed costs (utilities, HOA dues, insurance, property taxes)
   I think it will continue to appreciate the location is good and the economy & rents are increasing way higher than national average.
   Unit comes with a storage locker so I can basically keep more of my stuff for no monthly storage fee.
   Address is in a state with no income tax.  I would change my mailing address to a friends house to maintain my residence
   I would visit here every 6 years or so to get my drivers license, which would maybe be easier if I continue to own here.

Cons
   Chance for a natural disaster (specifically earthquake here) which would be very costly (could be up to $50,000 for replacement costs).
   Chance for large assessment building needs some work done in the coming years.  Our coffers would be much better but there was a lawsuit earlier this year that even though we won the nuisance case, had to pay nearly $150K in legal costs.
   Rental issues (repairs, bad tenants, etc even though Id be using a manager, still will be headaches and Ill be abroad)
   Legal issues always possible
   Tax issues need to have bookkeeping, taxes done

Ive asked this question from a pure investment basis before, but Im curious what other nomadic retirees have done.

LAGuy

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I'm trying to do the same as you. But I'm selling. Can't see hanging onto my condo - it represents too much or my net worth. What I will say, don't count on anything happening fast...even in this market. I listed my place, got several offers in 2 weeks. Went to escrow. 40 days later, after everything was a done deal, buyer backed out because they got spooked by Brexit. Went back on the market, and nothing. People asking what's wrong with the place because of the failed sale. Oh well, maybe next year. That's what people are talking about when they say real estate is not a liquid investment.

arebelspy

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Nomadic folks what did you do with any owned residences when you started traveling or retiring abroad?

We sold.  Wanted complete freedom, and had no plans to move back.  If we settle somewhere, it won't be in the same place we were before.

I can see why some people have a "home base," but it wasn't for us.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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JoJo

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Thanks for those who shared opinions - I guess my biggest fear is that there's no way I'd be able to afford to live here if I ever came back.  With <$3000 monthly retirement goal spend, no way I could pay the rents around here.

A couple more reasons to sell I just got my assessment for next year's taxes this weekend and it went up about 15%.  There's also a baby tree in the park across from me that is getting higher every year and may eventually block about 20% of my view, including the view of the city skyline and dock.  So, maybe it is a good time to sell.  Hopefully next spring will still be a hot market.

Rubic

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Nomadic folks what did you do with any owned residences when you started traveling or retiring abroad?

I'm selling my condo.  I considered keeping it as a rental, but the numbers don't
work out and there will be one less hassle of landlording (though it works fine for
arebelspy) to deal with when I travel abroad.

electriceagle

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Diversification is huge.

If you can get enough rent to keep the property from being a burden, it can provide a backup plan in case everything else goes south.

Of course, you have to be exceptionally good about screening tenants.

dreams_and_discoveries

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I'll have the same dilemma in 4 years time, and I'm leaning towards renting it out....I love my house, being near London and have the inside/garden all configured correctly. I'm not in a great place for rental yields, but the rent would easily pay the mortgage after fees, tax etc with some spare. And I think there is still long term growth in outer London to come.

I would use an agent, and debate getting a family member set up as POA to deal with emergencies when I'm away. 

Northwestie

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Thanks for those who shared opinions - I guess my biggest fear is that there's no way I'd be able to afford to live here if I ever came back.  With <$3000 monthly retirement goal spend, no way I could pay the rents around here.

A couple more reasons to sell I just got my assessment for next year's taxes this weekend and it went up about 15%.  There's also a baby tree in the park across from me that is getting higher every year and may eventually block about 20% of my view, including the view of the city skyline and dock.  So, maybe it is a good time to sell.  Hopefully next spring will still be a hot market.

We're in Seattle and buying back in is a concern - it would be very difficult.  We still have a few years before retirement so we'll see.  The good thing is the house is paid for, we really like our neighborhood, and the dang house has more than quadrupled in price.  So we're thinking some house swaps, renting it out for a bit, and maybe eventually selling.  But we like the town and the house.  Hard to predict. 

itchyfeet

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We are currently working overseas and seeing the world.

We did the opposite to others here. We kept our house in our HCOL home city (just in case we need/ want to go back to work there) and also purchased a place before we left for overseas in a LCOL location that we might FIRE to on our return instead of going. Both places are rented out. We did this before we gave up our jobs back home, so the banks would lend us the money for the 2nd place.

The logic for us was that we have seen property markets rise quickly and we didn't want to exit and then re-enter with less equity, also having regard to transaction costs (taxes and agents fees), and the fact we really don't know how long we will be away for.

