You are working with a large US employer overseas, and recently received a notice to return to the headquarters for 1-2 years. It is likely that you will be sent overseas again in the future to develop a new market.

You’ve been renting using a stipend from your employer for a long time, but won’t get it while being in the US. You think this might be a good chance to buy a condo back home for the first time. You’ve heard that rent in the area where headquarters is can be higher than a mortgage payment. Once you go overseas again, you hope the rent you get from leasing the place can cover the mortgage payment.

You also expect to be “called back” to the headquarters throughout your career. Even if you change jobs, you still would like to relocate to the same city. It would be nice to have a place you can always come back to and call your own.

Of course, you wouldn’t mind selling the place when you leave again, either, if for some reason the property value soared.

Here’s what the “Should I invest in a residential property?” worksheet can do for you.


Property and Mortgage

  • After research, you decide on a condo that costs $450,000.
  • You can only put 10% down, which is $45,000, and therefore needs to pay primary mortgage insurance and settle for a higher interest rate.
  • You are preapproved for a Fixed Term 30 year mortgage at 4.5% APR if it’s considered your primary home.
  • You don’t mind holding the property for 10 years, but happy to sell it if price is right. You think the property will at least grow at 1% per year above inflation.

Rental Income and Expenses

  • If you hold it for 10 years, you want to rent it out to long-term tenants after you leave again. To be conservative, you don’t expect to raise rent beyond inflation.
  • You think within the 10 years, you probably stay there for around 3 years. So on average, month self-occupied is 12* 3/10 = 3.6.
  • You believe it’s relatively easy to find tenant for the condo, so you estimate on average only 0.5 month per year a turnaround time is needed to keep the rent coming. That means you can get rent income 12-3.6-0.5 = 7.9 month per year on average over the 10 years.

(This is a limitation of the worksheet for now. It assumes the rental income is constant over the entire ownership and does not allow customized assumptions on self-occupied for 2 years, then leasing full-time for 3 years, etc.)

Annual Ownership Cost / Rental Expense / Transaction Cost of Purchase + Sale

  • See the screen shot below for my assumptions. Note that they may not be representative of what you will pay, since they are dependent on the property, locality, state, and various other factors. Make sure to do your own research on how much it would likely cost you.


(Consult your tax adviser if you are not familiar with tax liability and benefits relating to owning a property or receiving rental income.)

  • You file US taxes the same way overseas as in the US.
  • You don’t expect to have any paper profit on Schedule E after all the expense and deductions.
  • When you live in the condo, you are able to take itemized deduction on your mortgage interest and property taxes. That gives $1,500 income tax benefit a year, but only for the 3 years. On average the benefit is $1,500*3/10 = $450 a year.
  • Assuming you sell this property as your primary home, your gain on the property is exempted for federal capital gain tax.
  • Lastly, your state and locality may have a sales tax of 1% combined.

Other considerations

  • You assume the cost of owning and selling the house will increase by inflation of 2%.


Given all the assumptions above, your real investment return is 0.05% year over year for 10 years.

worksheet 2.1

For all the time and energy that goes into owning a residential property, this might not seem worth it to some, even with the professional management company. At least under this particular cost scenario, you are not losing any money to inflation.

So you may think, how about if I just sell it when I move overseas again?

Assuming you live there for two years, and the local market has a significant growth of 10% on top of inflation, you will have…

-1.48% annual return.

worksheet 2.2

That doesn’t sound very good, does it? Even though on paper it looks like you more than doubled your original investment back ($495,000 sale price – $391,633 remaining principal = $103,367), you still need to consider all the expenses related to the buy/sell transactions.

The total additional cost of those two years of ownership is:

Mortgage Interest / PMI + Ownership Cost + Purchase Transaction Cost + Sale Transaction Cost – Tax Benefits

$45,682 + $11,700*2 + $1,400 + $38,900 – $1,500 *2 = $107,882

Of course, this doesn’t take into account the money you will need to pay out of pocket if you rent. Two year’s of rent of the same property will be $2,500*12 = $30,000, while owning a property costs you $107,882 – $103,367 = $4,515 (and maybe some more time and energy.)

So in this case, it is more “cost effective” for you to own than to rent, but I wouldn’t consider it a great “investment.” If for some reason the housing market isn’t doing so hot, and you only sell it for the same price you bought, the cost of ownership will go above renting. It requires you to have good enough knowledge in the local market to forecast the potential real estate growth.


This case study gives you a closer look at whether continue to hold a property you once live in makes financial sense. It also illustrates when you should consider your purchase a cost, rather than an investment. The next, and the last case study, will look at the buying a property purely as an investment.

Missed the first case study? It’s about purchasing a property with some emotional utility, such as putting down roots in the US while living overseas.

Still have questions about how to use the worksheet properly? Have suggestions to make it better? Leave your comments below.


Related Posts

Pin It on Pinterest