Your house or your retirement

[RiddleMB]

Correct me if I'm wrong, but to my understanding, most of FIRE people are mainly from the US and some from Europe.

I got the impression that many people who invest in Index Funds in order to retire early, already posses some sort of assest, such as a real estate, herritage or simply are supported by their financially stable family.
As far as I know, Mr Money Mustache's main source of income is his rental house, and he lives in another house which he owns, saving himself the need to pay for rent.

I would be cusious to know from the mustachians here: Do you put all your money you have into stock investments? Is your investment portfolio your solely assent and a source of retirement income? Or do you have other possetions in form of an apartment/house/land etc?

Living outside of US and Europe, and furthermore, being a foreigner, my only asset is my bank account, containing some hundred thousands of hard earned money, a job which pays well but despised by me, and a Gibson j45 guitar :)

Not having a family to support me, nor an apartment of my own, I live on rent. The rental apartments in the country I live in (and I can't move anywhere else) are dreadful. These are old, low-kept, and completely strippe out of any furniture and appliences apartments.
Thus as much as I like the concept of renting over buying, I can't see myself living such a life till old age.

Curiously enough, the sum I need for an early retirement (food+rent+bills) is the same one needs to buy an apartment of his own. So in the next 10-20 years, I can either put my money into index funds, retire early but to live on rent, or to buy my own place, pay mortgage for the next 10-20 years (prices are high, wages are low) but retire at old age (I am 30 years old).

Thank you all in advance!

[Mesmoiselle]

Nope. Dug myself out of some clown debt by room sharing with multiple in laws. Still live with some of those in laws now that I own one of the cheapest houses I could find that just needed moderate repairs as I could work on them with my bare hands. After all the clown debt was done, I paid for those moderate repairs straight out of pocket. All the while socking away into my 401k and IRA now that I had the breathing room. Driving my 10 year old Toyota. And about to put myself through a bachelor's degree while I attemot to earn my way, debt free, into Medical school.

Husband was a TA, then a part time laborer for most of these years, so this was all pretty much on just me financially, although he pitched in a ton of sweat labor alongside me. He's just now in the last three months gotten full time employment that matches his education and still didn't crack three figures. Maybe his next job hop if we're lucky.

But I'm shifting down to full time student, so for all intents and purposes, our total income as a DINK won't change.

Both our families were varying levels of poor. I paid my sister to help me work on my house even, because she couldn't afford the time off otherwise. Still cheaper than a plumber and she has the detail oriented nature I needed on tiling projects.

There is some equation somewhere that helps one decide rent vs own in their area. Maybe it works out you could room share till you get your base saved up to make you solid. Don't get wrapped up thinking a temporary is a forever situation. Eventually my final in law will move out or I'll sell him the house, but either way, I will be living solo with the hubs and be done with roomies.

[Metalcat]

It all depends on where you live and what your goals are.

A lot of Mustachians rent because many live in cities with enormously expensive houses. So yeah, many still have to face the exact same challenges that you are facing.

If owning will set back your retirement, then you need to decide how important early retirement is to you, or you need to relocate, or you need to find a way to make more money.

MMM didn't just happen to live in a place where he could afford housing, he moved quite far from another country. He moved from a country where the major cities have some of the most expensive housing prices in the world.

However, he left a country with free healthcare and moved to the country with the most expensive and unpredictable healthcare situation. It's a trade off.

Examine your priorities and make a plan accordingly.
If staying in your region and staying at your income level are both non-negotiable, then your choice may be between renting and working longer.

We all have trade offs to make, figure out which trade offs are most worth it to you.

[Dogastrophe]

As far as I know, Mr Money Mustache's main source of income is his rental house, and he lives in another house which he owns, saving himself the need to pay for rent.

Today, from the blog posts, MMM's main source of income comes from several areas.  However, if you go back to his (and at time, Mrs, MMM's) first series of blog posts, you will see that they worked normal, albeit well paying, jobs.  They cut their expenses, saved as much as they could, invested in low cost index funds, didn't buy (much) stupid shit.  rinse and repeat. 

I would be cusious to know from the mustachians here: Do you put all your money you have into stock investments? Is your investment portfolio your solely assent and a source of retirement income? Or do you have other possetions in form of an apartment/house/land etc?

