rent or sell and move overseas?

[GD29]

Hello all--

Been considering moving overseas ( to a country where I am starting process for citizenship in the EU) and contemplating if better to rent out home at approximately 3450 per month on 1560 mortgage (rate is 2.5%) and ten years left on the balance.

Or, sell at anywhere between 640K-689K and possibly make 500K. Denver metro market is solid. At this point I do not know if I would come back or not.

My investment portfolio has taken a hit but I have three years liquid (were I to be living in col overseas).  I will be leaving a position and am open to working again once eligible overseas.

I'm mid forties and single!

Appreciate your thoughts all!

[Freedomin5]

Best advice I ever received prior to moving overseas for work 14 years ago...

If there is a possibility that you will be moving back to your home country, do not sell your property. Keep a foot in the property market to avoid being priced out if/when you return, especially in hot real estate markets.

In your situation, the rent would more than cover associated expenses of maintaining the property. I would keep the property and hire a property manager to manage it for you, since you don't know if you want to come back to the US.

if you decide you never want to come back to the US, and you've established yourself in the new country and have citizenship in the new country, then you can sell your US property at a later date.

[uniwelder]

+1 to not selling your house. For the reasons already stated, plus OP’s posting history. Just 5 months ago, you wrote about wanting to buy another house jointly with your new boyfriend in Denver. This is a very abrupt change in life plans. Keep your backup option.

[GD29]

thanks all--

This is my intuition as well. The only caveat-- capital gains. If I sell now and do remain overseas, I won't be hit with double taxation. This move will have me living less than 180 days for 2025 and so no taxes this year. Eventually, I will be subject to both U.S. and overseas taxes. If I sell and there are capital gains (which there will likely be) I would be liable to U.S. taxes and higher overseas ones.
I believe this is why I am seeing the trend of folx selling before moving....

[uniwelder]

If you rented it for less than 3 years before deciding to sell, you'd still avoid paying long term capital gain tax on 250k of the sale.  How much foreign tax do you think you'd have to pay in that scenario?  I'm quite ignorant about this.  Which country are you going to?

[Paper Chaser]

Does the $1560 mortgage include taxes and insurance? Will either of those likely change when it's a rental rather than owner-occupied residence? I'm guessing they'll increase compared to what they are now. Then subtract PM fees, vacancy, CapEx, etc, and it probably won't be as lucrative as the quick math suggests.

Sounds like you're looking for a clean slate to restart somewhere new. I'd sell it tax-free and use that money to start your new life, instead of dealing with the headaches related to managing a rental on another continent.

[Hula Hoop]

This really depends which EU country you're moving to.  Some EU countries such as Italy (where I live) have an annual 'wealth tax' on overseas property and accounts.  The tax rate is higher for real property owned overseas than for accounts.  In case you're planning to move to Italy, it's called IVIE and IVAFE here.

I've heard that the 'wealth tax' varies a lot between EU countries so look into this.  Also look into how much tax you'd pay on rental income in whichever country you're moving to.  Also, if you have mortgage payments you should find out if you're able to get a tax deduction for overseas mortgage payments in this EU country.

As far as double taxation, in most EU countries there's a tax treaty with the US so it's pretty rare that you'd be double taxed.  How it usually works here in Italy for US citizens, for example, is that they pay their Italian income taxes (IRPEF) and then file US taxes later with a foreign tax credit for the Italian tax they paid which generally completely offsets any US income taxes that would have to be paid as income taxes here are generally higher than the US. 

At any rate, you need to speak to an local accountant to figure out what makes sense in your case.

[uniwelder]

Does the $1560 mortgage include taxes and insurance? Will either of those likely change when it's a rental rather than owner-occupied residence? I'm guessing they'll increase compared to what they are now. Then subtract PM fees, vacancy, CapEx, etc, and it probably won't be as lucrative as the quick math suggests.

Sounds like you're looking for a clean slate to restart somewhere new. I'd sell it tax-free and use that money to start your new life, instead of dealing with the headaches related to managing a rental on another continent.

I don't think we're advocating for keeping the rental as a business opportunity, but rather just making sure OP won't be losing money while keeping a backup home available, at least until making sure the move is long term.

[Kwill]

I think it could be safer to sell, both because of the capital gains tax and because you don't know what you'll want your life to be like by the time you return, if you return. If you come back to the States in a year, you might be happy to go back to the same house, but if you come back in five or fifteen years, you might be in a different place in your life and prefer something else. You might come back for a job in Dallas or DC or Seattle instead of Denver. Or you might move back to Denver but not like the commute from your old place. Being a landlord from overseas could potentially be a pain.

One consideration might be how tied you are to the Denver metro area. Do you have enough family and/or close friends in the area that you would only ever consider living in the Denver area if you came back from the EU?

[Freedomin5]

The other issue is that OP currently does not have citizenship in the EU country. If for some reason they are denied citizenship they will have no option but to return to the US. If they’ve sold their house and the real estate market is strong, they may be priced out of the market. Therefore, it’s safer for OP to sell only after they’ve been granted citizenship in the EU country and they know for sure they won’t be returning to the US.

[Kwill]

The other issue is that OP currently does not have citizenship in the EU country. If for some reason they are denied citizenship they will have no option but to return to the US. If they’ve sold their house and the real estate market is strong, they may be priced out of the market. Therefore, it’s safer for OP to sell only after they’ve been granted citizenship in the EU country and they know for sure they won’t be returning to the US.

Well, maybe if the OP had a big family to house and if the OP were only willing or able to live in the Denver metro area. Being denied citizenship in the EU as a single person wouldn't automatically mean that the OP would need an entire house in Denver, as opposed to an apartment or a room in Denver or some other city in the US. I guess it depends on how the OP feels about the house and about homeownership generally.

[Freedomin5]

The other issue is that OP currently does not have citizenship in the EU country. If for some reason they are denied citizenship they will have no option but to return to the US. If they’ve sold their house and the real estate market is strong, they may be priced out of the market. Therefore, it’s safer for OP to sell only after they’ve been granted citizenship in the EU country and they know for sure they won’t be returning to the US.

Well, maybe if the OP had a big family to house and if the OP were only willing or able to live in the Denver metro area. Being denied citizenship in the EU as a single person wouldn't automatically mean that the OP would need an entire house in Denver, as opposed to an apartment or a room in Denver or some other city in the US. I guess it depends on how the OP feels about the house and about homeownership generally.

True. I suppose another alternative is if the OP has family who can house them and if the OP doesn’t mind living with said family, that could also work. Or if the OP was wealthy and didn’t need the rental income to support living expenses if the SHTF and they had to return to the US with no job and no other income. I guess it would also depend on rental rates wherever the OP is willing to live - will it be less than the $1560 they are currently paying on their mortgage? There are a lot of alternatives depending on the OP’s actual situation.