Since the 1980s the rate of people who seek jobs and ultimately choose to relocate for one has dropped from 40% to 10%. The job market is tight, and you can work from virtually anywhere thanks to the internet. So the desire or need to uproot for employment just isn’t what it used to be.
That doesn’t mean you shouldn’t do it, but there’s good reason to set the bar for “is it worth relocating for a job” high, especially when you have a house in the mix. The job itself and your stage of life should check a lot of boxes across different areas:
- Your current housing and financial situation
- Salary and cost of living considerations
- Your new employer’s relocation package
- How your family feels about it
- Your personal career goals
- Quality of life and local attractions
Let’s cover all these bases so you can better sort through this difficult decision.
Homeownership and your level of mobility right now
Gone are the days of apartment hopping from one lease to another… when you could up and go live like a nomad if you so well pleased for the cost of an awkward phone call to your landlord and a few thousand dollars to break your rental contract.
Owning a house makes relocating for a job a lot more complex.
Here are the factors you need to weigh in order to figure out if you can swing it:
1. How much equity have you built up and how long have you owned the house?
The beauty of owning a house is that in theory it should only go up in value over time, and even if you’ve lived there a short while, you should be able to sell it for at least what you paid for if not more. But you likely bought a house thinking you’d settle down for awhile and build up some equity.
The longer you’ve owned the house, the more home equity (the value of the house minus what you owe) you should walk away with. Every dollar you paid toward your principal balance is equity that could go toward a bigger, better house in your new hometown.
At minimum, you want to sell your house at a point when the price will cover what you owe plus any seller closing costs, which can range from 7%-12% of the sale price. If the sale price of your home leaves you short of the necessary funds, then relocating for a job could put you in a position where you have to come up with the extra money or potentially rent out the house from afar until it makes sense to sell it.
You also want to consider the tax implications of selling your house at this moment in time. The federal government allows homeowners to exclude up to $250,000 of capital gains on the sale of their primary residence.
However, to qualify for the gain, you’ll need to have lived in the house for at least 2 of the past 5 years. If you’re relocating for a job shortly after moving in or after you’ve rented out the house to a tenant, you could lose out on this exemption and have to pay taxes on your home sale profit.
You may be able to offset some of this tax liability with the job relocation exemption, which allows you to deduct moving costs in the event that the main location of your new job is 50 miles further from your current house than the main location of your old job.
But the bottom line is—if you’ve owned your house for awhile, you’re likely in a better position to sell it and relocate as opposed to if you just bought it.
2. How do home prices in the new city compare to your current neighborhood?
When you’re moving within the same city, home prices will be somewhat comparable from one location to the next in the sense that when you’re ready to move out of your starter house, your built-up equity helps you afford a bigger and better home.
However, this isn’t always true when you relocate. Homes with a similar lot size, square footage, and number of rooms could be significantly cheaper or more expensive depending on their location.
For example, the median home price for Las Vegas is $266,000, but move less than 300 miles away to Los Angeles, and the median price you’ll pay for a house is $634,000.
Higher home prices doesn’t immediately have to kill your relocating dreams, though—especially if you’re willing to commute.
“People who are willing to commute to work, can find some really affordable housing within an hour or two of major cities. And those suburban homes will be three or four times better in size and amenities than those closer to their workplace,” explains Dustin Parker, a real estate agent with relocation experience who ranks in the top 1% of agents in the Seaford, Delaware area.
“We have people who move to Delaware from Washington, D.C., and find they can get a $400,000 house that would’ve cost them well into the millions in D.C.”
3. How far will your salary go toward housing in the new location?
Even if it’s your dream job, relocating for work may not be the smart move if buying a home in the new location will put you in the hole financially for the foreseeable future.
On the flip side, an offer with a so-so salary may actually put more money in your pocket if the new locale is less expensive.
Let’s say your current job pays you $85,000 annually in D.C., putting you at around $5,200 a month after taxes. You’re paying about $2,000 of that a month toward the mortgage on your $400,000 home—leaving you around $3,000 monthly.
Now you’ve got a job offer in Delaware, but the salary offered is only $65,000 annually, putting you at just over $4,000 a month after taxes.
Some might automatically answer “thanks, but no thanks” to a $20,000 salary cut, but not so fast. Delaware’s median home price is $237,000, which puts you at a $1,100 monthly mortgage payment with a 20% down payment.
Do the math, and you’ve still got around $3,000 left each month after paying your mortgage. Plus, you’ll have all that equity from selling your $400,000 which means you’ll be able to make a larger down payment.
If the sale of your $400,000 home nets you $85,000 after the principal balance, closing costs and all other expenses are paid, that gives you a 36% down payment for the new $237,000 house—which will drop your mortgage payment down to $965.
