Author Topic: Case Study: Expat Returning Home - Lump of Cash Looking for a Home  (Read 1882 times)

EcoCanuck

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Case Study: Expat Returning Home - Lump of Cash Looking for a Home
« on: September 17, 2015, 04:52:02 AM »
Hello MMM Community,

I have read through the entire blog and started reviewing the forums and I think I have a slightly different case study than any I’ve been able to find on the site.

An opportunity came up for myself (31) and my wife (30) to relocate to the Middle East and it has turned in to a great adventure and financial success story for us so far. We are non-residents, living as expats and enjoying a mainly tax free life.

This is the situation (All figures in Canadian dollars):

Debt: $0
Credit Cards – Only used for points and always paid off.
Current Savings: 70,000 (basically earning 0%)
Current RRSPs: 12,000 (can’t contribute or touch as non-residents)
No Cars or other liabilities

Estimated Total Savings in 3 years: $300,000 (CAD)

Now the twist in the case study – forget about our current expenses. We are fairly frugal (myself more than my wife, although I’m slowly working on her) and our only plan moving forward is to start a family – soon. We don’t know if we’ll move back to Canada or if we’ll relocate to another country but we know that our time here is limited. In three years I expect us to be on the move with either 1 or 2 children in tow.

Assuming we move back to Canada (as it’s the most likely possibility) and we return to Canada with $300,000 (CAD) and a blank slate, what would you recommend we do to optimize our return and relocation?

After reading the entire blog (thank you MMM) I am debating between two major options: Rent vs. Buy. Given our financial start what would be the best Mustachian strategy?

I need to make a plan. The cash we’re accumulating is sitting idle because we expect to need it liquid very soon if we are going to buy a house and my understanding is that for investing (other than short term deposits at slightly higher interest) investing in the stock market for lets say 1-3 years is a bad idea (if you will need to liquidize it). However if we are deciding to rent I can put my little army of employees to work immediately and they can give us a 3 year head start.

On the flip side – we will eventually buy a place (I would say a fair estimate would be after 5 years of renting?). If we wait 5 years the prices surrounding the GTA are going up on average 5% a year, meaning the house we would buy today would likely be 100k more expensive when we make the move and we would have a smaller down payment (at least 20% though). What would be the best Mustachian move?

With no current commitments and a healthy start to our next step how would you suggest we tackle the short/long term investments given the Rent vs. Buy scenarios. An important note is that my wife is conservative when it comes to money and investing and she is leaning towards purchasing a home (which means there's good odds I'll be a commuting sukka). *EDIT* The purpose of renting would be to avoid being a car clown and commuting 90min-120min a day (in hopes of improving quality of life and saving money - if the numbers make sense)


Additional Details:
- If we rented we would have 1 car, if we bought a home we would have two cars (used/paid in full/fuel efficient).
- If we bought a home it would be on the west side of the GTA (closer to family).

Goals:
- Find the best way to re-establish ourselves in Canada.

This request is starting to get long but if you require any additional details please let me know.

Any suggestions would be very much appreciated.

Sincerely,
EcoCanuck (Mustachian in Training)
« Last Edit: September 17, 2015, 05:03:42 AM by EcoCanuck »

laufen

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Re: Case Study: Expat Returning Home - Lump of Cash Looking for a Home
« Reply #1 on: September 17, 2015, 05:36:07 AM »
Following. Expat here, somewhat similar situation.
Isn't it a great feeling to bank the cash instead of falling into the flashy expat lifestyle? :D

munch

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Re: Case Study: Expat Returning Home - Lump of Cash Looking for a Home
« Reply #2 on: September 17, 2015, 05:57:01 AM »


You mentioned briefly the other option ie not moving back to Canada, but then proceeded to expand only on the Canada option.  In my opinion flexibility in your options 3 years from now should be one of top priorities.  That priority should be given high consideration in how you invest the savings you will accumulate the next 3 years.

Having lived in the Middle East the past 5 years as an expat I can say your perspective and priorities 3 years from now will mostly likely have changed quite a bit from what they are today.  Continuing to live “overseas” could very much be you and your wife’s wish at that time.  So I suggest to invest your savings in a way which would not limit your options 3 years from now.   

For us that means stocks and rental RE back in the US.   In particular on the RE, I am keeping an eye out for a place that makes sense today as a rental investment that is located in one of the locations in the US would prefer to move back to if/when that day comes.   In the meantime (however long that may turn out to be) it will be a productive investment.   Maybe such a place can be found in the part of the GTA that you prefer.


EcoCanuck

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Re: Case Study: Expat Returning Home - Lump of Cash Looking for a Home
« Reply #3 on: September 17, 2015, 06:30:50 AM »
Laufen: Definitely. We still enjoy many of the amenities but in moderation and always with some sort of discount. The summer heat also helps keep the expenses down as I am an outdoor person and its just a little too intense.

munch: Thanks for the reply. I only focused on the return to Canada as it is the most likely scenario (of all scenarios) and as a first post I didn't want to write a short story and scare away replies.

We've been here two years now and I can say without a doubt that our plans have changed in a big way (kids!). With this change I think its almost certain that we would return however you are correct, 3 years is a long time from now. I'm a little hesitant on purchasing a property and renting it while abroad for various reasons but one of the main ones is for tax purposes and not 'confusing' the government with an intent to return and thus a reason to insist on back taxes which would be a serious hit. It is something that we have looked in to and will keep open as an option. Thanks!

Guesl982374

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Re: Case Study: Expat Returning Home - Lump of Cash Looking for a Home
« Reply #4 on: September 17, 2015, 09:17:20 AM »
I vote rent and invest. It sounds like you aren't sold on settling down into one place. The time savings alone (house and yard maintenance) was worth it to my wife and I to not buy a house.