Caruthers

Hello All,

I have a dilemma and wondered if expats especially with experience of the SF Bay Area have any good input. Although this is partly about moving back, its more about keeping assets here:

After 10 years plus I am looking at leaving. I was wondering if it makes sense to let the house out here as an investment or at least as a stepping stone until I settle. The UK place has been rented out all this time by a local agent and gives me a place to go for the interim. Now I am wondering if holding this place could be a good strategy in reverse.

I guess there is about 10 years left on the mortgage here. The house consists of 2 units, 1 of which has been continuously occupied on a more lucrative short term basis for over a year to various tenants. From this activity, I know there is a constant market and the rental income, even at a lower long term contract would cover property tax and remaining mortgage easily plus with money for maintenance. Often I have looked back on previous places (London!) and thought, if only I had kept it....but then again hindsight is 20/20.

I guess I am wondering if it makes sense, especially in light of the poor interest rates in banks at present and the fact that renting out a UK place for the last decade paid off, so to speak. I am aware this is the states so different and also that there is an underlying earthquake issue...but I suppose there is the earthquake insurance.

I know there is a lot of experience here, hence my laborious detail. Hopefully its sufficient for the sages...

Many thanks for reading and considering.

Caruthers

I forgot to add. I probably won't be coming back..but then you never know , do you...

Pulaski

The rental may, or may not make sense, but don't forget to look at capital gains tax. If you sell within three (?) years you should be able to avoid the CGT at least on the part you occupied. If renting is a good idea you might look at selling to lock in the gain and buying a new rental property, on say, a ten year mortgage (so you'd still have it paid off around the same time).

Caruthers

Thanks for your reply Pulaski.

I had realized CGT will effect if I move and sell the UK place now but I had not considered the US CGT. I suppose, If I move back here a some point and occupied it for 1 year, prior to selling, I could circumvent that. Not sure how realistic that would be.

Don't think buying a place here on a 10 year mortgage is realistic for me. The prices have escalated too much in that time.

Dammed if you do, dammed if you don't..

Pulaski

I think the US CGT rules are "2 of the last 5 years"
Well if you sold and bought a comparable property at the same price and rolled all the proceeds into the new property, you'd only need a relatively small mortgage to fund the balance, and presumably the closing costs. AND you'd get increased depreciation from the increased cost of acquisition.

Caruthers

Thanks but not sure that works for me.

Not into borrowing more money just decreasing the outstanding increasingly. Besides I'd hate to try and go through all that lending nonsense again especially now after the financial debacle.