When deciding to settle overseas, homeowners are often conflicted on whether or not to sell or rent their home.
The two options of either renting or selling your home depends on many factors such as country’s tax implications, financial circumstances, locations of the property and many other issues..
It is important to consult a professional tax attorney to familiarize yourself with the tax implications but here are some considerations:
Rent or Sell
Renting
Should you rent your home and use the monthly income to pay expenses in your new location. Renting your home has some advantages and disadvantages as follows:
Advantages:
– Monthly rent can be used as a steady stream of income to partially replace the salaries you are leaving behind and thereby reduce the amount you would need to draw from savings to meet your daily living expenses. The income would cover our rent, food, living expense and more.
– Rental income can help you secure a residence visa in your new country. Some nations—Uruguay, for instance—require a provable stream of income to gain permanent residence. Rental income can help you meet this requirement.
– You can test out your new location with the ability to return home if you want to move back to your country.
Disadvantages:
– Cost of a management company to advertise and oversee the property would bite into your profit. These companies often charge a fee equal to one month’s rent to find a renter and then 8% to 10% of the monthly rent to maintain the property and respond to issues raised by the tenant. While online sites such as Airbnb exist as free platforms to help connect landlords and tenants, those tools can’t manage the property.
– Rental income is taxable.
– Tax implications in your country vary but there may be tax advantages to selling your home before it becomes a rental income. For example, in the U.S. under section 121 of the Internal Revenue Code (the housing exclusion), profit would be taxable with a capital gains exception only for some of the profit. In Canada, property is valued at the time you change residency with tax implications. Again, it is extremely important to consult tax experts to know the tax implications of not selling your principal residences at the time of moving.
Selling
Advantages:
– Ownership would result in zero taxes because it was a principal residence.
– Profit can be used to reinvest and live off the profits
– Free of any responsibility of managing a property.
Disadvantages:
– If you return home you will have to deal with renting or buying again.