For me, all my money is invested in index funds.  I have no desire at this point in my life to own and manage rental properties.  We have some equity in our condo but do not factor this into our retirement plans.

my only asset is .... a Gibson j45 guitar

Piece of junk guitar.  Send it to me and I will dispose of it properly for you.  :)

[Much Fishing to Do]

Curiously enough, the sum I need for an early retirement (food+rent+bills) is the same one needs to buy an apartment of his own. So in the next 10-20 years, I can either put my money into index funds, retire early but to live on rent, or to buy my own place, pay mortgage for the next 10-20 years (prices are high, wages are low) but retire at old age (I am 30 years old).

Yeah, I would not have bought a house if the costs were anything like that.

I live in a low to medium cost of living area in the US but telecommuted and had clients in a high cost of living area (and corresposnding HCOL salary), so that situation somewhat allowed me to buy a lot more easily than some.  About 15 years ago I purchased a house for about what I made in a year, and paid it off over about 7 years while still investing a lot, so it was not the cost burden buying a house is for many.  I don't see it as an investment, just a permanent reduction in expenses that therefore lowers my needs and thus risk in retirement (the income will come almost completely from index fund investments).  Even at today's higher value it only represents something like 10% of my total net worth.  I lived in HCOL areas before this and the housing costs were high enough I never considered buying (though that was probably more b/c I knew I wasn't staying long), but the rent was also so high that housing costs were still a huge impediment to saving no matter what choice I made (though I know the rent/own ratios can be dramatically different depending on the area, so just depends I guess)

As far as owning, my thoughts on the benefits of such have changed over time.  I used to think of it as the way the middle class got wealth, but now I think thats more of a slight of hand (that worked for quite some time) where one was 'forced to save' by paying a mortgage down over time with money that would have otherwise been spent (you had to pay your mortgage, you didnt have to save).  But the ability to easily pull money back out of a house, get interest only loans, and move around etc a lot more, I think that kinda went away, and in the end its kinda the same, you make yourself save money or you don't.  The expenses that come along with a house you live in don't make it much of an investment I don't think either.  So in the end I've concluded the only really good reason to own a home is so noone can make you move if you don't want to.

[ericrugiero]

Make sure you are considering all the options you have and challenge the normal assumptions.  Could you buy something and rent out part of it to help cover the costs? (read about house hacking)  Are you able to move?  I know you say you can't but you should really consider what is keeping you from moving.  You mentioned how poorly furnished the apartments are.  Could you spend a reasonable amount of money to buy a few nice pieces of furniture that would make you happier in these cheaper apartments? 

Ultimately, you need to decide what makes you happiest.  That's one of the key messages around here.  Don't just accept that you need to spend your money on stupid stuff that doesn't make you happy.  Think outside the box, figure out what really matters to you and do that. 

Also, you mentioned having a decent amount in savings accounts.  Is that making you a good interest rate?  Make sure the money you have is making you more money somehow. Compound interest is VERY powerful.   

[AnxietyFly]

If I was 100% into the FIRE movement, I would not want to purchase a home. Owning a home would hold me back from investing in the market and also would strap me down from moving to a cheap part of the world to live. 

[partgypsy]

Correct me if I'm wrong, but to my understanding, most of FIRE people are mainly from the US and some from Europe.

I got the impression that many people who invest in Index Funds in order to retire early, already posses some sort of assest, such as a real estate, herritage or simply are supported by their financially stable family.

There may be some on this forum like this, but I wouldn't assume that is the norm. Other than my parents paying the parental portion of college tuition, I was (financially) on my own.
I am both contributing to retirement funds, and paying a mortgage on a house. I got a mortgage on an inexpensive house 20 years ago that is now worth quite a bit more due to real estate increasing in this area. So look into the difference between paying a mortgage and your current rent. If you live in one of those places where housing prices are much higher than renting, then it is not financially optimal to get a house.

Like others have said, everyone has to make priorities. While you don't have the support of family or a partner, you do have more flexibility than someone with a family. look at all your options for getting to where you want to be. 

[SwordGuy]

If I was 100% into the FIRE movement, I would not want to purchase a home. Owning a home would hold me back from investing in the market and also would strap me down from moving to a cheap part of the world to live.

