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Old 17-01-2017, 17:21   #31
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Re: Housing and life post Sailing

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If you have owned your personal residence for a long time and hopefully have a large built in capital gain, then decide to rent your property, you will have converted your personal residence into an investment property and it will not qualify for a personal capital gains tax exemption should you sell the property in the future while it is still a rental property.
Not bad advice. Something I'm looking at. The question is.....How long does one have to rent the house to have it qualify as a "rental property"? As far as I know there is nothing written in black and white and the IRS is supposedly on to this.

My accountant has no clue.....says "just be careful". My realtor says 1 year. Guess it will depend on the auditor.

As the OP is not from the states, this is a bit of thread drift....but an important topic for all of us that cruise or intends to cruise.
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Old 18-01-2017, 04:16   #32
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Re: Housing and life post Sailing

We, as of yet, are not looking at any significant change in our finances or budgeting by living ashore. We're planning on renting a fairly small place of slightly more than 1,000 square feet. I know this is small by housing standards, but it's excessive for us. The sum of our rent and car ownership are not far different from our boat related costs of slips, maintenance, fuel, etc. Renter's insurance is a fraction of Florida boat insurance!

We're also not seeing or expecting any change in the dynamics of our relationship by living ashore. We have always been close and often isolated in our cruising, but even at times away from any community of others, we have had independent endeavors.

We are now three days away from leaving our boat for land and we're developing one unexpected anxiety. For the last forty five years we've not had a fixed location that was identified as an address. Sure, we had times while living aboard that we were employed, but our home was not identified. We always used post office boxes or mail services. We're finding it difficult to claim a physical and numerical street address. We have only given vague answers when friends have asked us where we are planning to live. We don't have any reason to remain "undefined" by residence, but we are anxious about this new step. ....silly of us?
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Old 18-01-2017, 09:14   #33
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Re: Housing and life post Sailing

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Originally Posted by Valmika View Post
Good information Joe but they are in Australia. My question is, in California is there a law about no capital gains on a house at all if you are over 55?
Don't think so. I'm not aware of any age exemption, though I think there should be.

Also it used to be that there was no tax consequence if after the sale of your home, you turned around and bought a home of equal or greater value.

Sucks all around. I have a retired friend that bought a house in the city for low 6 figures back in the 70s. Now the house is worth some 5 million dollars...at least.

So for him to sell his house and relocate.....BAM.....capital gains hit on aprox. 4.3 million bucks!!!!

For him to relocate to Florida for instance.....he can take the HUGE tax hit OR turn his house into a rental, rent in Florida for a specific period of time, then do a LIKE KIND exchange.....and walla, no huge tax hit. However, he would be paying crazy property tax and other expenses on a 5 million dollar property. Much better deal for his heirs I would think.

Personally, I hate the idea of leasing my nice expensive home. No way i can cover even the cost of replacing the carpet with a normal deposit. Then there are liability issues, esp with being waterfront. However, it's either that or pay a TON in taxes when i sell....am single so any profit over 250k is taxed. In fact the bloody taxes will be more than the cost of the yacht!

Then of course there is the issue of where to go after the cruising is done. Paying rent is money out the window too.

So many options to think about. I had rental properties that i paid to have managed....worked out well for me with only 1 eviction in 20 some odd years. Seldom a headache as I just had to write the checks and pay taxes on the income. I personally am looking into buying some more as I feel a mix of investments is a good idea. JMHO

I was hoping some tax/ real estate experts would have chimed in by now. Please feel free to correct any bad info I just may have passed on.

Back to the OP..... I am curious about Australia. I just got back a few days ago after spending a couple of weeks in Coff's Harbour and SYD. My mate has done QUITE well in the real estate market...has 2 BEAUTIFUL custom homes just off the beach.....one he uses as a rental for $650 bucks a night!!! He told me that his friends in SYD have REALLY gotten wealthy off their real estate there.