I also wanted to take on some additional leverage with the aim of generating capital gains, at the expense of some net rental income, which will be heavily taxed whilst we are not tax residents in Australia. We will worry about capital gains tax when we return to Australia - we have some options, like not selling for instance.

With low interest rates, and a good amount of equity in the first property we have been able to more than fully cover repayments (principle and interest), and all maintenance/ management costs whilst we have been away from the rental income. When we get back we can work in the HCOL city again, or FIRE to the LCOL house, with limited employment prospects, but without a need for employment as a result of the comparable LCOL.

Yes, I am nervous about the large amount leverage we have, without particularly secure employment, and the risk that property prices could drop instead of increase. In the worst case scenario we won't sell if prices dive as the properties do not require any cash from us. I have confidence in the rental income (it is more "guaranteed" than hoped for capital gains), and we wont be forced to sell any time soon due to other sources of funds/ FU Money (ETFs and my job for now).

In the 2 years we have been away the HCOL house has appreciated significantly, and the house in  the LCOL location not so much, but I still believe in it as both an investment and as a possible FIRE home.

Post FIRE we will keep a home base, but that is because we intend to travel only for a part of every year. By the time we get back home we will have been away for several years, and already we are keen to spend more time with friends and family.

Aussiegirl

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I'm guessing from your description that you are in the greater Seattle area.  If you hope to live here again, I would hang on and rent rather than selling now.  Even if you have to pay an assessment.  Because I think the chances are good that if you sell now, you will never be able to afford in your lovely community again.  A new roof, a growing tree and the remote possibility or an earthquake would not be enough to offset that bigger risk if it were me.

But I have family here and don't really want to live anywhere else, so that is a big consideration.

This would be a real consideration for me.   I've seen it happen to a couple of our major cities - prices have sky rocketed and if you happened to have sold before the boom there would be little chance of buying back in to the same locality.  Depends on how attached you are to living where you do.  Ask yourself - if prices went up 40% in the next 5 years while you were away, could you afford to buy back in, or would you be happier moving elsewhere to a more affordable city.   

FIKristen

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #10 on: September 06, 2016, 10:31:10 PM »
Consider downsizing your condo maybe?   

We downsized to a tiny condo in a great spot with a strong HOA to minimize any chance of surprise assessments.  Taxes and fees are next to nothing.  It provides us with a home base and a place to keep our valued possessions.  It is cheap enough that we don't need to fret about rental income.   Departing this winter for South America and who knows when we'll be back...

flyingaway

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #11 on: September 07, 2016, 08:38:50 AM »
This is a real problem that we are considering constantly. We plan to travel around the world slowly in a few years. Our house in the US is too big to make any sense to keep. But we do not know how to deal with this yet, mainly because the cost of selling the current house and buying a new smaller house is substantial. We just want to do once for all, so that we will not buy another house in retirement. Not maintaining a house in the US does not seem to be an option for us at this time.

Rubic

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #12 on: September 07, 2016, 11:21:46 AM »
This is a real problem that we are considering constantly. We plan to travel around
the world slowly in a few years. Our house in the US is too big to make any sense
to keep.  But we do not know how to deal with this yet, mainly because the cost of
selling the current house and buying a new smaller house is substantial.

You may have reasons for doing this, but it doesn't make any financial sense. 
I'm in the process of selling my condo and will rent until I retire -- probably
first quarter of 2017 -- and then travel internationally for an indeterminate
period of time.
 
If I absolutely had to have a smaller home after selling my larger one,
I'd definitely rent, especially if the game plan was to travel immediately
upon retirement.

Quote
We just want to do once for all, so that we will not buy another house in
retirement. Not maintaining a house in the US does not seem to be an
option for us at this time.


Why not?

My parents have relocated twice after retirement, and are considering a third
move to a more age-friendly home layout.  For each house they bought (cash),
they assumed would be their last relocation, but it hasn't turned out to be that way.
I don't think this is something most people can plan on for the entire course of their
retirement lifespan, though you may have special circumstances.


ZiziPB

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #13 on: September 07, 2016, 12:06:30 PM »
I am definitely selling my townhouse before I FIRE in Europe in 2018 - it doesn't make economic sense as a rental.  Coming back would be a concern as I would likely be priced out of the market, but I have no current plans to return once I move overseas.  I am considering downsizing to a small inexpensive unit and keeping it as a rental but haven't really made any plans for it.  It's definitely something I need to seriously think through over the next year.  For now I'm leaning towards just selling and making a clean break of the US residency.