   

Lots of assumptions in that statement that don't apply to lots of people.

1) It always costs more to buy than to rent.   This is provably false because landlords buy properties and rent them out at a profit whilst still paying the mortgage.

2) A home cannot be a profit center.  I know of people who have not only reduced their housing expenses to below rent costs, they've actually turned a profit on it.

3) A home prevents you from moving.   An albatross of a home can do that, but a home that's bought at the right price and would be a suitable, profitable, rental does not.

4) Although a lot of people love to travel and see the world,  many have no interest in uprooting their lives and moving so far away from friends and family.

[erutio]

Curiously enough, the sum I need for an early retirement (food+rent+bills) is the same one needs to buy an apartment of his own. So in the next 10-20 years, I can either put my money into index funds, retire early but to live on rent, or to buy my own place, pay mortgage for the next 10-20 years (prices are high, wages are low) but retire at old age (I am 30 years old).

For most people, that may be true. In fact, most people choose option B (buy a house, pay mortgage, work till old age).   But you are on the MMM forums, so it does not have to be one or the other.  Consider posting a Case Study, and we can advise you where you can cut your expenses.  Then you can buy + retire early.  It can be done in any country!

[RiddleMB]

But you are on the MMM forums, so it does not have to be one or the other.  Consider posting a Case Study, and we can advise you where you can cut your expenses.  Then you can buy + retire early

Interesting! Lets try, although being a mustachian for many years I'm not sure where else I can cut costs :)
All prices are per month. "n" stands for the local currency.

Me: Single 30 years old man. Not planning to marry nor to have kids. An Industrial Engineer with a Bsc degree who works as a BI developer (over 5 years of work experience). Currently starting an MBA (education here is dirt cheap, so I don't even consider it as an expense).
Monthly income: 10,000n, after taxes.
Monthly expenses:
Rent: 4,000n. A 2 room apartment which is about 30min walk from my work.
Food: 1,000. These are only groceries I buy and cook myself. I don't eat in restaurants and bring my own food to work.
Water+electricity: 100n. I don't have an air conditioner, nor a TV. I do have to use a small heater during the winter from time to time, though - poor apartment isolation. I do have an electric guitar+ a tube amp and a mid-range gaming pc. Not sure how much these two cost, but I'll hate to see them going...
Cellphone: 10n . I barelly make any calls, and don't need internet on the go.
Internet: 30n
No car, no Netflix, no insurances of any kind (apart from the local version of k401 and IRA, which are maxed out already)
Price of buying a similar apartment in the same location: 1,500,000n

Thanks to everyone who shared so far her/his life situation! They really help me in forming my decision!

[Villanelle]

We are accidental landlords.  We bought a house to live in and had to move (work) and decided to keep it as a rental. 

But I think the fact that you differentiate and almost seem to imply that those who own a house have a leg up is interesting.  To me, it's no different than one person choosing to invest in stock portfolio A and another in portfolio B.  Neither has an unfair advantage.  If real estate in your country is a bd investment, don't make it.  If it's a good investment (and that can be for non-financial reason), make it.  I think most of the people on this site who do own in investment property or a home in which they live did it by putting their cash flow party toward that, instead of toward investments.  It's not that they were handed some unfair advantage.  They just made a decision to invest some of their money differently, either because they hoped that would turn out better financially or because the financial hit was worth it to them for whatever owning that house added to their quality of life. 

The own v. rent decision isn't a special category.  It's like every other budget category--you decide what is most important you splurge in some areas, knowing it will prevent some savings, because it is important.  Maybe that's owning a car vs. public transport. Maybe it's higher speed internet or having a smart phone or eating out once a week or buying those snazzy new shoes.  Or maybe it's buying a nice house instead of renting a crappy one.

But I'd also examine other options.  Can you buy a nice house and rent a room or two?  Are there really no nicer rentals?  It seems somewhat strange to me that ONLY crappy apartments are available for rent, when there are nice places that exist. 

Also, why is moving to another area not an option?  You stated that very definitively.  But almost always, choosing not to explore that is something you are buying, just as surely as is the food you eat and the home you rent.  You may have strong reasons, but then that's the priority you are "buying", and it may costs you many more years of working.  That's not necessarily a bad thing, but I think it's important to view it as something you are using your money to purchase, rather than something the universe has imposed upon you.  (In very rare cases, this might not be true, but it nearly always is.)

