Author Topic: Housing strategy for beginner mustachians  (Read 1201 times)

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Housing strategy for beginner mustachians
« on: December 12, 2018, 04:15:41 AM »
Hey everyone,

Sorry for the wall of text in advance. Me and my SO are currently in the 'stashing' stage of FI, and we are trying to figure out how it would be best to make a nest. Let me share some details of us so that you can have a better insight and maybe you can give an advice/idea on building up a master plan for us.

Me and my finace are a Hungarian 28 years old couple currently living in the capital of Hungary, Budapest (population ~2 million ppl), renting an apartment. Our long term vision would be to move back and live in (or near) to our hometown (population ~120k ppl). So why don't we move right now?

In Budapest we are currently earning $3500 per month and being on a SR of 55-60%. The rental is $500 per month for our aparment.
Compared to our hometown, real estate costs~70-80% more in Budapest (both rental, buying price of a flat/house) but so as our salaries. Also, we have much better career opportunities here (I'm working in IT and my SO as an engineer).

So our plan would be to stay and stash money here then in 5-10 years FI(RE) and move near to hometown, to live closer to family.

For the time while we live in Budapest we would rather have my own property then paying a rent. Our hearts' desire is living in a house, having a dog do some gardning. But a house ofcourse costs like 30-40% percent more than an aparment. Let me share you briefly what assets we have right now and what scenarios I can imagine.

What we have:
- 1 (inhereted) flat in hometown (worth $49000) - very good city apartment, currently rented out for  $250/ months.
- 1 (inhereted) house in hometown (worth $63000) - my childhood home, currently on sale, houses are unpopular for renting.
- $70000 savings in different assets

A house in Budapest costs ~$116k and a flat like $84000. (Of course you can find more expensive ones depending on the neighbourhood.)

Long term plan (when FI(RE)) to get a cheap house in the neighbourging villages of my hometown for $35000 (price today, I'm not considering future prices and inflation). Reason being for cheapness is that people are moving to cities for work.

Scenario #1 - buy a flat in Budapest
Sell house in hometown
Buy flat in Budapest (complete buying price from our savings OR get a loan?)
Keep flat in hometown (as an investment)

When FI(RE):
Buy a cheap house close to hometown.
Keep flat in Budapest for a decent income

Benefit: Cheaper cost of housing while in BP, less real estate transaction.
Drawback: We have to live in a flat in Budapest for another x years.

Scenario #2 - buy a house in Budapest
Sell house in hometown
Sell flat in hometown OR use most of our savings AND/OR get a loan?
Buy house in Budapest

When FI(RE):
Sell house in Budapest
Buy flat in Budapest/or more flats in hometown (for investment)
Buy a cheap house close to hometown.

Benefit: We can finally live in a house after living in rented apartments for 10 years.
Drawback:
  • Affordable houses are out in the suburbs of Budapest (more commute time), with some research could be able to find one within 40-60minutes of bicycle ride from city center (workplaces).
  • More cost on monthly utilities
  • More hassle with buying and selling properties

Scenario #3 keep house in hometown
Sell flat in hometown
Rent out house in hometown (It might be rented out for like 500 a month, with varying success)
Buy flat in Budapest (complete buying price from savings / loan)

When FI(RE):
Just move back home.
Rent out the apartment in Budapest.

Benefit: It's easier and faster to sell a flat than a house.
Drawback:
  • It's harder to rent out a house. Considering that people want to rent cheaper they tend to move to flats, only lower income people are the target audience.
  • I'm not sure if I want to live in my childhood home rather than filling a new one with memories

I hope you understood what I wanted to describe here and please point out the good parts or the flaws of my master plan and also my scenarios for execution. Also, if you have any other/better ideas just let me know.

Update:
Converted amounts to USD
« Last Edit: December 13, 2018, 06:51:51 AM by ther »

havregryn

  • Bristles
  • ***
  • Posts: 437
  • Age: 35
  • Location: Luxembourg
Re: Housing strategy for beginner mustachians
« Reply #1 on: December 12, 2018, 02:18:33 PM »
I think it is difficult for people here to relate to your situation (imaginary currency doesn't help as we have to take your word for it that you did all the math correctly...but for example, you missed a zero when mentioning prices in Budapest as otherwise none of it makes any sense)....so not much to go on.
Also, coming from the former Eastern block I completely understand the fixation on real estate and the whole "need to live in an owned residence even though we don't even want to live here much longer" thing, but I think most people on this very rational and US-centric forum would not.

