That's it. You're moving abroad. What should you do with your current home, whether it's a house or an apartment? Should you sell it or let it? Should you rather invest in property abroad? Here is a roundup of your various options.
Take stock of your situation
Before booking a meeting with a rental management specialist, taking stock of your situation is necessary.
Are you going on an international transfer, moving abroad for a defined period, or immigrating permanently?
Your company might be transferring you overseas for a short or long assignment. In the end, you will be returning to your home country. If the placement abroad will last only a few months, selling your house is unnecessary. You can consider letting your house if you will be posted abroad for a longer period of time.
You are an expatriate employee if you've bagged an expat contract with your employer. This is the definition of expatriation in the strict legal sense. Your contract should define the duration of your expatriation, which is usually a few years. Hence, you know that you will eventually return to your home country. Nevertheless, the length of your stay abroad could bring you to let out or even sell your house.
A broader definition of “expat” is someone who immigrates to a foreign country. Here, we're not talking about a defined period of time. The broader definition of “expat” is hence the same as “immigrant.” If you want to settle down for good in that foreign country, selling your house seems the only option. But letting it could be more profitable, depending on your situation, and it would allow you to build up a real estate portfolio.
What's your financial situation? Your professional situation?
This aspect is mainly about taking stock of your bank accounts to evaluate your resources and needs.
- Your job
Are you an employee on secondment or an expat? Are you a future immigrant with a job offer abroad? Are you moving to look for a job abroad?
- Your resources
What are your current sources of income (salary, pension, annuity, rent, allowance…)?
Do you have passbook accounts? Life insurance? A securities account (stocks)?
- Your expenses
Do you have one or multiple outstanding loans? Are they consumer loans or mortgages?
What are the terms of these loans? Do you have other outflows of money? Are they regular or ad-hoc?
- Your investments
Do you currently have investments (land, housing, garage, commercial space, house brought alongside other investors, passbook accounts, securities account, life insurance)?
Do you plan to invest in your expat country? If yes, in which areas, and how much do you want to invest? Do you already have the required budget to invest in your expat country, or do you plan on taking out a loan? Will your visa allow you to contract a loan there?
What is your personal situation?
Are you single, married, or in a civil partnership? With or without kids? Do you plan on having kids? Are you already planning to rent or buy a large house abroad in order to raise a family?
What's your relationship with your property?
Was it an inheritance? Or a property passed down your family from generation to generation? Does it have a strong sentimental value for you? You shouldn't downplay the sentimental value of a house. What your house means for you will play a part in making you decide on whether to let or sell it.
To sell or to rent?
Should you rent or sell your property? Of course, the question arises only if you're the owner.
Selling your property
The sale of your house applies to you if you are moving abroad for good. You can also consider it if you plan on investing in your expat country. In short: selling is the best option if you no longer have ties with your current country. The first advantage of selling is that you immediately get a large sum of money. This money can be used to finance your move abroad and new plans there.
To guarantee a profitable sale, seek professional guidance: from bankers, notaries or real estate professionals. They will help you take stock of your current finances (a bank will tell you which accounts you can keep while abroad) as well as understand the legal and financial aspects of your plans.
For the sale to be profitable, it needs to be completed before your move abroad. Depending on your situation, you could avoid capital gains taxes.
The real estate market must also be favorable. What is the state of the economy? Is offer higher than demand in the real estate market? Is your property in line with market trends? Is it in a good state? Is it fairly new? Does it comply with new environmental regulations? Selling your house requires considerable thought. You might have to wait until the economy is favorable, lower your selling price, or perform home repairs to make your property more valuable—hence the need to seek professional advice.
Letting your property
Renting is a good option for you if:
- You will be living abroad for only a few years
- You will travel back and forth frequently and need a home base
- Your relatives don't live far from your house and can look after it while you're gone
- You want to invest in turning your main home into a rental property
- Your house has strong sentimental value for you. You wish to keep it.
The advantage of letting your property is that it will provide you with a steady rental income. That's a safe and profitable investment. But be careful about the tax liability of your rental income.
Furnished or unfurnished rental?
You can benefit from tax relief depending on whether your rental property is furnished or not. In France, for instance, rent earned from a furnished property “is considered industrial and commercial profits and is chargeable to income tax” (Ministry of Ecological Transition and Territorial Cohesion). On the other hand, rental income earned from an unfurnished house falls under the category of property income; you'll hence pay taxes of this category (and not of the category of industrial and commercial profits).
Seasonal or long-term rental?
Since the arrival of Airbnb, countries have been adopting increasingly restrictive measures to regulate seasonal rentals (furnished rentals for tourists). These rentals should be of limited duration and are restricted to some neighborhoods. In Japan, for instance, some neighborhoods of Tokyo and Kyoto are not allowed to host short-term tourist rentals during summer. French, Portuguese and American tourist towns have adopted similar measures.
Seasonal renting is hence far from being advantageous. In addition to the drastic regulations it must comply with, it can also be costly for the owner, notably when it comes to maintenance. More people moving in and out means more damage done to the house. Tourists are sometimes less careful than long-term tenants. Furthermore, renting exclusively to tourists makes you vulnerable to market fluctuations. You will be exposing yourself to long periods without rent if there are no tourists to rent your property to. It's better to aim for long-term rentals.
The value of investing in property as an expat
Real estate is expats' favorite form of investment. It's the safest and most profitable type of investment. True, real estate is, in theory, less profitable than stocks. But investing in stocks is far riskier. With real estate, you're guaranteed to build up assets. You'll also benefit from a steady inflow of cash and from having a fallback plan if you return to your home country.
Expats can choose to invest in real estate in their home country or their expat country. If you wish to invest, enquire beforehand about your options in both your home country and expat country. It holds true even if you plan on taking out a loan in your home country while you are abroad. Keep in mind that for banks, an expat has a higher risk and less profitable profile than other people. Consult your banker before relocating in order to build a solid case.
Tips for managing your property from abroad
Avoid leaving your house vacant. It risks quickly falling into disrepair and could be squatted. It's best to let it.
In case you want to sell it, you need to think about your furniture. Which pieces of furniture will you include in the house sale? Which will you have to sell individually? You can also bring some with you abroad. In that case, contact international removal companies and check if they ship to your expat country.
Keep in mind that rental income is taxed. You might thus have to pay taxes in both your home country and host country. This will include being liable to property tax and/or housing tax. Don't forget other expenses like the maintenance of the house or accrued liabilities when the house is empty (electricity, gas, water).
To manage the property that you're letting, avoid relying on the advice of friends and family, especially if they know little about real estate and taxation. You should turn to a professional in rental management for expats.