Plenty of people in the US face similar choices.  We live in a rental right now because it's so much cheaper, but there are plenty of things I hate about it (though overall I'm very happy with it, primarily because of location).  We could have bought, but it would have cost a lot more (probably 3x costs, when all expenses are figured in, for a comparable place).  So we didn't.  And we put that extra money in our investment accounts, because overall the decision was the better one for us.

[John Galt incarnate!]

Correct me if I'm wrong, but to my understanding, most of FIRE people are mainly from the US and some from Europe.

I got the impression that many people who invest in Index Funds in order to retire early, already posses some sort of assest, such as a real estate, herritage or simply are supported by their financially stable family.
As far as I know, Mr Money Mustache's main source of income is his rental house, and he lives in another house which he owns, saving himself the need to pay for rent.

I would be cusious to know from the mustachians here: Do you put all your money you have into stock investments? Is your investment portfolio your solely assent and a source of retirement income? Or do you have other possetions in form of an apartment/house/land etc?

Living outside of US and Europe, and furthermore, being a foreigner, my only asset is my bank account, containing some hundred thousands of hard earned money, a job which pays well but despised by me, and a Gibson j45 guitar :)

Not having a family to support me, nor an apartment of my own, I live on rent. The rental apartments in the country I live in (and I can't move anywhere else) are dreadful. These are old, low-kept, and completely strippe out of any furniture and appliences apartments.
Thus as much as I like the concept of renting over buying, I can't see myself living such a life till old age.

Curiously enough, the sum I need for an early retirement (food+rent+bills) is the same one needs to buy an apartment of his own. So in the next 10-20 years, I can either put my money into index funds, retire early but to live on rent, or to buy my own place, pay mortgage for the next 10-20 years (prices are high, wages are low) but retire at old age (I am 30 years old).

Thank you all in advance!

I own my home.

OP, regarding your titling  of this thread, not owning my home (being a renter) is incompatible with what "being retired" means to me.

I understand that lots of  people prefer to rent; I have no criticism of renters.

[partgypsy]

But you are on the MMM forums, so it does not have to be one or the other.  Consider posting a Case Study, and we can advise you where you can cut your expenses.  Then you can buy + retire early

Interesting! Lets try, although being a mustachian for many years I'm not sure where else I can cut costs :)
All prices are per month. "n" stands for the local currency.

Me: Single 30 years old man. Not planning to marry nor to have kids. An Industrial Engineer with a Bsc degree who works as a BI developer (over 5 years of work experience). Currently starting an MBA (education here is dirt cheap, so I don't even consider it as an expense).
Monthly income: 10,000n, after taxes.
Rent: 4,000n. A 2 room apartment which is about 30min walk from my work.
Food: 1,000. These are only groceries I buy and cook myself. I don't eat in restaurants and bring my own food to work.
Water+electricity: 100n. I don't have an air conditioner, nor a TV. I do have to use a small heater during the winter from time to time, though - poor apartment isolation. I do have an electric guitar+ a tube amp and a mid-range gaming pc. Not sure how much these two cost, but I'll hate to see them going...
Cellphone: 10n . I barelly make any calls, and don't need internet on the go.
Internet: 30n
No car, no Netflix, no insurances of any kind (apart from the local version of k401 and IRA, which are maxed out already)
Price of buying a similar apartment in the same location: 1,500,000n

Thanks to everyone who shared so far her/his life situation! They really help me in forming my decision!

Wow that is expensive! I guess your first question is, would you want to live in your retirement in an apartment that you buy? Or would you prefer finding some other kind of living arrangement or location? If doesn't make you really happy to think 20 years from now, living in an apartment like that, then don't do it. Owning your own apartment or house always has more expenses than renting. It looks like be 30 years and 8K a month. That would give you only 800 to invest a month. I guess some questions are whether you think housing costs will go up alot or be the same, stability of job, and whether at retirement you get social security, some other benefits which means if you retire at a more traditional retirement age you get benefits to pay for retirement or not.

If you decide to continue to rent, possibly spend a little more money on making the apartment a nicer more livable place.