So, anyway, I see little point in buying an apartment in Budapest if you want to live in a house. However, I also see very little logic in buying a house if you are 28, no kids and know already now that you want to move elsewhere. I mean, how much gardening would you really end up doing? Even if there are next to no transaction costs involved (no idea about Hungary there but according to this, there are transaction costs to consider https://www.globalpropertyguide.com/Europe/Hungary)

I don't see how buying a property in Budapest just so you can stop renting (even though as said, I completely understand the cultural context this is coming from, in Eastern Europe the social stigma of being an adult renter is probably similar to that of being homeless somewhere else and the market and landlord behaviour often reflects that) would really work for your plan. Maybe if you have no other real option to invest the 200 000 imaginary monies. But also, it sounds like you have quite some savings , as you seem to have saved enough to buy an apartment in Budapest in cash...that sounds to me like an impressive feat at your age and definitely implies you have way more income than most Hungarians so you shouldn't be needing much longer to have enough to FIRE?  Hard to say not knowing the actual value of the imaginary currency. But according to this link above, your imaginary currency shouldn't be too far off from the US dollar?

My impression is that you are earning well above average for your surroundings and are probably getting a lot of social pressure over living in a rental. I completely get it, we own three properties and still I feel uneasy about renting something to live in that works better for us temporarily simply because I grew up in this kind of a society. But if you know you want to move eventually and you are saving bucketloads of money like this, I really don't see how this would really help your plan....but of course, it's hard to say just guessing. Using actual conversions of your numbers into a real currency would definitely help.


ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #2 on: December 13, 2018, 04:40:37 AM »
Hi havregyn, thank you for your response.

You are right, I should have converted the values properly, let me get this straight.
Currently we are earning ~$3150 from our salares and an additional $350 from rental income.

Our net worth is something like:
- house in hometown (worth $63000) although I wouldn't count this since it will be used as residental property (or to be sold to get one)
- flat in hometown (worth $49000) rented out for $250
- other assets (worth $70000) (including two garages rented out for $100)

Our current monthly budget is $1400-1500 that is including a rental of $500.

The market price on an affordable flat in Budapest is $84000-85000, and a house is sth like $116k+.
The transaction would cost an additional $3500-4000.

The reasons why I started thinking about having my own property in Budapest are:
  • Getting rid of paying a rent
  • Future real estate investment (after moving from Budapest)
  • Getting rid of the currently empty family house I inhereted


As for having this eastern european fixation of owning a property, you are completely right, on the contrarty the Budapest rental possibilities are developed in my opinion in a way so you can get a long term steady rental, and you don't have two move every year or two (assuming you are paying the rent, and not demolishing the place).

An additional reason for having our own place is that in the coming years we are planning to have a child as well, but on the other hand that could still work with a steady rental apartment.

Thinking through again and again, my main question would be, what would be the best to do with the inhereted family home?

« Last Edit: December 13, 2018, 04:49:15 AM by ther »

kristof

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: Housing strategy for beginner mustachians
« Reply #3 on: December 13, 2018, 06:14:18 AM »
Your long term plan is to move back near your hometown and it sounds like you left mostly to accelerate your path to FI. If that's the case, have you thought about going abroad for a few years instead of staying in Budapest?

If I'm doing the imaginary-currency conversion right, you're making under 1 million HUF/month combined. Since your English is excellent and you're both in high demand fields, I'd be surprised if you couldn't at least double that in another country, which would accelerate your FI timeline and/or give you a bigger cushion before you stop working.

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #4 on: December 13, 2018, 06:37:41 AM »
Hey kristof, thanks for the advice.

Our current stay in Budapest is part of our move back from abroad. We were expats for 1.5 years, but we were missing family and friends therefore we decided to move back home. I was able to relocate within my company, so it was a feasible decision to do it, now it is the time to decide what to do next.

But I still see a point in moving abroad for a year or two in the near future, but that may happen when we will have a child and my SO is staying home with him/her anyways.

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5299
  • Location: Norway
Re: Housing strategy for beginner mustachians
« Reply #5 on: December 13, 2018, 07:28:00 AM »
If you are not sure you want to live in your house in your hometown, I would just sell it to stop worrying about it. Whether you want to keep the rental apartment should depend on whether it generates a good cash flow and how time consuming it is. As I presume you don't want to live in that apartment in the future. If you decide to buy another house, you do get a higher interest rate on your mortgage because you have to borrow more, than it might pay off if you sell the apartment.

