Hi Everybody !
This is a complicated situation for me, so I'd like to ask your advice.
(I live in Japan and will write in JPY, just remove two zeros to have equivalent in USD (1 USD = 100 JPY)).
Situation:
- French National (34 y.o), Japanese wife (30 y.o), 2 kids (1 and 4 y.o).
- Living in Japan, family income after taxes is around 11,700,000 JPY (70% from me, 30% from my wife). That is 117,000$
- Own and live in a Tokyo appartment currently worth 65M (650k$) but we have only 22% equity in it. We purchased it new, 3 years ago for 61M.
- No car, train commute paid by employers.
Assets:
- Appartment Equity: around 14,000,000 JPY (140k$)
- REITs investments in France: 50,000 euros (55k$).
- Cash: 4,500,000 JPY (45k$)
- Stocks and REITs in Japan: 1.4M (14k$)
- No debt other than mortgage
Monthly expenses:
Net Income: 885,000 JPY
Mortage: 166,000 JPY (132,000 principal, 34,000 interests at 0.775% variable rate, 32 years remaining)
Grosseries: 100,000 JPY
Daycare total for both kids: 65,000 JPY
Gas/Electricity/Water: 30,000 JPY
Lunch in weekdays: 30,000 JPY
Building charges (includes internet): 23,000 JPY
Eating out, vacations, etc..: 50,000 JPY
Mobile phone: 10,000 JPY
Haircuts, beauty: 10,000 JPY
Transport (for leisure): 5000 JPY
Kids swimming club: 7000 JPY
I forgot some items, but we manage to save around 30% of our income (on top of equity building with mortgage).
We have a comfortable situation, even though it is still moderate mustachianism.
Now, our problem is that we have a strong desire to leave Japan, and move to France in summer 2017 (schools start in September there). The reasons are mainly a wish to have our kids in the french education system, and also my wife and I being tired of the work environment in Japan.
Should we sell the appartment or rent it out for ?
Reasons to sell (agent fee 3% for seller):
- Market is rather good now (+10% in value in 3 years).
- Avoid risks of interest rate rising as our mortgage is in variable rate (and it's a big exposure considering the size of the principal, the loan is over 35 years... it was before I discovered MMM)
- Avoid risks of market downturn due to earthquake, typhoon, fukushima-like nuclear crisis, financial crisis.
- Avoid FX risks, by cashing out the equity in JPY and buy EUROs, while the JPY is still quite strong.
Reasons to rent out (net return would be around 3.5% assuming the property is managed locally, so not that great, but could still be good cash flow for a fw years before selling it):
- Appreciation opportunity with Olympics coming and demographics trends in Tokyo.
- Amortize initial costs (we paid around 2M in taxes and various fees).
- Continue building wealth with debt leverage. If we sell and terminate the loan, we will have no debt left, so opportunity cost of having a debt with low interest rates.
- More flexibility about return in France, as we can find a tenant in one month. In case of selling it might take a 3-6 months, so it will be a headache when applying for jobs in France as companies may not want to wait that long.
What would you do ?
One thing to consider is that when we move to France, I expect our net income to drop by around 50%. Wife would not be working, only Paris offers top salaries and we are not interested in living there.
Of course, public education is free until college, and cost of living will be much less, but still a big lifestyle adjustment would be needed. We are actually considering staying one more year in Japan to stash up so more cash, but then our oldest son would need to enter the international school which is a big headache..
Thanks a lot for your advice !