[Duke03]

I still think the smartest financial decision I ever made was I bought my first house pretty young at the age of 22.  The second smartest decision I made was getting a 10 year mortgage and the third smartest thing I ever did was I paid it off in 7 years.  Of course everything wasn't roses and sunshine during this time.  I was laid off and under employed for 2 years, but I circled the wagons and made it out alive.  I parlayed that house into my current home and in 3 more years I'll have a paid off 400k home in a low cost area.  Average house around me sells for around 200k.  During this time I maxed out two pensions and have been maxing out my 401k for the past 6 years.  Currently trying to also max out a roth IRA, but it's tough... when you already put 36k away in retirement accounts each year and we are a single income household.  In my case I don't think my retirement has suffered by me focusing on my house first.  Because in 3 years when it's paid off I'll have an extra $2000 a month.  The one thing that did suffer is my taxable accounts.  I just didn't have the extra money laying around after making larger house payments due to short mortgages and maxing out several retirement accounts.  I plan on rectifying this issue with the extra 24k a year I will have when my current house is paid off.  During the last 15 years of my life I've always believed in having plenty of cash laying around in an emergency fund.  It probably would have served me better in a taxable account, but I was young and dumb and probably would have gambled in away on snake oil stocks.....  Now that I'm older and wiser and I woke up tomorrow with a 10k Dow Jones I'd plow every penny into mutual funds and watch it double over the next 18 to 24 months as the market recovers....

[tipster350]

There is no global one size fits all path to early retirement. Every location has its own set of circumstances offering its own opportunities and limitations. In the US we have expensive and unpredictable healthcare and a weak safety net, but relatively high professional-level salaries. Some areas of the US are favorable for real estate investment and others are not, and also depend on personal situation.

The point is to take advantage of your own set of opportunities for saving and investing. The investment vehicles differ by country, by location, and by financial circumstance.

I'm US-based and was an apartment dweller until recently, when I moved to a location offering affordable and stable house purchasing opportunities. I do not consider home ownership a requirement for financial independence or retirement, but I enjoy home ownership for now. I am single with no family support or future inheritance to count on. I have been saving earned money for a number of years, having also made many mistakes along the way. My portfolio contains a mix of investments.

[happy]

Random thoughts that may or may not be relevant to you own personal circumstances.

Your rent and housing costs sound similar to Sydney in Australia, one of the most expensive housing markets in the world, although it would certainly be possible to get an apartment for less than this in ordinary parts of Sydney. And furthermore the ROI by renting an apartment is about the same  - around 3%. Nevertheless, home ownership in Sydney, something the average Aussie holds dear to their heart, will put a big brake on  early retirement.

One of ways through would be to stay frugal and invest heavily, whilst renting....if your returns are good you may be able to afford a place of your own when you are older. In my country older folk in rentals are really the vulnerable group both socially and financially.

Are you permitted to  and have you thought about letting out your second room? This will improve your savings rate.

You may be committed to your current location whilst working. Are there cheaper locations you could live once you have amassed enough to retire, and could you then afford to buy? Geographical arbitrage if you will.

The only reason I could see to try to  buy is if you predicted ongoing strong capital gain in the property market where you are located. Otherwise owning your own looks to be a poor investment and an expensive  lifestyle choice. What is driving the high prices? Is that likely to continue? Or has the market topped out at that price?

[RiddleMB]

Happy, you are very accurte about your comparison with Sydney Australia! And yes, as a hi-tech worker, 90% of my job opportunities are in that area.

Real estates are way cheaper in the north, my favorite place, but it is a rural area, so no work there. I do wish I could work remotely but such a method is not popular here yet. So I guess this option is opened to me only when I won't have to work for the money, provided I saved an additional sum for buying a place.

The second room is kind of a small living room together with the kitchen, so it'll be inconvenient to have another person living there. Besides, it is illigal to rent a certain part as a renter.

The high prices are due to a massive population growth, low land capacity and low building rate. Statisticians here predict an overpopulation in the near 20 years on a similar level to India, so I assume that real estate value will only keep climbing.