You can use the money to buy something in or near Budapest. It is nice to own your own place. If you intend to live in it for the next 7 years or so, the transaction costs might level out, compared to renting. If you intend to live there for a shorter time, keeping renting might be a much better financial alternative.
Keep in mind that a house requires a lot of expected and unexpected maintenance. When having a young child, you might not have the time and energy for it. But on the other hand, it might be the house where you want to keep living for a longer time. An apartment might be more convenient, but you might want to have more after some years. And remember that maintenance of your house is only/mostly a good investment, if you do the stuff yourself and don't spend a lot on handymen.
Also keep in mind that if a house in Budapest gives you a long commute, it might turn out to be costly if that leads to buying more ordered food, paying for longer child care, hiring others to do maintenance etc. You wrote about commuting by bicycle, so the transportation costs shouldn't be high.
Also keep in mind that selling a house causes a lot of stress. If you want to keep your options open, renting gives more flexibility than buying something.


2Cent

  • Pencil Stache
  • ****
  • Posts: 644
Re: Housing strategy for beginner mustachians
« Reply #6 on: December 13, 2018, 07:39:15 AM »
I think having a child while staying in a Nice apartment is no problem at all. I also have the idyllic image of children running in the yard, playing with the dog. But in reality kids don't need much space until they are 2-3 years old and small city gardens are quickly too small for them anyway. Add 9 months of pregnancy and you are already close to your FIRE date. The only good option to move is if that house can be profitably rented out when you move out or if the intrest and taxes are cheaper than your current rent.

I would definitely not move abroad. If you missed your family now, you will miss them much more when you have a baby. Your wife will be at home completely isolated if she doesn't even have a job there and child care will be expensive if she goes to work.

Laura33

  • Handlebar Stache
  • *****
  • Posts: 2275
  • Location: Mid-Atlantic
Re: Housing strategy for beginner mustachians
« Reply #7 on: December 13, 2018, 08:41:33 AM »
I think the decision is difficult for you because you have an emotional reason for wanting a house, and you are justifying it for a financial reason (it's an investment!), and then asking us to validate that it is the best financial choice.  But you can't make a proper financial evaluation unless you focus only on the financial side of things.  So let's split the two things apart -- here is a very over-simplified way of looking at it:

First, a home that you live in is first and foremost a consumption decision.  You have a reasonable living situation now.  So if you choose to spend more on a different living situation, that extra is discretionary money that you are choosing to spend for your current comfort instead of investing for the future.

Second, look at all your various housing options as if you were buying them to rent out.  Are they good investments on that basis? 

- Hometown properties:  would you buy the flat/house in your hometown today as investments if you didn't already own them?  If not, then the best financial course is to sell them.
- Budapest properties you are considering:  if you were buying them to rent out, would they be good investments?  And by this, I don't mean "will property prices appreciate in the next 5 years?"  That is speculation, not investing.  What I mean is could you rent them out for a sufficient amount of money that you cover all of your costs of ownership, plus generate a good profit on top of that?  If so, then it is a good investment.  If not, it's not (see "consumption decision," above).

Third, consider all of the extra costs associated with your possible new option.  In particular, the costs of the commute.  How much extra gas/transport costs?  And even if you bike:  how much is your time worth?  Is it worth having the perfect house for your possible new baby, if you're going to be gone an extra two+ hours a day to commute to the job?  Would your family be better off if you lived close and used that time to either work more (and thus possibly earn more) or spend it with them?

Fourth, look at the opportunity costs of each choice.  Specifically:  if you buy any apartment/house, you will need to take money out of investments in order to make your downpayment.  In almost every situation, the stock market does better over time than properties that you live in.*  So it is pretty likely that when you are ready to sell, you will make less money from selling the flat/house than you would if you had just kept the money in investments, especially once you consider the costs of buying/selling/maintenance.

Yes, this is all very very simplified -- I am completely ignoring the likelihood that the property market may boom in Budapest, I am ignoring the equity you would build through a mortgage, etc.  But you have to start somewhere (and property markets go bust, too).  I also don't know your market well enough, don't know the transaction costs or likelihood of prices going up or down, tax implications of property ownership, or any of the information I'd need to know to give you good advice.  But at the big-picture level, it looks like this:

1.  Renting where you are and selling the hometown places is probably the best financial move, because it will leave you the most money to invest (whether in properties or businesses, your call), but it may not satisfy your emotional desires.

