I am a US expatriate living in Israel and I am trying to save up in the next 7-10 years for a down payment on a house/apartment.
The prices here are what some would call a "bubble" here but even if they come down the banks still require 30% down payment on appraised value (per BoI) to give a mortgage.
The areas my wife and I are interested in range from 2-2.5M NIS so the down payment would be around 700K NIS.
My salary is high by Israeli standards (just at the FEIE cut-off) and I match 7.5% pension with employer and also put 10% (2.5% employee / 7.5% employer) into what is basically a 7 year tax free Israeli savings plan (Keren Hishtaldmut). With a very conservative growth rate it will be around 150K NIS in 7 years.
My concerns about putting money in investment funds here is the PFIC rules for my savings plan and also any mutual funds here would probably be PFIC as well.
An accountant had suggested I invest in US real estate, but not sure how that would affect taxes living here and owning/renting property in the US.
So to break it down I have come up with 3 options:
Save all money in Israel including investments until down payment sum reached. (Doesn't seem best from tax perspective)
Save cash and use tax savings fund but extra money invest in the US in real estate or some other vehicle until sum reached.
Save until we can buy a less expensive apartment and rent for us and rent out the apartment until there is enough equity to buy the place we really want.
Does this sound reasonable? Out of these options what would be the most likely to succeed and cause the least tax headaches? Any suggestions welcome.