[happy]

Real estates are way cheaper in the north, my favorite place, but it is a rural area, so no work there. I do wish I could work remotely but such a method is not popular here yet. So I guess this option is opened to me only when I won't have to work for the money, provided I saved an additional sum for buying a place.

What is the rental market like in the northern rural area that you favour? Is it feasible to buy something you might like as a home and rent it out in the meantime? Move there once you have enough to retire?

[RiddleMB]

What is the rental market like in the northern rural area that you favour? Is it feasible to buy something you might like as a home and rent it out in the meantime? Move there once you have enough to retire?

Just checked that same thing. Unfortunatly, the north is not a popular place to live in, only to come for summer vacations.
People who rent guesthouses in these areas have clients for only a couple of weeks a year, while paying high costs for maintenance. Moreover, people expect high standards in service and hospitality, and low prices.

I know I'm not tyring to compete with them, for I'm planning to buy a place for living, not to start a guesthouse business, nontheless, it shows that I won't get much rent to cover its expenses. Another downside is that I'll have to own a car and make regular trips of several hours if I want to maintain the place in a good shape myself.

Not dismissing entirely such an option, but I can't see it working well, for now.

[happy]

Ok, I was just asking in case you could get a steady rental income until you retire. Eventually given the pressure in your city prices further north will inevitably rise and you might be able to get in on the ground floor.  But at present if you are just going to lose money, forget it. Worth keeping a watch on because things may change in the future.

[Abe]

My parents and my wife's parents paid for our education at a state school, back when prices were fairly reasonable for US standards. Since then, we've been financially independent from them. Right now we live in California, and are in an interesting situation where rent for a house is far less in our city than buying.  That's mostly because many of the landlords bought their houses when prices were much lower (1/3 to 1/2 current prices), and thus rentals can be profitable while still still being lower cost than a mortgage for an equivalent house (otherwise most people would buy). I feel you are in a similar situation, though the quality of rentals seem to be better here (come with appliances and well maintained).

I don't really foresee us buying anytime soon if we stay in California or another high-cost real estate market. Since we consider that a sunk cost either way (not anticipating significant market increases in our 15 year timeframe for retirement), we've decided to put the 2-3k/month we save from not buying into index funds. Once we retire and children are in college, we'll downsize to a much smaller house with an affordable mortgage.

[MrThatsDifferent]

I’m definitely rent and invest, it’s a no brainer. However, I’m fortunate to have a good income which allows me to pulls this off effectively. I’d go for whatever strategy allows you live comfortably with the least expenses so you can do whatever to grow your money the fastest. There are a variety of strategies that can lead there.

[use2betrix]

.... or simply are supported by their financially stable family.

I’ve been on this forum for several years, and I can’t think of a single person that has FIRE’d to live off the support of their family members, unless you’re talking about like a husband living off their wife’s salary, or vice versa..

I’m not sure where you would have gathered that idea, but it seems like an attempt to take away from some personal accountability.

[RiddleMB]

Big thanks for everyone who wrote! Your stories really helped me to make a decision.

I desided to forgo the option of buying. Mainly because I'm bound to an expensive area due to my job.
I may revisit this question in 10 or 20 years and see what new options my career and financial situations will allow.

Cheers all!

[Abe]

Sounds like a good plan, best of luck!

[partgypsy]

Big thanks for everyone who wrote! Your stories really helped me to make a decision.

I desided to forgo the option of buying. Mainly because I'm bound to an expensive area due to my job.
I may revisit this question in 10 or 20 years and see what new options my career and financial situations will allow.

Cheers all!

It does sound like where you live, buying is more expensive than renting. Especially if you have the option of relocating somewhere less expensive after retirement.

[RiddleMB]

Just making sure I got it right:

I talked to a friend of mine, who rents an apartment. He managed to buy it at a good price of 820000n and rents it for 3600n. No additional monthly exenses (here, the tenants pay for everything). Thus he gets a steady stream of 3600n every month.

I tried to calculate how much of a monthly income I may get from VTI dividends:
820000n equels 232,839 dollars, thus for a price of 154.41, I can buy 1507 units of VTI. Div yield is 1.78%. My calculations are:
annual div per unit = 0.0178*154.41 = 2.74$ per unit
2.74*1507 = 4141$ annualy = 345$ monthly = 1215n

Did I get everything right? His apartment generates 3 times more that VTI dividends, for the same ammount invested, per month?