2.  Buying a house in the suburbs is likely the worst financial decision, because it will cost a lot more of your savings and/or more of your income than your rent currently does, and it will add on a horrible commute that will cost more and interfere with your quality of life and family time.  But it is the option that fulfills the mental picture of your dream and so is the most emotionally satisfying to think of (at least before you're making that commute every day!).

3.  Buying a flat may be the happy medium, IF you can find one that would be a good investment (as defined above), and if you are willing to hold it and continue renting it out once you move back home.  If you plan to sell it, you would also need to consider the additional costs of buying/selling in this analysis.

Good luck!


*The rules are different for investment properties that you rent out, because of leverage:  A house that rents out for $1000 will provide $1000 every month regardless of how much money you put into it.  So you can buy one house with all-cash and receive $1K/mo. (no leverage -- comparable to what you do when you buy stocks) -- or you can take the same money, put 10% down on 10 houses that each throw off $1000, borrow the rest, and take home [$10,000/mo. - mortgages].  If you find good rental properties, the second option brings you in a LOT more money than the first.  But note that if you live in the property, you are "using up" that rental benefit for yourself and so not generating that income.

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #8 on: December 13, 2018, 10:01:11 AM »
First of all, thank you all the answers you amazing people.

If you are not sure you want to live in your house in your hometown, I would just sell it to stop worrying about it.
You are right, that is/was my intention as well, and to get things going it's currently on sale now.

As for the rental apartment in hometown is fine as it is, have some stuff to do with it (as renting a flat out is not a passive income), but it's managable for the money it generates.

Quote
Keep in mind that a house requires a lot of expected and unexpected maintenance.  When having a young child, you might not have the time and energy for it. But on the other hand, it might be the house where you want to keep living for a longer time. An apartment might be more convenient, but you might want to have more after some years. And remember that maintenance of your house is only/mostly a good investment, if you do the stuff yourself and don't spend a lot on handymen.
Also keep in mind that if a house in Budapest gives you a long commute, it might turn out to be costly if that leads to buying more ordered food, paying for longer child care, hiring others to do maintenance etc. You wrote about commuting by bicycle, so the transportation costs shouldn't be high.
Also keep in mind that selling a house causes a lot of stress.

You are very right, if I take the pros and cons of owning a house in Budapest it has a lot of cons (price, distance, maintenance, stress with selling) so it might be just better to compromise on our hearts' desire and having a house later, when we have more time to enjoy it (FI).

Quote
If you want to keep your options open, renting gives more flexibility than buying something.
That's true as well, altough having a good flat in Budapest can easily be turned to be an investment apartment (when moving back to the countryside) generating more money because of it's location for the same amount of time consumed.



The only good option to move is if that house can be profitably rented out when you move out or if the intrest and taxes are cheaper than your current rent.
I think it's quite a pain to rent out a house even in Budapest, probably I would have the same problems with it what I have now with the house in my hometown.

Quote
I would definitely not move abroad. If you missed your family now, you will miss them much more when you have a baby. Your wife will be at home completely isolated if she doesn't even have a job there and child care will be expensive if she goes to work.
That is only some hypothetical side mission I had in mind even if do it we would go abroad to some neightbouring country where you don't need to take a plane to get home.

More text incoming soon...

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #9 on: December 13, 2018, 11:03:09 AM »
I think the decision is difficult for you because you have an emotional reason for wanting a house, and you are justifying it for a financial reason (it's an investment!), and then asking us to validate that it is the best financial choice.  But you can't make a proper financial evaluation unless you focus only on the financial side of things.  So let's split the two things apart -- here is a very over-simplified way of looking at it:

First, a home that you live in is first and foremost a consumption decision.  You have a reasonable living situation now.  So if you choose to spend more on a different living situation, that extra is discretionary money that you are choosing to spend for your current comfort instead of investing for the future.
I wasn't considering this a bad decision from an investment point of view. But true, that can be a better use of that money.

Quote
Second, look at all your various housing options as if you were buying them to rent out.  Are they good investments on that basis? 
That's a very good point to consider, thanks!

