Well it's been over a year since my last post in this series (Part IV, which covered US Visa options) but I've been prompted to write Part V based on a reader email - thanks Dylan 👋🏼
In this post I'll be covering finding housing in the US, namely about renting, buying, and selling property in the San Francisco Bay Area as an Australian.
I'll split this into 3 subsections - one for renting, one for buying property, and one for selling.
A couple of basics to start with:
Most rentals in the US are quoted as $X per month, rather than the $X per week we're used to in Australia.
Use sites like Zillow, Trulia, Redfin to check prices - they're the equivalent of RealEstate.com.au and Domain in Australia.
When starting a new lease, you'll usually be asked to pay 1 month rent up-front as well as an extra month as your security deposit. Unlike in Australia I don't believe landlords in the US are required to keep the security deposit / bond with a 3rd-party organisation like the RTBA in Victoria for example. I'm not sure whether that means you're more likely to have unscrupulous landlords withhold your security deposit for minor damage, luckily that never happened to us.
For example, I found that rental prices were:
about 2.5 - 3X more expensive in SF compared to Melbourne. For example, AUD ~$450 - $700 a week for a 2 bedroom apartment close to the center of Melbourne would be equivalent to USD ~$4 - 7k a month for a similar apartment in SF. It's marginally cheaper in Seattle, and maybe another USD ~$1 - 2k a month more expensive in New York.
about the same prices as Sydney if you just use the numbers and ignore currency conversion (ie AUD $4k a month in Sydney CBD will get you something similar in the SF Bay Area for USD $4k a month).
When we first arrived in the Bay Area, we rented for about a year.
Initially we stayed for 2 months in what's called "corporate housing" (think "serviced apartment" in Australia) which are relatively soulless apartment complexes setup for stays from weeks to months while you look for something more permanent. There's plenty of these around, just Google it.
One difficulty we had when looking for a place to rent was that most landlords will do a credit check when you apply to rent. As a recent arrival to the US, our credit score was either non-existent or lousy and we had some questions about it. We ended up having to show proof of income and assets instead, by sharing the letter of offer from my job and some bank statements, and it ended up being relatively straightforward.
My wife and I ended up buying a house in the Bay Area in 2017, and selling it in 2022 when we returned to Australia.
Here are some of the differences we found when buying in California vs buying in Melbourne.
This means that if you arranged your financing in a low-interest period, you would pay the same interest rate for the entirety of your loan! This is definitely different to most home loans in Australia which are either a variable interest rate loan or a fixed rate loan for 2 - 5 years only.
Unlike Melbourne/Sydney, most properties in the US are sold via private offers and not via public auctions. Properties will have a viewing period of 2 - 6 weeks where you can either arrange private viewings or attend open houses, and potential buyers can submit their offers at any time.
Offers are submitted in writing and using a fairly standard form, and the vendor can choose to accept / counter any of these offers at any time.
Most buyers will be represented by a property agent (unlike in Australia where this is far less common).
These buyer agents are not directly paid by you, but typically take a 3% commission from the vendor's agent upon a successful sale. The vendor/homeowner usually has a listing contract with the vendor's agent promising them 5-6% of the gross sales price, and the vendor's agent "shares" about half of this with the buyer's agent.
In Australia, buyers are used to paying 1-5% of their purchase price as "stamp duty", a form of taxation which gets paid to the government. This additional cost doesn't exist in the US, so it can feel less costly when buying.
However, once you are the homeowner you will be subject to property taxes every year which is ~1% of the property value every year (eg ~USD $10k a year for a USD $1m property).
But note! California has a law called Prop 13 which limits any property tax increases to a maximum of 2% a year - meaning your neighbour who purchased 30 years ago may be paying only $1k a year for a similar USD $1m property. That is, 1% of a $20k purchase price from years ago, compounded at 2% increases since then is a lot lower than 1% of today's market value.
You may be wondering why we chose to buy rather than continue renting, given that we always expected to leave the US within less than 10 years.
The answer is that the US tax / financing structures makes it economically logical to buy rather than continue renting.
Namely:
The US allows you to claim a tax deduction for the mortgage interest paid on your personal residence. This is unlike Australia, where mortgage interest for an investment property is tax-deductible but not for your personal residence. If you are in a higher tax bracket (ie many software engineers) then there could be a loan amount where the amount you save in tax makes buying a viable option compared to the costs of renting (which is not tax-deductible in any form).
The 30-year fixed rate mortgages in the US severely removes the "mortgage stress" caused by rising interest rates in Australia. Once you lock in a loan, you never end up paying more than your initial repayment. You can refinance to a lower rate if interest rates go down, but there is no risk of being moved to a higher rate if interest rates go up.
Lastly, the Prop 13 regulation which limits the annual property tax increases means that in a market with rising prices, buying earlier is better than buying later.
There are little to no restrictions for a non-US citizen to buying real estate in the US (well, apart from the cost anyway!) so this may be a viable option for you when you arrive.
When we decided we wanted to return to Australia in 2022, we initially considered not selling our US property and to just keep it for rental income.
However the US tax code makes it much better for us to sell before we left the US (ie became non-resident for US tax purposes) for 2 reasons:
Any rental income while we were non-resident is subject to a flat 30% tax rate, which made it an unprofitable option.
If we hadn't sold the property until after we left the US, we would be selling as non-residents. This would have subjected us to a 15% withholding on the sale price, which would have taken a year to claw back.
We ended up using the same property agent who helped us buy the house as for the sale. In summary:
She charged 5-6% of the gross sales price as her commission (which includes about half of that going to the buyer's agent's commission).
We were selling in a hot seller's market, so we ended up only being open for viewings over 2 weekends. At the end of this period, we received 4 offers which varied in terms of offered price and settlement period.
We chose our preferred buyer and counteroffered to include a rentback period. This is a period after settlement where technically we were no longer the owners, but were renting back the same property for a 30 day period while we finalised our relocation back home.
The US allows for you to claim a tax-free capital gain on the sale of your personal residence of between USD $250 - $500k depending if you file your taxes singly or as a married couple. We were fortunate enough to have a capital gain which exceeded this, so we ended up having to set aside a portion of the sale proceeds for tax payments.
Read on to Part VI to navigate healthcare and health insurance when working in the US.