Good Problem to Have

[Expat3003]

Hi, I've been a lurker here for some time and appreciate all of the good conversations. I'm in a bit of a unique situation and am writing to see if I can get some new ideas. My situation is that I am an Executive Expat living overseas. A few right decisions here and there has allowed me to get a pretty lucrative package. A bit of background; I am 40, married and have no kids yet (trying). My 32 yr old wife cannot work in this country and spends her time volunteering. Our two previously lived-in homes are now rental props in the US that break even annually. We have no debt other than those two mortgages.

On the plus side, I earn about $250K per year plus stock options in "regular" pay plus all kinds of other allowances and such that bring my total gross income to over $500K annually. It gets pretty complicated, but cash into my accounts from my job totals about $240K net without touching the stock options. We live off of about $60K leaving $180K left per year to invest/save.

A bit more background is that we have $240K in my 401K, $300K in savings/equities, and another $250K net waiting to exercise in vested stock options (at today's price).

I know this is a bit much to read, but these are big figures and I come from a regular middle class background. I understand markets and finances well enough, but don't really have a mentor or family member to guide me. I'm trying to take bits of advice from here and there to figure out the best way to set ourselves up for the future when we return home. The current plan is to return to the same city after another two years, but not live in either of our two houses (location reasons). We also plan to have two children and will need two vehicles.

There are so many things to consider, but I guess my main question to the forum is about housing. I know to max out retirement, start 529s for the (eventual) kids, maintain zero debt, etc.

But how much should I be planning on keeping in savings/investments vs. how much house to buy? If the neighborhood and type of house we are targeting is $700K, how much should we put down? I can't say that I love my job and would love to get out of the stressful "rat-race" as soon as possible - perhaps do something more enjoyable for (far) less money. In the meantime, I'll likely return home with the same $250K year gross income. Perhaps call it quits sooner rather than later?

Anyone with a plan of action? Any and all comments or opinions are welcome. Many thanks in advance.

[bjl584]

Rule of thumb is 20% down for a house and having total cost of home represent no more than 3 years salary.

You could move into one of the rentals. Or you could sell both. Do you want to keep them? What is your longterm plan for being a landlord? If they are not near where you will be living, I would dump them. Long distance landlording is not a good idea in most cases.

The 529's, I'm not sure you qualify. There may be income limits, but I'm not sure.

You are close to a millionare at 40, so that is excellent. Can you post up a more detailed budget listing expenses and assets? I think that you are doing great. Do you have a taxable brokerage account? If so, what do you have in it?

[Nika]

In your situation saving as much as possible to pay cash for the house, or for most of it, would give you a lot of options as to what job you can take.

When you have your kids, you might want to spend more time with your family, take few months to help out your wife and bond with the new baby, or to take a position with less stress or overtime. The smaller your payment it (or if it is gone), the more options to do things like that you will have.

[feh]

Putting the issue of buying a house aside...

You are talking figures that will allow you go retire in short order if you do things right. To that end, I suggest you talk to a professional, not an internet forum.

[Hector]

Seems like you know a lot about investing.
Howz your current asset allocation and return on investment working out for you? If your expected rate of return is more than interest that you are going to pay on mortgage, I don't see reason to put more than 20% down payment to get best mortgage rate possible.

So keep 20% down payment somewhere safe.
Bank would be a good option if you don't want to take any chance of loosing real money. Check out two year CD at ally.
Short/ltd term bond/muni fund would be another option if you are comfortable with that.

[LivingAlmostLarge]

How are the rentals doing now? ROI? Is it worth keeping? Too far underwater? Could even manage to keep the rentals and a $700k home on a lesser salary? Would it be a feasible thing especially with kids in the near future.

Will your wife work when you get back? I think that just keeping the savings $180k/year in the bank is a good plan, but looking long term there are lots of considerations. Perhaps buying a home cash, or selling rental and keeping enough cash to purchase house outright but not doing so.

[vitalogist]

A 20% down payment on the house is a good move. Since you have no kids, education cost won't matter, although I think you should start planning for it.

[Expat3003]

Thanks everyone for the replies. We obviously will seek some professional advice, but many of the good ideas here will help guide those conversations. It seems that at the end of the day, patience is key. There are so many variables - the markets, housing prices, kids, etc - that we just need to stay the course. That means keep costs in check so that these figures remain accurate, manage the investements properly, and keep refining/deciding on the long-term goals.