andy1881

Hi All

New to the forum. My wife and I may be relocating from the UK to the US later this year, potentially around the Philadelphia area. I have a question about housing rental pricing versus buying.

Initially our thinking was given we would be moving to a new country the sensible option is to rent out the home we own in the UK and rent somewhere ourselves in the US. Then I started doing some research and it seems like the price to rent is exponentially bigger in the US than the UK when compared with the value of the house being rented. For example a $250k house seems to rent for $2000 p/month or even more in the US where a £250k house in the UK would likely rent for well under £1000. This obviously makes a strong argument for buying a house instead.

I realise there will be discrepancies and differences based on the areas but I was wondering if someone can tell me if I am missing something fundamental. Is renting generally much more expensive in the US than UK? Are there hidden costs involved on either side that I'm not taking into account?

Any guidance much appreciated!

Andy

Pulaski

What you are missing is the cost of buying and selling houses in the US. A round trip (buy and sell) will cost you about 10% of the value of the house i.e. $25,000 on a $250,000 house in estate agent and lawyers fees, so unless you are absolutely certain that you will live in house for a minimum of 3-5 years it makes sense to rent, despite the apparently higher cost of renting.

Also you are missing the fact that property taxes in the US fall on the landlord (effectively they are included in the rent), and you have no "council tax" to pay as a tenant, and that property taxes in and around large cities in the US, especially in the NE of the US can be very considerable.

You will also find that rents vary, as do property prices, based on the perceived "quality" of the schools that the house is in the catchment area of. If you don't have children of school age you can afford to shop around looking for a "deal" in an area that doesn't have the top rated schools.

fozzyb

US property taxes (equivalent of Council tax in UK) are often a LOT higher in the US than the UK - varies enormously from state to state and even city to city - I don't know what they are in Philadelphia. But this is almost always included in the rent.

The other thing to watch out for is Realtor fees tend to be much more than in the UK - Its best to budget on loosing 10% of the house cost on various fees when you sell - so you have to own the property for quite some time to make it worth it.

fozzyb

Oh you beat me to it...

Pulaski

..... Yup, but it goes to show that the facts about the cost of renting v buying are well known and agreed upon on this side of the pond.

sir_eccles

Philly is a big place, there are some nice cheap places in South Philly but they may be a little run down.

Schools, really struggling with cuts right now.

fozzyb

Other things for the OP to think about - if you are coming on an 'L' visa - then if your employer decides they don't need you in the US any longer then you have almost no say in the matter and have to return to the UK. If you have bought a property then tough.

Secondly if you sell a house in the UK that hasn't been your primary residence for 3 years then the sale becomes subject to capital gains tax.

andy1881

Thanks for the responses. Seems like the sensible option is to rent initially and get a feel for areas, make certain we are staying long term and then maybe buy at that point. It will be an L visa although they will be creating a permanent role for me in the US and have given me confidence it can be long term if I wish.

Sir_eccles: Have been looking at places in NE and NW Philadelphia so far, Germantown, Chesnut Hill, Manayunk, Pennypack etc. These areas seem to suit our lifestyle (btw no kids so schools not an issue) - any other recommendations on neighborhoods gratefully received!

Pulaski

It's two of the past five years for US CGT, in other words you must sell before the third anniversary of moving out to avoid US CGT. US CGT is a weird beast too - and can under certain circumstances, tax a "gain" on the US$ value of paying off the loan compared to the USD value of the original mortgage - even though you weren't a US resident when the mortgage was originally taken out.

Different and more complex rules apply for UK CGT, and if your employer sends you over seas to work you can escape UK CGT for longer periods.

caleyjag

Agreed. This was brought up in a very recent thread.

Just because you buy a house here, doesn't mean you have a right to live in it. If you are on a visa and lose your job you only have days to legally get out of the country. Then you will have to manage sale of the property remotely, which could be a nightmare.

fozzyb

Make sure you get it in writing that they will sponsor you for a greencard, and get the timetable agreed upfront.

I learned the hard way that a verbal contract isn't worth the paper its written on.

Pulaski

It might make you feel better to have it on paper, but in all honesty on an L-1 you're in the US at your employer's whim, so having it on paper doesn't count for much either.

MidAtlantic

That is what I did and would definitely do again. It gives you a chance to get to know neighborhoods, commute options etc. Also, as others have said, I would not buy until your permanence is real, otherwise it could be very expensive. Good luck!

fozzyb

I agree - but having it in writing does make things just that little more awkward for the employer to change their mind. When all you have is a verbal promise from with a manager who is no longer with the company you are really stuffed.

But you are right - its never going to be something legally enforceable - and indeed there is no guarantee the company is going to be able to get the greencard anyway, so you have to plan your life accordingly.

caleyjag

I had it written in my offer letter that a green card application would be initiated after 90 days of employment.

This turned out to be very important - my head of departement, an american unfamiliar with the process, questioned why he should be fitting the bill for expensive attorneys to do their thing.

When I showed him the relevant paragraph on my offer letter, he got out of the way and everything went smoothly.

It should be noted that this was largely luck on my part - I did not expect any problems, and hadn't asked for that to be written, but it turned out to be very important.