EndlessJourney

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #14 on: September 09, 2016, 03:41:41 AM »
Nomadic folks what did you do with any owned residences when you started traveling or retiring abroad?
[..]
Ive asked this question from a pure investment basis before, but Im curious what other nomadic retirees have done.

We've been on the road for 4.5 years and we sold our primary residence before we left.

We knew we'd be gone for a long time (initially estimated 18 months -  which is quite a laugh when we think about it now), so we didn't want anything to tie us physically or mentally to one place.

That's been one of the largest contributing factors to feeling totally free - that sense of "where you are is where you are". No rushing "home" to take care of residential issues: renters, maintenance, bills, etc.

Even apart from the potential physical maintenance, the primary residence also takes up mental resources. You're always thinking, planning and worrying about it, no matter where you are. It's an amazing feeling to only worry about a few bags and two motorcycles (we're overlanding around the world on motorcycles, BTW) and absolutely nothing else.

Another benefit to offloading our home was that it freed up a lot of capital, which we invested to partially fund our travels via dividends. We left in the midst of (still) one of the longest bull markets ever, so the capital has appreciated significantly. The flipside is that housing in Toronto, where we used to live, has also risen accordingly.

Normally investments outpace real estate, and the thinking was that since we were selling our place at the height of the "bubble", if and when we ever decided to move back, we could take advantage of a cooling market, or hopefully catch the RE market when the bubble burst.

Unfortunately, RE has continued it's skyrocket-trajectory since 2012 and while we're not priced out of the market, there's no way we'd dare enter the market at these prices. We thought the market was overpriced when it was 30-40% lower than it is right now!

We're still glad we sold the place, because in retrospect, we weren't ready to go back after 18 months. In fact, the high cost of living in Toronto has opened us up to living in other places in the world and we're having fun "window-shopping" for new and interesting places to live - either for a few months or perhaps longer.

Villanelle

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #15 on: September 09, 2016, 05:36:22 AM »
Thanks for those who shared opinions - I guess my biggest fear is that there's no way I'd be able to afford to live here if I ever came back.  With <$3000 monthly retirement goal spend, no way I could pay the rents around here.

A couple more reasons to sell I just got my assessment for next year's taxes this weekend and it went up about 15%.  There's also a baby tree in the park across from me that is getting higher every year and may eventually block about 20% of my view, including the view of the city skyline and dock.  So, maybe it is a good time to sell.  Hopefully next spring will still be a hot market.

We moved overseas for DH's job with no real intention to retire abroad.  But we kept our home in the States.  If we move back--even if we go back to the same city--it's unlikely we'd ever move back in.  We loved the place, but it is built in to a hillside and has no yard, and we'd like at least a small space for gardening and a pet.  Anyway, we kept it largely based on the bolded.  It has turned out to be a great decision.  The place was slightly cash flow negative at first.  Now it makes a small profit.  However, it has appreciated about $150k since we left in 2009.  (And no, this is not a mcMansion.  It's a 1950sqft townhouse.)  We certainly weren't counting on that kind of growth, we we did suspect we were near the bottom of the market.  We may never move back to the city or even that State (we have all sorts of ideas for FIRE location, and some do include at least the general area, though some include other states and even other countries.  .)  But we will move back to the States and it's been nice to have kept a foot in that pool, and I like the diversification.  It helps that it is an amazing rental market (tons of military, super un-affordable housing) and that CA limits property tax increases significantly so we don't have to worry about that skyrocketing. 

Mr. Green

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Re: Nomadic FIRE'ees - keep a residence in your home country (USA in this case)?
« Reply #16 on: September 09, 2016, 12:12:59 PM »
I'm pondering this question myself at the moment. We are planning to build a small house in coastal North Carolina a couple doors down from some very dear friends of ours. It would make a nice, low-cost home base while we did some travelling. However, our friends might be leaving the area due to employment so we've put the brakes on. Thankfully we hadn't quite gotten to building yet. We have 70k invested in the property and we were probably going to spend another 50k on the house so that's 120k that I could keep liquid if we sold the land. It was quite a blow to hear the news. We've been working toward this move for 3 years. Maybe I won't be making a brief return to work to pay for the house after all! FIRE has certainly been one surprise after another for me so far and I'm only 3 months removed from working. Despite all the craziness that not working has managed to bring, I've never felt more alive because of the spontaneity that has become my life.