Quote
Fourth, look at the opportunity costs of each choice.  Specifically:  if you buy any apartment/house, you will need to take money out of investments in order to make your downpayment.  In almost every situation, the stock market does better over time than properties that you live in.*  So it is pretty likely that when you are ready to sell, you will make less money from selling the flat/house than you would if you had just kept the money in investments, especially once you consider the costs of buying/selling/maintenance.
As I wrote before, I wasn't really thinking about it as it might worth putting this money in other assets, but worth consideration.

Quote
Yes, this is all very very simplified -- I am completely ignoring the likelihood that the property market may boom in Budapest, I am ignoring the equity you would build through a mortgage, etc.  But you have to start somewhere (and property markets go bust, too).  I also don't know your market well enough, don't know the transaction costs or likelihood of prices going up or down, tax implications of property ownership, or any of the information I'd need to know to give you good advice.  But at the big-picture level, it looks like this:

1.  Renting where you are and selling the hometown places is probably the best financial move, because it will leave you the most money to invest (whether in properties or businesses, your call), but it may not satisfy your emotional desires.

2.  Buying a house in the suburbs is likely the worst financial decision, because it will cost a lot more of your savings and/or more of your income than your rent currently does, and it will add on a horrible commute that will cost more and interfere with your quality of life and family time.  But it is the option that fulfills the mental picture of your dream and so is the most emotionally satisfying to think of (at least before you're making that commute every day!).

3.  Buying a flat may be the happy medium, IF you can find one that would be a good investment (as defined above), and if you are willing to hold it and continue renting it out once you move back home.  If you plan to sell it, you would also need to consider the additional costs of buying/selling in this analysis.

Good luck!
1. As I mentioned, the hometown flat is working really well as investment property, I wouldn't touch that now.
2. Thanks for point out the drawbacks of having a house there, as others have pointed on it as well, financially that might not be a good descision.
3. I need to put up some analysis now, playing with the different scenarios.

Quote
*The rules are different for investment properties that you rent out, because of leverage:  A house that rents out for $1000 will provide $1000 every month regardless of how much money you put into it.  So you can buy one house with all-cash and receive $1K/mo. (no leverage -- comparable to what you do when you buy stocks) -- or you can take the same money, put 10% down on 10 houses that each throw off $1000, borrow the rest, and take home [$10,000/mo. - mortgages].  If you find good rental properties, the second option brings you in a LOT more money than the first.  But note that if you live in the property, you are "using up" that rental benefit for yourself and so not generating that income.
I am thinking this type of real estate investment requires a lot of time to manage (financially and the houses as well), I wouldn't like to be that committed to it for now.

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1662
Re: Housing strategy for beginner mustachians
« Reply #10 on: December 13, 2018, 11:24:07 AM »
Owning is over rated, in my opinion.  Part of the reason I own, as opposed to rent, is that typically, landlord-tenant relationships end within 5 years.  I do not wish to move that often (the older I get...).

When in doubt, rent.

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #11 on: December 13, 2018, 11:27:18 AM »
So, thanks again for all the reponses, they really highlighed the good and bad parts of my different possible moves. I think I can put up new more detailed scenarios now.

So I think selling my hometown house seems to be a good decision, since it's not a good property for rental investing and is only causing hassle.
What to do with the money? That's another one.

I am going to do some research and some simulation on how it would turn out financially IF:
  • We would buy a flat in Budapest and pay the difference from out savings
  • We would buy a flat in Budapest and get a loan to pay the difference
  • Buy different assets from the price of the sold house, and keep on renting an apartment while we are Budapest

I would do it in a way to see what would happen in the different scenarios in 5-7-10 years time. I should also take into consideration an estimated time to FIRE each case, or the fact that I can get some reducement on taxes if I am buying property from the price of the sold one.

Buying a house seems to be out of the picture, as it is something that financially seems to be a very bad decision in this situation.

I am going to post the result of my research in the coming days if you are interested.

BicycleB

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Location: Live Music Capital of the World
  • Older than the internet, but not wiser... yet
Re: Housing strategy for beginner mustachians
« Reply #12 on: December 13, 2018, 04:21:14 PM »
I am interested in your research.

Also, I am curious about investments that are not real estate. Do you have reliable access to invest in global stock markets? What are the costs and expected returns, as you see them?

I am intrigued because I, like most posters, am only familiar with United States investments, laws, and cost comparisons. Do tax rates on gains differ in your country between stock gains and real estate gains, for example? Is there a strong mortgage market there, or would all of these real estate transactions be cash deals?