However we didn't discuss the trends, and right now personally, I would be hesitant to buy as the prices, to me, are outta sight. But hey, I'm always a day late and a dollar short.:face palm:
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Old 18-01-2017, 15:23   #34
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Re: Housing and life post Sailing

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Originally Posted by Saleen411 View Post
Back to the OP..... I am curious about Australia. I just got back a few days ago after spending a couple of weeks in Coff's Harbour and SYD. My mate has done QUITE well in the real estate market...has 2 BEAUTIFUL custom homes just off the beach.....one he uses as a rental for $650 bucks a night!!! He told me that his friends in SYD have REALLY gotten wealthy off their real estate there.
Australia in general, Sydney in particular, has become one of the least affordable places in the world for a family home. Last I looked (about three months ago) we were in the top 10 most expensive, might have been the top 4 in the case of Sydney.

I keep thinking something has to break, because at the moment people are only paying the money they are paying for investments properties because they assume (correctly up to this point in time) that the properties will increase in value. The actual rental returns in relation to the values of the properties are not great, you can get better returns from a term deposit, but term deposits don't appreciate.

Partly it has come about from the tax incentives of negative gearing, which from time to time the politicians threaten to roll back. At this point the voter backlash on the politicians is enormous so they chicken out and leave it all alone.

In the case of the OP, depending on when they bought the current property (I think the cutoff date is in the 80's from memory), they would be able to sell it without paying any capital gains tax, and if it was their primary residence all that time (i.e. they didn't rent it out) then they can sell it capital gains tax free no matter when they bought it.

Hence my advice to the OP would be to buy the replacement family home as part of selling the current family home because of the whole capital gains tax, unstable market and low rental returns problem.

If the OP sells the current family home and buys a rental property now they face the options:

a) The housing market finally collapsing from it's incredible (and sustained) high leaving them with an investment property that is worth a considerable amount less than what they paid for it, making the purchase of a family home near impossible.

b) The housing market remains steady but the income from the rental will still be trivial compared to putting the cash in the bank.

c) The housing market continues to climb but half of the capital gains made from buying and selling the rental property are lost to capital gains tax while in the interim the family home they need to buy has also gone up in value but now the OP is shopping with a reduced relative budget due to the loss to CGT. (Oh yeah, it is also worth noting that the biggest capital gains have been in family homes, not speculative units, many of which have gone down in value, even in Sydney.)


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Old 19-01-2017, 06:08   #35
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Re: Housing and life post Sailing

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Hi Wildfire (and Ann T. Cate....),
My wife and I have lived aboard up the east coast of Oz and in the Med for the last five years. We set ourselves a goal of five years, and now that time's finished our big decision was what to do. I feel I've just scratched the surface of cruising, but my wife's had enough. Fair enough too, as she was never a blue water sailor and misses the family and comforts of shore life. So we've decided (very amicably) to separate.
We've agreed on a fair split of the assets, and to get to your point about post-cruising financing in Australia.... We kept our Sydney home rented while we cruised, and have just sold that. With my half I've invested in two smaller apartments in Sydney. Together these give a gross rental yield of just on 5%, and with the capital growth in Sydney I think I'll do better than the banks or bonds over the ten years or so I plan to slowly circumnavigate. I also have a self-managed super fund (shares and a bit of cash) which is still in accumulation mode. When I turn 60 in three years I'll convert that to a pension. I could have added to the super, but I wanted to spread the risks and maintain some sort of diversity.
Not sure if the above will help you as everyone's circumstances are different. Good luck with your plans.
Wow thank you for a very personal share. Sorry to hear about your separation - that's tough. Our experience has been very positive with real estate so will probably invest in a smaller property once we sell the family home that is on acreage - finding an area with good capital growth is going to be the answer. Considerable $$ are tied up in the cat, which I am hoping won't depreciate too radically whilst we are off sailing. I think a 5 year goal and subsequent increments of 5 years is a good way to plan. All the best with your slow circumnavigate. We might bump into you out there - not literally I hope lol. CHeers Gaye.
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Old 19-01-2017, 06:22   #36
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Re: Housing and life post Sailing

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Originally Posted by GILow View Post
We plan to rent the house out and have renovated it with that in mind. (I.e. Making sure whatever we do will not be a maintenance problem or too specialised for a normal renting family to manage). We are also fortunate in having what is effectively a false second story on the house so we will be able to store our furniture and belongings in the building while it is rented out. (Sentimental stuff will go to stay with family members)

In this case the OP has decided to sell the current home for what appear to be good logical reasons, but I would suggest to the OP that if you buy a replacement home to rent out while you are travelling (a good idea to my mind) then don't make the mistake of buying a "rental home". In other words, buy a home that you would want to live in on your return, not some speculative rent optimised unit or the like. The likely difference in overall returns are not going to be all that great and the stamp duty costs of selling the rental and buying a home you want to live in will far outweigh any difference in financial return when you get back.

