One of the more critical questions when considering Aliyah is whether or not to sell your current home.
A person’s home is much more than just the place in which he lives, which makes the decision to sell a very difficult one for most people. This section is to help you crystallize your thoughts regarding the potential sale. For practical information see ‘Buying and Financing a Home in Israel’
The main reason to not sell your home in the “old country” is to have a fallback option in the unhappy event that your Aliyah is unsuccessful. Though this is rare (Nefesh B’Nefesh quotes a 97% retention rate for olim since the organization’s founding in 2001), being able to return to your home will make your transition back as smooth as possible. If you are considering trying the Aliyah experience for a year to see whether it works for you and your family, holding onto your current home is very advantageous. It allows you the opportunity to leave your possessions more or less in the same location without needing to pack up everything and ship it with you, or sell it in a secondhand market where the resale value is usually significantly below its functional value.
Another advantage is that you have the option of renting out your property and using this additional income to help subsidize your Aliyah expenses. If you have a very high rent-to-value ratio (i.e., the amount of money you are earning from rent per the value of your property — in many Western countries the ratio can be between 6–10% rent-to-value annually), this option can be attractive. For example, if you own a home in Baltimore, valued at $250,000, and can rent it out for $2,000 a month, your rent-to-value ratio is 9.6% ($2,000 x 12 months/$250,000). Similarly valued properties in Israel will generally earn only between 2–4% of the property’s value per year.
The final advantage of this scenario depends on the current state of your local real estate market. If the local real estate market is depressed, selling your property may be undesirable at present, especially if you’ve seen the value of your home drop significantly.
If you are confident that prices will rise again, then you might consider holding onto your home even after making Aliyah — especially when your home is located where real estate demand has traditionally been strong and prices have consistently grown.
But be careful. Real estate, like all assets, is very much subject to the laws of supply and demand, with sellers receiving what buyers are willing to pay right now. Prices can always move in unexpected directions for many different reasons. While you might be convinced that real estate is going up, you always risk continued or additional losses in the value of your property the longer you hold on to it.
Despite the advantages enumerated above, there are significant disadvantages to keeping your house in the “old country.”
Sometimes having an easy fallback plan prevents people from giving the Aliyah experience a real try. Making Aliyah is not easy, and there are challenges along the way. Will you stick it out or give up at the first sign of difficulty? Psychology can play a tremendous part in whether or not Aliyah is successful, and making it too easy to return can work against Aliyah success.
Keeping your home limits your liquidity. For most people, their home is one of the largest or the single largest asset they own. Most people will be unable to consider buying a home in Israel prior to selling their original home. While buying a place is not critical in the first months or year in Israel, eventually most people will want to consider buying a home of their own, and sooner rather than later they’ll need to sell.
Selling a home from abroad can be more difficult for many reasons — for example, being unable to respond quickly to offers or to changes in market conditions, especially the nuances in the local real estate market. Finding someone reliable to sell the property and follow it through to completion as you would is not always a simple task.
If you rent out your home, management costs and stresses can be high, and you need to find someone trustworthy to manage the property. Renters are not always sensitive to taking good care of your home. Repairs, property taxes, vacant periods of rental time, and other expenses can reduce the overall profitability of rentals. Managing a property from Israel is sometimes much more complicated than imagined, as well as incredibly time consuming. The time differential and inability to take care of things yourself can be a major disadvantage.
As we’ve seen in recent years, real estate prices can exhibit tremendous volatility, both upward and downward, which can leave your unsold property as a very large question mark in your Aliyah plan. You won’t know how much money you’ll net from your sale (compounded by the fact that your home will be sold in a currency that’s not shekels), and this fact will handicap your ability to not only find a new home, but also bring closure to your former life.
Tax considerations might also affect your decision to sell your home. Residency issues (and the tax implications that result) in some countries are heavily influenced by whether you own a property there. If you’re trying to become a nonresident for tax purposes (most countries — excluding the United States — allow nonresidents to sever all tax connections with their homeland), keeping your property might complicate this to your disadvantage (especially if your home country has inheritance taxes on assets remaining in that country). In the USA, taking advantage of a capital gains exemptions can be influenced by when you sell your home and can cost you a very large tax break. Consult tax experts who specialize in expatriate issues so that you can assess the tax impact of your sale if it occurs after making Aliyah.
You’ll have to evaluate the advantages and disadvantages of your particular situation before reaching a decision of whether or not to sell your home.
What is your home worth?
How has the market value changed in recent years?
Do some research: Can you reasonably expect to sell your home for what you think it’s worth?
Examine possible tax implications to selling after Aliyah. Tax advisors in Israel often present better advice than a local advisor who generally knows little about expatriate rules and procedures.
Evaluate how important it is for you to have a backup plan in place, in case your Aliyah is not successful.
Consider how quickly you anticipate buying a new home in Israel. Will you need to sell prior to buying?
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