What do I do with my house? That's one of the first questions employees often ask when they've transferred abroad. The usual answer: keep it -- if you can afford to.
"We encourage most people to rent out their homes here rather than sell," says Thomas Downs, manager of employe relocation at Mitre Corp., Bedford, Mass. "They're going to have to buy back into the market when they come back, and it's going to cost a lot more than when they left."
Tax laws also encourage renting. If employes sell their houses when they are transferred abroad, they can defer recognition of any capital gains on the property by reinvesting the proceeds from the sale on new principal residences in the United States or abroad within four years. But if they sell their houses and stay abroad for more than four years without buying new homes, they are liable for tax on the capital gains.
Some companies even make it easier for the employes to rent. Aluminum Co. of America, for instance, agreed four years ago to pay for all management and tenant-finding fees associated with renting out employes' houses in the United States when they were sent abroad. The result is that 85 percent of such transferred employes hang on to their homes.
"Most who don't really are dumping white elephants," says Homer Garren, Alcoa's manager of international compensation. "They would have wanted to sell anyway."
But there still are plenty of problems. Most companies leave it up to the employe to find renters and pay for a manager. Many people fear -- often justifiably -- that their homes will be a shambles when they return. And for those who have bought homes in recent, high-interest rate years, rental payments rarely cover the principal and interest charges on the mortgage. For these homeowners, the burden of paying the difference plus housing costs abroad could dictate a decision to sell.
On the other end, almost everyone who is transferred overseas elects to rent. The vagaries of foreign legal systems, fears of foreign exchange fluctuations, problems with borrowing money abroad and difficulties in getting capital gains out of some countries make buying abroad unattractive. "What's going to happen if there's an insurrection in a foreign country?" asks Mitre Corp.'s Downs. "What's to protect their properties?"