No expenses except food; where to put money?

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No expenses except food; where to put money?

Postby Wino » Fri Aug 17, 2012 12:14 am

I saw a similar post with someone living overseas. I, too, live overseas, and my contract terms are that my house, utilities, car (fuel, maintenance, everything), return trip annually to the US ... as the topic says, everything except food and entertainment is paid for. We also have some small US expenses such as our storage unit ($100/month), US car (ins, taxes), and home insurance plus flood. I have simple tastes, so this mostly means I buy food and have a weekly date night with my wife.

I own my US house outright and have relatives staying there now. The relatives are paying only the taxes and about $150/month for a maintenance fund, as well as utilities. They are saving to purchase their own place while we're basically breaking even on the transaction. Yes, it would rent for much more than this. It is in a desirable neighborhood that has not lost any value during this bust. In fact, the house has probably appreciated in real terms by 10% since the beginning of the crash. I could sell it within 30 days of putting it on the market for about $250K and would be able to sell it for more if I was willing to wait and play hard ball. I do not desire to sell it, though.

Anyway, we're left with essentially all of our income to invest or enjoy. I have maxed out our IRA's and continue to put a few thousand per month into Vanguard funds. This still leaves me with a few thousand per month that is available to invest or to purchase toys. I don't own any toys, so the money is earmarked for investment.

I was thinking about immediately financing our new return-to-the-US house because the one we now own is not ideal for our needs. We have located both the area and the builder we would use, as well as a price for this house. The cost is $400K. Right now, I don't have $80K in a money market fund, and I'm not touching the other funds for this. We could save up the $80K in a relatively short time (within a year). Would you go ahead and get the loan, have the house built, and then allow it to be vacant - or a different relative to be a caretaker? Or would you continue to save until you return to the US and have the house built at that time, allowing more money into more funds set up for this purpose? The house would be in Houston, Texas, so we'd have to keep the AC running for much of the year to keep the humidity in the house at a minimum whether we have caretakers or not.

I think real estate is pretty near its bottom, as are interest rates. It would not be smart to avoid this loan, in my opinion, but I am concerned about letting the house sit idle for a few years. My relatives are industrious, college-educated with good jobs, but are young, so the caretaker aspect is not going to have meth parties or similar happening in the houses. As another item that may apply, I have never used my VA loan, so that is still on the table for use if I could get any value from it.

I know most folks would kill to be in my situation, but 30 years of hard work does have a few rewards. I had more than a decade of chewing my nails wondering if the lights would be on thirty days in the future, and another decade of not worrying, but still not being much more than living comfortably if austerely.

So, what are the opinions of others? Should I buy as soon as I get the down payment by itself, or should I wait and just continue to amass cash in a taxable fund until I return to the US? I'm also open to other suggestions, but my only real goal is to purchase and keep both houses and retire when I get back, using the older home for rental income (and maybe to help out my younger relatives still getting started as I'm doing now for the couple living in my present house). In any case, I won't touch any of my existing fund accounts which are for retirement. As you can see, I'm not trying for income off of these properties as my personal income is sufficient for our needs.

Thanks for any replies,

Bichon Frise
Posts: 1108
Joined: Fri May 04, 2012 2:23 pm

Re: No expenses except food; where to put money?

Postby Bichon Frise » Sun Aug 19, 2012 7:56 pm

Let me get this straight, you have a house you don't want to return to when repatriated AND you want to buy a new house for whenever the time comes to return home? Do you have an impending repatriation coming up?

IF you have no use for the house once you kick the family members out, I would sell. First, if located in Houston, the market is tied to essentially the price of oil. If you lived in that hell hole during the early 80's, you probably know a person or two who either got foreclosed on or brought cash to closing when they sold the house.

I agree that the market hasn't been hit as hard in the Houston area, but you may be understating the time required to sell. I recently divested of a home in the Heights area within the last year, we priced to sell and it moved within about 5 days. Our friends up 290, they are underwater on their home. So, it does matter where you live.

In regards to building a new home, if you have no timeline to repatriation, I would wait. Tastes and needs can change. So can neighborhoods. You have no idea what the future holds. I would rather hold the cash for the home to be built when needed. JMO.
Bichon Frise

"If you only have 1 year to live, move to it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

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