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Money Matters

How do I manage selling or renting a home from overseas?

Dear Money Matters,
I am planning to buy a house in a few months. I may have to pack my bags after two years and leave this country. In that situation, do I have to necessarily sell the house, or can I rent it? If I am not able to come back and sell it, is there a way to sell the house in my absence, or do I have to be present?

Dear Dheeraj,
First, you have every right to rent your house regardless of where you live. Moreover, should you ultimately decide to sell the property, there is no need for you to be physically present. You can always hire a real estate broker to handle the transaction on your behalf. Also, thanks to Federal Express and other similar services, it's a breeze to get papers back and forth for you to sign.

However, there are some issues to bear in mind. First off, should you decide to rent the property, it will be impossible for you to serve as a hands-on landlord (unless you want to jump on a 747 with a wrench in your luggage every time the tenant calls to say the toilet is leaking). That means you'll have to pay someone, such as a property management company, to handle the details of the rental, including upkeep and rent collection. Likewise, if you sell the house, that, too, will cost you, as you'll have to pay someone to represent you.

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There may also be a couple of concerns regarding the purchase of the property of which you should be aware. One of the central principles of sensible homeownership is owning the property long enough to recoup the expense of buying the property -- closing costs, points and any other upfront costs. It generally takes three to five years to offset those expenses. So, if you're thinking of buying the house but only expect to own it for two years, you may not have enough time to build up sufficient equity to outweigh the transaction costs.

The other potential issue is renting the property too quickly. When most people buy homes, the lender approves the loans on the assumption they're going to occupy the property. In your case, living in the house for a couple of years and then renting it shouldn't pose a problem. On the other hand, buying a home on the premise that you're going to live there yourself and turning around and immediately renting it out won't sit well with your lender. Most are perfectly happy to lend money on rental properties, but they're considered higher risk, so they charge a higher rate.

-- Posted: April 24, 2002

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See Also
The tax advantage of rental properties
Study up before becoming a landlord
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