What to do? A Q for after FI...

[travelbug]

Hi,

I have a question and I keep reviewing it but I think I may be missing something somewhere.

We are going to sell our house and travel for afew years. IF we decide to settle down with a home base again after that we will not resettle in our current city.

The few locations we have listed will cost around the same amount as what we have saved from the sale of our house. (for a figure, I will state 500k- we are in Australia)

So we have invested 500k and we will have either re-invested the earnings from that, or have let it compound.

Would you rent a house and use the income from this (500k @ 4% = 20k pa = 385 per week) to pay for the rent, or would you buy a house?

Obviously the house would cost more in upkeep and maintenance, but then again rents will rise and the house will appreciate over time. (generally).

What am I missing?

[arebelspy]

It depends on the cost of renting in that area versus the cost of purchasing.

Some areas it makes no sense to buy (DC, for example), while in others it makes no sense to rent.

There are other factors as well (the liquidity of your money - if you will have to sell high, or low, or whatever, to get the house payment - the length of time you will be living there, etc.)

My favorite comparison tool for the two scenarios is the New York Times' Buy vs. Rent Calculator.

[travelbug]

thanks arebelspy I will check it out.