Author Topic: Small Property Investment vs. Index funds?  (Read 1525 times)

fizzgig

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Small Property Investment vs. Index funds?
« on: February 02, 2017, 10:24:38 AM »
I don't make much money, 57K a year. I live in NJ where it's too expensive to own a house.
I'm 40 years old, saving about 20K a year, putting it into index funds for the past 2 years, totaling 153K in a Vanguard account at the moment.
Would like to retire but I'm nowhere near what I would need to do that. I like the town of Jim Thorpe, PA. There are houses for sale for around 80K.
I was thinking of buying one in cash, renting it out through a property manager until I'm ready to move in at least 10 years from now, maybe longer.
Is it better to do the house option, depleting half of my savings, but getting small rental returns, or is it a better move to just keep saving and let the index funds grow and worry about a place to live down the road?
Jobs are scarce, so I'm not considering flat-out moving to PA, yet.
What would you guys do?

Murse

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Re: Small Property Investment vs. Index funds?
« Reply #1 on: February 02, 2017, 11:17:05 AM »
Honestly. Depends on a lot more than "real estate vs index funds?" Real estate can be much better or much worse, it depends on the specific property. As a rule of thumb monthly rents should be AT LEAST 1% as a filtering tool. In this case an 80k property's monthly rent should be AT LEAST $800/month but there is much more to consider than just how much the property costs. How much per month will PITI be? How much per month will you set aside for maintenance? How much will you need to set aside for property taxes? What about property management, how much do they charge and do you know anyone in the area that you would trust with your asset?

yachi

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Re: Small Property Investment vs. Index funds?
« Reply #2 on: February 02, 2017, 11:33:49 AM »
I don't make much money, 57K a year. I live in NJ where it's too expensive to own a house.
I'm 40 years old, saving about 20K a year, putting it into index funds for the past 2 years, totaling 153K in a Vanguard account at the moment.
Would like to retire but I'm nowhere near what I would need to do that. I like the town of Jim Thorpe, PA. There are houses for sale for around 80K.
I was thinking of buying one in cash, renting it out through a property manager until I'm ready to move in at least 10 years from now, maybe longer.
Is it better to do the house option, depleting half of my savings, but getting small rental returns, or is it a better move to just keep saving and let the index funds grow and worry about a place to live down the road?
Jobs are scarce, so I'm not considering flat-out moving to PA, yet.
What would you guys do?

I would be worried that jobs will be scarce for your tenant too.  If you want to be a landlord, there are cheap properties on the New Jersey side of Philadelphia.  My uncle made his living and retired by owning rental property there.  I think houses sold for 40k-80k.  Also, it sounds like you're only saving outside of retirement accounts, you might consider putting your savings into an IRA or 401(k) to reduce taxes.