Also, you won't know how long your cruising will last so you may be back in as few as a couple of months or be away for a decade or more. Therefore you have no idea how the real estate market will look and cannot anticipate if your rental property will be easy to sell and if your rental property can even still fund a home you want to live in.

Matt. (Three years behind you and counting down)


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Lucky you Matt having solved your storage prob! A few years ago none of this was a prob, but life got in the way and decided to change things. I do hear what you are saying about buying a house that "we could live in". It was a thought that had crossed my mind. Good luck with ur plans.
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Old 19-01-2017, 06:22   #37
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Re: Housing and life post Sailing

In Australia there is a loophole of sorts where you can rent your house out for up to 6 years without incurring capital gains. You need to be in a situation that geographically prevents you from living in the house during that period. This exemption is probably intended for people that move for work purposes but I reckon a cruiser or other long term traveller would also qualify.
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Old 19-01-2017, 07:27   #38
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Re: Housing and life post Sailing

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Originally Posted by WildFireAus View Post
Seems strange to be planning on life post sailing but please just bear with me for a minute..............
You are being smart to plan for a life after cruising. Unless you and your wife both die at sea, there will come a time when you can no longer handle the boating life or need constant medical attention that you can't get while cruising. It's sad, but this is reality. There are several ways to do this and all are not for everyone but you do need a plan.

Selling your boat when you're done and buying a house with the proceeds is not a good plan. Your boat may not be worth what a house costs when you're done with it and in any event, it probably won't sell quickly.

Some people rent out their homes and move back in when they are done sailing. Some people sell their homes and buy a smaller, retirement home and rent it out until they are done sailing. And some people sell their homes and invest the money so they will have it to buy a home when they are done sailing.

It seems to me that selling your current home and investing the money is the best plan as long as you have the willpower not to draw the money out for other things. That way, when you're done cruising, you can buy the home you need or want in the place you want. Your needs or wants could change over the next few years.
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Old 19-01-2017, 10:35   #39
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Re: Housing and life post Sailing

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Originally Posted by Reefmagnet View Post
In Australia there is a loophole of sorts where you can rent your house out for up to 6 years without incurring capital gains. You need to be in a situation that geographically prevents you from living in the house during that period. This exemption is probably intended for people that move for work purposes but I reckon a cruiser or other long term traveller would also qualify.
Thanks for this - wasn't aware of it. Will check it out. Gaye
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Old 19-01-2017, 10:46   #40
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Re: Housing and life post Sailing

[QUOTE=rwidman;2307004]You are being smart to plan for a life after cruising. Unless you and your wife both die at sea, there will come a time when you can no longer handle the boating life or need constant medical attention that you can't get while cruising.

Thanks Ron that fairly much summarizes it! CHeers Gaye
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Old 19-01-2017, 10:57   #41
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Re: Housing and life post Sailing

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Originally Posted by GILow View Post
I keep thinking something has to break, because at the moment people are only paying the money they are paying for investments properties because they assume (correctly up to this point in time) that the properties will increase in value. The actual rental returns in relation to the values of the properties are not great, you can get better returns from a term deposit, but term deposits don't appreciate.
Sounds like buying and selling Tulips in Amsterdam
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Old 19-01-2017, 11:45   #42
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Re: Housing and life post Sailing

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GILow;2306482]Australia in general, Sydney in particular, has become one of the least affordable places in the world for a family home. Last I looked (about three months ago) we were in the top 10 most expensive, might have been the top 4 in the case of Sydney.
I can understand that. Not just housing.....I was shocked at how expensive some of the basics were. I don't know how many folk afford stuff there, esp pensioners.

