Provided by MAGELLAN JAPAN:
THE FINANCIAL PLANNING COMPANY
So you have been transferred abroad to work, what do you do about your home? Leave it empty? Rent it out? Sell it?
Questions, questions, but when it comes right down to it, your home is just another asset and it needs to work for itself just like your cash deposits, retirement savings and other investments.
Leaving it empty is not a good idea; who is going to look after it for you whilst you are away for perhaps two or more years? If you have a mortgage you still need to make the repayments only this may have to be from your income. Security and insurance needs to change when a property is left empty, often higher than if someone is living in it. You could of course rent it out to family—usually not a good idea as even the strongest of family bonds can be strained if something goes wrong— plus of course there is an expectation that any rent will be as cheap as possible as, after all, it is family!
Renting out is a perfectly acceptable way to make the property pay for itself. Using a professional lettings and management company takes the headache out of managing the property in your absence. They will find tenants for you, vet them, collect the rent for you and after deducting their fees will pay the net rent into your bank account each month. They will also check to make sure the tenants look after the property for you and handle any repairs that may be required. It saves you getting that midnight phone call about a dripping tap when you are half way around the world and in a different time zone!
Fees for managing your property can vary, but up to 15 percent plus tax is typical. It is money well spent and of course you can offset these expenses against your rental income to reduce any tax bill that may arise. Similarly, repairs, insurance for the property and your accountant’s fees for handling the tax reporting, can be deducted from the rental income.
If you have a mortgage on the property, often the rental income will cover the monthly repayments and may even leave you with a small surplus. This way the property defiantly pays for itself and whilst you are working overseas you benefit from capital appreciation of the property itself.
Of course you could sell your property before you leave for your overseas assignment, however, this will only add to the stress of leaving, coupled with the fact that you are out of the market and re-entry when you return may be at a much higher level.
All in all, renting your property makes sense. It pays for itself, especially if you renegotiate your mortgage to a Yen loan where loan rates are typically between 1.8 percent and 2.3 percent depending on your home country. It keeps its value and of course it is there when you return home.