From when is building a house sensible?

Hello,

we are probably in a rather unusual situation: Currently, I (29) live with my wife (29) and our child (1) in the USA because of my job. However, at some point, we plan to return to Germany. At the latest in 3-4 years before our little one starts school. Then, although not immediately, we would like to build a single-family house relatively soon. For us, the question now is from when the return makes sense from a financial perspective. For other reasons (family), we would rather go earlier, but I think it is probably not yet sensible at the moment.

The financial situation looks like this: With my US salary, I can put aside about $1500-$2000 per month besides all the other costs. Currently, we have $51,000 in savings. I have a bonus agreement with my employer so that I stay until the end of 2016. If I fulfill that, and we continue to save as before, we would have about $125,000 in savings by the end of 2016. Throughout this time, my wife may not work and is otherwise quite restricted due to the visa. Another reason to go earlier.

My job would bring in approximately a net monthly salary of 3,900 EUR in Germany. That is significantly less than I earn in the USA – but rent and some other costs are also higher here in the region. It is difficult to compare, but on the whole more remains monthly in the USA. My wife would first have to finish her training in Germany, so we initially do not count on any income from her.

On the one hand, the matter is of course clear: Waiting 2 years ($125,000) seems better than returning immediately ($51,000). What I am not sure about: How much can we afford in Germany, on the one hand if we come at the end of 2016 with about 90,000 EUR, on the other hand if we come now with 38,000 EUR; considering my expected salary? Is that a huge difference, or can that be somewhat compensated by a higher burden?

Thank you in advance for your advice.

Good morning,

I wouldn’t make it dependent on the money but on personal circumstances. Do 2 more years working in the USA benefit professionally? Then stay there?

Is the child doing well there? Then stay.

Can your wife complete her training there without problems? Then stay.

I wouldn’t tie the 2 years to a property. Especially since you first have to come, settle in, and only then look for a house, land, etc. In my opinion, you won’t start building before 2017. Possibly acquire an existing property.

Hello,

after 1.5 months here is my feedback :-) First of all, thank you very much for the input. It is indeed true that the possibility of building a house should not be the decisive factor for returning to DE. It certainly isn’t – but it is important to us not to lose the perspective of building a house through the move.
A lot has happened with us in the meantime. We have decided to return, also because there is a good professional opportunity for me. I have the opportunity to transfer to our German branch, with almost unchanged salary. The bonus agreement also remains in place. Thus, my net income will be about 5,500 EUR per month, and our equity capital will be able to increase to about 70,000 EUR just through the bonus, plus savings from what remains of the salary.
My wife will first need a while before she can show an income, after the visa-related several years’ break in the USA, the birth of our child, and some further training. I will therefore remain the sole earner for the next few years.

Of course, we will first wait 1-2 years until the new situation has stabilized. But afterwards: Does it make sense to think about building a single-family house with then 70-110k EUR equity? Is it too risky as long as we could not cover the monthly installment by her salary alone?

Thank you very much!

Hello Matt85,

first of all, I want to say that I think it’s good that you are dealing with the financial aspects of buying/building a house and giving it some thought. Financially speaking, with the planned equity and your salary, it definitely makes sense to think about building a house. However, I am writing this solely based on your income and the equity; I don’t know what your household budget looks like. :-) As you yourself said, I would also wait first until you have settled here again and feel at home and are sure that you both want and can work and live in this place. Regarding your last point, here are a few thoughts from me:

How security-conscious you are and how much risk you are willing to take is something only you can decide. It is always desirable that at least one partner can maintain the house alone, which is the case for you if the numbers permanently look like this. This is not possible for everyone. What is important to me personally is also that longer periods of unemployment (as far as I have read, your job seems pretty secure though) or illness/accident with correspondingly lower income can be compensated for, but that could definitely be possible with you as the sole earner (of course it depends on your expenses/loan amount and installment...). The ideal case is, of course, if both partners can maintain the house independently, but this is possible in very few cases. That increases security and allows you to sleep even more peacefully, but the question is how realistic that is for you. You say your wife still has to complete her training/continuing education. Is it realistic that she will earn enough in the foreseeable future to maintain the house with her salary? And since your wife has not worked for quite a while, there is also the question whether she will go back to full-time work immediately after this time?
It is always good if the partner earns something extra, but the decision about how much risk you are willing to take cannot be taken from you by anyone.
As a small side note, even though it is written here in the forum over and over again: think about securing your earning capacity/your income, i.e. life insurance/disability insurance (RLV/BU).

Yes, it is indeed rather unlikely that my wife will be able to earn enough income in a few years to cover the monthly installment on her own. Our idea is therefore rather that we might wait until she actually earns something, so that if my income were to disappear at some point, we could survive longer with a financial cushion & her income than purely from our savings. Without already living in Germany, we also do not yet know what our monthly budget will be like; however, I assume that the targeted salary will be at least 2000 EUR. Which, by the way, is still significantly less than we pay here in the USA for our apartment rent – some areas here are really extremely expensive.