[GrumpyPenguin]

I got the impression that many people who invest in Index Funds in order to retire early, already posses some sort of assest, such as a real estate, herritage or simply are supported by their financially stable family.

I own no real estate (or other significant asset), inherited nothing and do not rely financially on family (in fact my financial situation is significantly stronger than the rest of my family).  I put all savings into index funds.

I *could* buy a place, it's just where I want to live the math works out that it is far better for me to rent than own.

I get the impression that a large percentage of people here are like me.

[GrumpyPenguin]

Just making sure I got it right:

I talked to a friend of mine, who rents an apartment. He managed to buy it at a good price of 820000n and rents it for 3600n. No additional monthly exenses (here, the tenants pay for everything). Thus he gets a steady stream of 3600n every month.

I tried to calculate how much of a monthly income I may get from VTI dividends:
820000n equels 232,839 dollars, thus for a price of 154.41, I can buy 1507 units of VTI. Div yield is 1.78%. My calculations are:
annual div per unit = 0.0178*154.41 = 2.74$ per unit
2.74*1507 = 4141$ annualy = 345$ monthly = 1215n

Did I get everything right? His apartment generates 3 times more that VTI dividends, for the same ammount invested, per month?

You can't just compare rent to dividend yield to compare the return on these assets.  A fair assessment would also factor in expected appreciation of the apartment and the expected capital gain of VTI, include any fees involved in buying/selling, consider risk, and opportunity cost of your time. 

Here's some useful information by another FIRE blogger: https://www.gocurrycracker.com/renters-for-life/

[efree]

Just making sure I got it right:

I talked to a friend of mine, who rents an apartment. He managed to buy it at a good price of 820000n and rents it for 3600n. No additional monthly exenses (here, the tenants pay for everything). Thus he gets a steady stream of 3600n every month.

I tried to calculate how much of a monthly income I may get from VTI dividends:
820000n equels 232,839 dollars, thus for a price of 154.41, I can buy 1507 units of VTI. Div yield is 1.78%. My calculations are:
annual div per unit = 0.0178*154.41 = 2.74$ per unit
2.74*1507 = 4141$ annualy = 345$ monthly = 1215n

Did I get everything right? His apartment generates 3 times more that VTI dividends, for the same ammount invested, per month?

I'm not sure why you focus on dividends - you get most of the value out of stocks as a price increase, not dividends.

Anyway, your friend paid 820000 and gets 43200 a year out of the apartment. That's 5.3% a year. That's not bad but not quite close to stocks (historical average is about 10% so even if the next decade has below-average returns it should still beat 5.3%). Now if your friend had only paid, let's say, 200000 and got the rest of the money from a bank on a low mortgage rate, his yearly revenue would be 21.6% - a very different story. There would be a mortgage payment, of course, but his 620000 would be in the stock market earning let's say 8% while he paid the bank 3%. My math says it would be a good deal for a while. When the mortgage gets small and the return from the apartment drops from 21.6% to 6%, well, you can look at your options then. Maybe remortgage it, maybe sell it.

[BicycleB]

Just making sure I got it right:

I talked to a friend of mine, who rents an apartment. He managed to buy it at a good price of 820000n and rents it for 3600n. No additional monthly exenses (here, the tenants pay for everything). Thus he gets a steady stream of 3600n every month.

I tried to calculate how much of a monthly income I may get from VTI dividends:
820000n equels 232,839 dollars, thus for a price of 154.41, I can buy 1507 units of VTI. Div yield is 1.78%. My calculations are:
annual div per unit = 0.0178*154.41 = 2.74$ per unit
2.74*1507 = 4141$ annualy = 345$ monthly = 1215n

Did I get everything right? His apartment generates 3 times more that VTI dividends, for the same ammount invested, per month?

No, but great questions.

As other posters noted, the return on stock includes both dividends and price appreciation. Unlike real estate, appreciation in stock is built in, because companies routinely reinvest in their own businesses, which grow. So the future income from stock grows, causing buyers to pay more for the stock. Historically, in US$, dividends plus appreciation are close to 10%; after inflation, close to 7%. A long term conservative estimate for VTI might be 5%, comparable to your friend's real estate return if your real estate information is correct.