I wouldn't feel I could advise well without knowing such things, though I am impressed by some of the remarks by prior posters.

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5299
  • Location: Norway
Re: Housing strategy for beginner mustachians
« Reply #13 on: December 14, 2018, 02:27:27 AM »
As for buying an expensive house, instead of investing... I am currently living in that situation. We had approx 550K in index funds, nicely earning passive money. We sold the whole bunch and sold our low price first house for 300K. Then we spent 800K on a big house. Since then the stock market has been doing really well. The value of our house has hardly lived up with inflation. I regret this decision bigtime.

ther

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 29
  • Location: Hungary
Re: Housing strategy for beginner mustachians
« Reply #14 on: December 14, 2018, 06:13:12 AM »
So I made some calculations. As I mentioned I completely ditched the scenario of buying a house in Budapest for now, so I only aimed for buying an aparment (or not).

Some keys in my calculations, then I will explain them in detail below:
  • Sell price of hometown house: $63000
  • Buy price of Budapest apartment: $84000
  • Time period: 5 years
  • Selling and buying happens immediately, starting on 2019-01-01
  • Savings from income is invested yearly
  • Inflation by year: 2.8%
  • Aggregated weighted yield of investments: 5%
  • Monthly income: $3500
  • Monthly rent: $500
  • Monthly mortgage: $380
  • Monthly budget excl. the above: $900

Time period
I had tried with different time ranges for my calculations but in the end I just sticked with 5 years because I'm not sure if I can plan on living here for 5+ years.

Inflation
I picked a number that can be more probably in the coming years, but I adjusted the income, rent and the budget each year.

Investment Yield
That was a tough one, because I didn't have much detail about my current portfolio, so I had to look into it.
Currently my portfolio has a big percentage of cash, therefore having a low yield, but I should rebalance it to have more potential yield in the long run.

Mortgage
I learned that you can get a mortgage of $21k on a 3.07% interest rate (that's including all extra fees) for 5 years. That's with an overall payback of ~$22.6k which means an approximate $380 each month, and this is a fixed price for 5 years.



The scenarios
Step 1 is always to sell the hometown house for $63000.
In case of buying an apartment in Budapest the buying price is $84000

Buy apartment, pay the difference from mortgage
Savings: ~$246k on 2024-01-01 and an apartment worth of ~$84 (+-inflation).

Buy apartment, pay the difference from savings
Savings: ~$244k on 2024-01-01 and an apartment worth of ~$84 (+-inflation).

Keep on renting, invest sell price
Savings: ~$316k on 2024-01-01

Keep on renting, invest sell price safely
Savings: ~$310k on 2024-01-01

Summary and what I've learned
I've learned that my current portfolio is quite conservative and cash heavy. Reason being that I didn't do this math and just didn't invest the money because 'it might be used for property buying in the near future'. But as the number show it definately not worth it to use my savings to complete the buying price, that's for sure.

I've learned that since I would like to use the money from the sold house for funding my first own residential property, I would rather invest it in something safer that stocks, e.g. 5 years Hungarian Goverment Bonds, currently yielding 4.1% (1.7%+inflation). And also, if I want to have my own property in 5 years for example, that might be too short time range for stocks to work out properly in the swings of the market.

Since the mortgage is less than the rent, I can have a better savings rate each month. Also, since the mortgage is quite cheap right now, it might be even worth it to get a 10 years mortgage (that is 3.5% interest rate for ~$209 a month flat fee for 10 years) - gonna do the math for it.

I guess now I should hope to do step 1 and sell the house, then think about the rest later.

If you see any flaws in my math, please let me know. I tried to be as detailed as possible, but of course I wasn't taking into consideration our change in income/budget if the baby comes and SO stops working for example, (and probably a lot more thing as well).
You can find my calculations in deatils here: https://docs.google.com/spreadsheets/d/1_f7IyY1Fulyu0DIjrjX1eKZ1LVTL4o6M644hBnjQBZw/edit?usp=sharing

Thank you very much for your time reading this, please share your thoughts.
« Last Edit: December 14, 2018, 12:30:49 PM by ther »

2Cent

  • Pencil Stache
  • ****
  • Posts: 644
Re: Housing strategy for beginner mustachians
« Reply #15 on: December 14, 2018, 07:56:39 AM »
Bonds are fine, but are you sure that when you will move you will put all your money into the new house. If not, you could put the portion you will not need into stocks as they will be a more long term saving for FI.