In Coff's I shopped a fair amount to cook for our hosts.....I thought food was really expensive....Booze too...18 to 22 bucks for a six pack of beer? Crazy!....forces one to buy by the case. My mate asked me to buy duty free booze for him at the airport....he considered 35 bucks for a 750ml bottle of Bombay Sapphire or Bundaberg CHEAP. No wonder he drives 4 plus hours to Brisbane to shop at Costco.

Eating out was also stupid expensive.....even in the small non touristy towns......15 to 22 bucks for simple breakfast, 35 to 50 bucks for a steak.....and worst of all $18 bucks for a bloody margarita in a so so restaurant in SYD!!! I regularly travel to some VERY expensive cities like Tokyo, Singapore and HKG. None of which is anywhere near as expensive for some of the basics as I recently paid in Australia. And this after a decent exchange rate.

In any case, sorry for the drift. I'm just thinking that as a post cruising Australian retiree, living some place more affordable would DEFINITELY be a consideration for me. Unless of course one has millions stashed away after selling the mega expensive house.
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Old 19-01-2017, 13:56   #43
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Re: Housing and life post Sailing

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Originally Posted by Reefmagnet View Post
In Australia there is a loophole of sorts where you can rent your house out for up to 6 years without incurring capital gains. You need to be in a situation that geographically prevents you from living in the house during that period. This exemption is probably intended for people that move for work purposes but I reckon a cruiser or other long term traveller would also qualify.

According to my accountant the clause is "no fixed abode" and yes, our house will be safe from capital gains implications while we are cruising. (Usual disclaimer: I'm not an accountant so do seek professional advice. :^) )


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Old 19-01-2017, 14:06   #44
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Re: Housing and life post Sailing

Being an island nation, with great cruising areas, sometimes wild seas and sometimes inhospitable neighbours (not you NZ!), it can be somewhat difficult to cruise "somewhere else" for many. Sydney is an extreme example of overpricing. I left the place over 20 years ago and have never looked back. there are some very cheap (relatively) areas around the country in which to buy real estate which are fine for retirees that don't need to be near sources of work. A food strategy is to sell that expensive home and downsize to a smaller place in a rural or fringe region.

On the subject of what to do with the existing house, our strategy is a little different. The housing boom in our region is over and we are waiting for the next to come along. The house is a pain to rent in the regular sense, as it is large and needs a lot of maintenance that wouldn't suit us as absent landlords. Rather than sell in a depressed market, we are moving/have moved towards a serviced short term renting model which produces higher yields than regular renting. We do have the advantage of having a detached one bedroom flat on the property as well and we are planning on doing a deal for an older retired couple to caretake and service the house in exchange for free or cheap accommodation (once we head off). We are actually doing this now as a trial of sorts and the results are looking very promising. The other advantage we also see is that if the cruising thing doesn't work out, we have both a home and job to return to.

On another note, when I got diagnosed with cancer and things didn't look too promising we sold and gave away most all our furniture and appliances when we downsized to the flat in preparation for whatever the future held at that stage, now that things are looking rosier we recently had to buy a house full of decent furniture for serviced renting purposes. We used Gumtree and Facebook to refurnish our place with good clean appliances and furnishings (including lots of beds) for about 10% the cost of purchasing new. And the beauty was it took no time at all to acquire everything required off our list and if we were to sell it all again, we'd probably make just as much selling it as what we paid. So my advice is definitely consider selling everything you can rather than storing it because in this modern Internet age you can just buy it all back again if you need to and save on the storage costs.
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Old 19-01-2017, 14:19   #45
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Re: Housing and life post Sailing

[QUOTE=Saleen411;2307256]I can understand that. Not just housing.....I was shocked at how expensive some of the basics were. I don't know how many folk afford stuff there, esp pensioners.

LOL Millions stashed away. No Hope of that after you have built a boat!!! But you are right the cost of eating out in some places are just way over the top. Guess that's an advantage of eating on your boat. The priceless views make up for it even if you have still be chief cook and bottle washer!
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