Cost of living and taxes
Calculating whether or not it pays to relocate depends a lot on the area that you’re moving from and moving to—because the cost of living can vary greatly from state to state, as can how much you’ll pay in taxes across the board.
Property taxes
A 2019 analysis by WalletHub shows that average annual property tax payments range from $525 in Hawaii (which claims the lowest average real estate tax rate) to $4,725 in New Jersey (the state with the highest average real estate tax rate).
“We get a lot of people relocating from places like New York or New Jersey where the cost of living and taxes are significantly higher,” advises Parker.
“They’re not going to earn the same amount of money as they used to, but in Delaware, our property taxes are typically only 25% of those in Jersey or New York. So relocators usually get a little bit more bang for their buck.”
Residents in neighboring cities may also pay different tax rates depending on factors like local parks and schools. As you look into the possibility of relocation, do some digging into what kind of property taxes you’d pay based on where you’d like to move.
Sales tax
Sales tax is the tax you pay on various goods and services from the candle you buy at the mall to the burger you eat at the food court. Rates vary by state and local jurisdictions (check out this evolving list of state sales tax rates, including the range of local rates).
As of Jan. 2019, the top 5 states with the highest sales tax rates include:
- California (7.25%)
- Indiana (7%)
- Mississippi (7%)
- Rhode Island (7%)
- Tennessee (7%)
By contrast, some states such as Oregon and Delaware have no sales tax.
How does a tax on the everyday stuff you pay for impact your finances in the long term, and whether you decide to relocate for a job?
Let’s take an example:
You order the exact same thing at your local chain restaurant in Chandler, Arizona each time you visit. You know the total by heart. The $9.99 cost of the meal totals out to $10.77 every single time, including taxes. Then one day you grab your favorite meal at a location across town in Phoenix, AZ and the bill rings up at $10.85.
No, they didn’t raise their prices by a random $.08—Phoenix, AZ simply has a higher sales tax. You’re paying 7.8% in Chandler, but in Phoenix they’re paying 8.6%.
That $.08 difference doesn’t sound like much—after all, you’d just be spending an extra $4 a year if you got your favorite meal once a week at that higher rate.
But multiply that $.08 on every dollar you spend every month. Say you spend $1,500 of your monthly salary on food, gas, etc.. That .8% difference in sales tax (between the 7.8% rate and the 8.6% rate) will cost you an extra $12 a month and $144 annually.
That $144 isn’t enough to make you turn down an offer to relocate. But let’s say you’re living in Phoenix paying an extra 8.6% on all products and services subject to sales tax.
Now you’ve got a job offer in Oregon where they have 0% sales tax. In Phoenix, you’re paying $1,550 annually on your purchases if you spend only $1,500 a month or $18,000 a year.
In Oregon you’ll be paying $0.
A savings of $1,550 adds up over time. In five years, you’ll have an extra $7,750.
Now sales tax may not be enough to determine whether or not to relocate, but it can help you decide which area of town to live in. (So, if you’re moving to Phoenix, you might consider living in its Chandler suburb for its lower sales tax rate).
Other taxes
Property and sales have long-term implications for your relocation budgeting, but there are a handful of taxes that can significantly alter your short-term expenses.
A handful of higher-tax states are seeing residents flee to lower-tax states—to combat this, they’ve imposed what’s known as an exit tax.
“Every state has different rules and regulations regarding relocating out of state. Some have what they call an exit tax, so if you relocate out of state, they will charge you a tax to do so,” advises Parker.
Just ask high-earning residents of New York who try to move, only to have the state’s Department of Taxation and Finance tracking their financials and issuing subpoenas. They’ll do everything within their power to verify that you’ve actually relocated, and when—so that they can collect every tax dollar they can get.
Some states like New Jersey claim it isn’t really an exit tax—but whatever you call it, you’ll have a hefty tax bill if you move out of some states, even if you can eventually get some of it back.
General cost of living
Calculating both long and short-term relocation costs isn’t all about taxes. There’s also lots of other cost of living expenses to consider, like the cost of food, gas, utilities, and anything else you currently spend your money on.
For example, if you move from Minnesota to Colorado, you’ll be paying about $400 a month for utilities in both states. But move to Rhode Island from either state, and you can expect to pay $530 a month for utilities—that’s an extra $120 a month, or $1,440 a year.
Food prices differ across the country, too. Take milk for example: you’ll pay an average of $2.59 a gallon in Phoenix, AZ, but as low as $1.85 in Louisville, KY and as high as $4 in Minneapolis, MN, Kansas City, MO, and Chicago, IL.
Costs vary on all sorts of products and services from state to state, from everyday items, like gas pump prices, to major monthly expenses, like health insurance premiums.