You say that all expenses in your real estate market are paid by the renter. Does that include repairs over time, not just utilities? Do property owners pay tax in your market?

Looking forward, many aspects of the stock vs real estate decision depend on societal factors. I suspect that these factors are different in your country compared to the US. I don't know which option is better, but suggest that you continue to study your local real estate in detail. It may be hard to predict whether prices of real estate go up or down, but that can have a big effect.

Are real estate purchases in your country usually done in cash, or does your country have mortgages (loans in which you borrow part of the money)?

My personal guess is that accumulating stock investment and then buying the northern place to live in that you like will be the best, but you should learn more to be sure. For now, stock investment preserves your options.

[six-car-habit]

 *** The rental apartments in the country I live in (and I can't move anywhere else) are dreadful. These are old, low-kept, and completely strippe out of any furniture and appliences apartments.***

 I'm not sure why you have to keep your personal apartment in this condition.  Most USA apartments come without furniture. You bring or buy your own, get a friend to help you lug it up the stairs to your apartment. Set it up how you like. Certainly your rental agreement lets you bring furniture in [?]

 Also on the appliances. I lived in a place that had a clothes washing machine hooked up to a sink , water feed from sink, water drain into sink.  Another had a "portable dishwasher", same idea with sink hookups .   Refridgerators and A/C units can + do run on normal 105-120 VAC single phase power.   The only issue i see is that a clothes dryer and an oven are usually wired to 220-240Vac, and maybe your apartment doesn't have that.

  With several hundred thousand "monetary units " in your bank savings account you should be able to afford some of these luxuries....

[RiddleMB]

I'm not sure why you focus on dividends - you get most of the value out of stocks as a price increase, not dividends.

Yes, I completely neglected the price of stocks and the value of the apartment itself for the sake of a better comparison, because the latter is not liquid.

I find it a bit strange and unpredictable to relay on index funds keeping their high value 20+ years into the future. Yes, I know that index funds always contain the top companies in the US/world, but there are so many, non apocalyptic, events that can affect their price.

By the way, here is a quote from MMM himself about dividends vs stock price from his review of ERE book:

To reconcile the differences, I keep some money invested in index funds and some in other places. And I think of dividends, rather than stock price appreciation, as an important source of income.

Wonder about your opinions on the matter. (again, not bashing anything, just want to understand before I put all my money into ETF)

Here's some useful information by another FIRE blogger: https://www.gocurrycracker.com/renters-for-life/

Very nice post! But most of his points are not very valid to the situation where I live in, except about the neighbors, where I agree 100%.

[efree]

I find it a bit strange and unpredictable to relay on index funds keeping their high value 20+ years into the future. Yes, I know that index funds always contain the top companies in the US/world, but there are so many, non apocalyptic, events that can affect their price.

I think maybe you should read https://jlcollinsnh.com/stock-series/. He explains it all very well. And the 10% average in the past is including all the non-apocalyptic events of the past. If there had been no such events, the average would be perhaps 15-20%.

Really coming to terms about how stocks and indexes work in the long term and why it's pretty safe to rely on them will be very beneficial for your FIRE.

[aGracefulStomp]

Same. House prices where I live are so high that in 20 years time, I can either be FI OR own a place.

I've decided on FI. House ownership would be nice but it's a luxury. FI is vital (for me).

Also, house ownership is not financially efficient where I live because rent is so much cheaper than buying a place. $650k of investments would pay my rent forever (4% rule). For house ownership, I would need $900k to buy the place and then roughly $150k of investments (4% rule) to pay all the extra costs that you don't have to pay as a renter. That's nearly double the amount of money I'd have to save.

Nevertheless, I have two plans to obtain the stability of house ownership by the time I hit old age. Plan A, I will probably make money between FI and old age and use that to buy a place. Plan B, work for a few extra years after FI and use double supercharged savings (FI income + normal savings) to buy a place/have a substantial deposit. I'll assess the likelihood of Plan A when I reach FI, and go for Plan B if I don't think it's very likely.

[RiddleMB]

Efree, I read and re-read Jim's Stock Series 3 times, to make sure I understand it well. It is on my bookmarks for quick access.
All my posts written here are after reading it.