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Old 10.11.2020, 12:22
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magyir magyir is offline
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

I empathise with the OP having gone through a similar thought process in my late 20s, when the risk reward radio for property was more beneficial to today.

Personally Id continue to rent and invest for growth. Now 50 Id look at the 200k as a pension/retirement accelarator (most folks wont have this sum in their late 30s yet, so the OP is 10years ahead, before compounding for 20 to 30+ years).

You like numbers: renting is reasonable if you think of the rent as including a premium for insurance so you are not liable for many issues as buildings age. The lifetime of kitchens, bathrooms, flooring, heating etc is unvelievably short especially from a discounted cash flow perspective over time. (2 to 3 total replacements in 30-40 years). Even new building warranties only last 10 years!

10% growth a year on your 200k doubles each 7 years (7% each decade). In 30-35 years you could have up to a million or more additional pension which means you never need to buy as you can afford to rent until 90 (before likely entering alternative living arrangements anyway).

I assume you do your pillar 3a and 3b and pillar 2 contributions until retirement or later above also.

Achieve the same with your future life partner and you can add 50-100% to the above.

Just maintenace on a property is 1% a year so at least a third to almost half of its value over 35-50 years. Plus equipment replacements, at least once or more.

For me the trade is the following: linear increases in rent but with leveraged exposure (200k+) to potentially exponential growth in the markets (eg see TSLA since your original post just in 2020).

You have time to soend time in the market, so no need to time it.

No-one lives for free so rent is cheaper than it seems equalizing the risks.

Good luck, Im sure youll do fine either way. Choose exponential over linear especially as you have 200k to start with. Keep 3-6 months living expenses (not salary) as an emergency fund in cash or cash equivalents just in case.

Enjoy your future portfolio management hobby! (perhaps)

Personally I bought in my late 20s and again 10 years later before the boom. However Ive also sold one property recently and invested instead as above.
Next review in 10 years when I hopefully reach 60
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