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Old 27.04.2020, 16:16
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Should I buy a home or invest? I just reached 200k in savings and they are sitting in

Hello, I really need some advice, from different prospectives, on what would be the best way to use my money?

First of all some informations:

-30 years old male
-single
-job in IT (management position, solid company and no foreseeable risk in losing my job)
-making 90k a year
-no debts
-no car (I move with the Train and I got a big scooter for when I need to move, if needed I borrow the car from parents)
-living in rented appartment

I live in Ticino and I have NO plans to move.
I'm confident I will always have/find a job in Ticino.

For that reason, I'm considering one of the following scenarios:

-Buy a house
-Invest heavily my money

I just reached with my last salary, I reached 200k CHF in savings.

Of those, 90% is sitting in my Bank Account and 10% is invested in Crypto.

In the last years I was so busy with life, making a career, that I just left the money there.

Now I want to do something with it and I m seeking advice!

First idea is, would it make sense to buy a house? I'm sure I'll always live in Ticino, currently I'm paying 2'000 CHF per month just to rent.
Even if in the future I switch work place, Ticino is fairly small that I can commute anywhere without issue.
I have the capital to put 20% for a 1million house.
And with the current Interest rates I would probably pay less monthly for the mortgage interests (if I buy a house, I plan to just amortize until only the first mortgage is left (67% of total house value), and then just pay interest for the rest of my life (tax benefits).
So this seems a good idea to me, especially because sooner or later I'll want to start a family and for sure I'll need a bigger place!

The other option is to keep renting and invest heavily all that money, but also here I'm clueless, what is my best option in this case? Would it make sense to invest over buying a property?



Thank you
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Old 27.04.2020, 16:29
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

can you get a decent house for < 1 million??
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Old 27.04.2020, 16:52
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

oh yes- just depends where
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Old 27.04.2020, 17:53
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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can you get a decent house for < 1 million??
in Kanton Ticino there are nice house with less than 5 years since they have been built, around that price point!
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Old 27.04.2020, 17:27
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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-making 90k a year

I reached 200k CHF in savings.

I have the capital to put 20% for a 1million house.
I took these 3 things out of your post.

You might have the 200K to put down, you however have nowhere near an income that would allow an 800K mortgage. I'd guess you can do half of that max (and don't forget the extra costs involved with buying) putting you in the market for houses of around 600K max.

Often people do forget that even tho they have the downpayment, they just lack the income for the loan.

I'd say forget about it for now.
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Old 27.04.2020, 17:43
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I took these 3 things out of your post.

You might have the 200K to put down, you however have nowhere near an income that would allow an 800K mortgage. I'd guess you can do half of that max (and don't forget the extra costs involved with buying) putting you in the market for houses of around 600K max.

Often people do forget that even tho they have the downpayment, they just lack the income for the loan.

I'd say forget about it for now.
Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?
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Old 27.04.2020, 17:49
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

I think that you should:
1. Find a cheaper place to live than 2000CHF/month (or is Ticino really that expensive? :O)
2. Invest
3. Buy a home (if it will make financial sense) when you will need it for your family, not on a tentative plan of starting one "sooner or later"
(e.g. you might change your mind about moving in 2 years - be it work or whatever; your future wife might not like the house; you might together decide to go somewhere else etc. etc.)
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Old 27.04.2020, 19:18
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I think that you should:
1. Find a cheaper place to live than 2000CHF/month (or is Ticino really that expensive? :O)
2. Invest
3. Buy a home (if it will make financial sense) when you will need it for your family, not on a tentative plan of starting one "sooner or later"
(e.g. you might change your mind about moving in 2 years - be it work or whatever; your future wife might not like the house; you might together decide to go somewhere else etc. etc.)
about point 1), I can for sure find cheaper places, but I don't have any particular "vice" or special expenses like cars or expensive hobbies,
the one thing I LOVE, is having a nice place to live!
I lived for years in low cost apartments to save as much as possible, and now my main goal is to get a nice place.

about point 3) when I talk about buying a house, I don't plan on buying mid-range/older houses, and for around 1 million you can get very nice houses!
And I won't be moving from Ticino for sure, I've got family and friends here.

So sometimes I just feel I'm throwing away 2k per month, when I could just use my savings and get a house, where I would pay the same amount until I get to 65% of the mortgage,
then I would pay around 1k per month!

finally, about point 2) I would love to invest, but not sure what s the best way to do this, is there a Topic on this forum with all the informations needed to invest in CH?
What are the best tools? I would avoid wealth management and investing by Banks, as I assume they take a nice cut.
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Old 28.04.2020, 09:06
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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about point 1), I can for sure find cheaper places, but I don't have any particular "vice" or special expenses like cars or expensive hobbies,
the one thing I LOVE, is having a nice place to live!
I lived for years in low cost apartments to save as much as possible, and now my main goal is to get a nice place.

about point 3) when I talk about buying a house, I don't plan on buying mid-range/older houses, and for around 1 million you can get very nice houses!
And I won't be moving from Ticino for sure, I've got family and friends here.

So sometimes I just feel I'm throwing away 2k per month, when I could just use my savings and get a house, where I would pay the same amount until I get to 65% of the mortgage,
then I would pay around 1k per month!

finally, about point 2) I would love to invest, but not sure what s the best way to do this, is there a Topic on this forum with all the informations needed to invest in CH?
What are the best tools? I would avoid wealth management and investing by Banks, as I assume they take a nice cut.
Interactive Brokers account for investing and just a simple strategy with some stocks. However, I would buy the house in your case if you can afford the mortgage.
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Old 27.04.2020, 17:57
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?
euh nope.

Bank also has to reserve amounts of your income for maintenance of the house, living, also they don't calculate with the current interest for a maximum loan amount but calculate with like 5% interest to be certain one can handle the payments on the long term.

For the 1M house he'd need an income which is at like Double of what he has now.
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Old 27.04.2020, 17:57
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?

Nope, have a look at this calculator:
https://www.moneyland.ch/en/mortgage-calculator


If you put in following data:
1mil cost of house
200k downpayment
90k gross income


Basically income is too low to be in 'safe' - below 33% in this calculation. Also, please note that (if I remember correctly) affordability calculations are done for interest rate of 5% (and that is by law)


Another thing is, in 'region Lugano' on homegate (whatever that means) there are houses starting from 70k (almost a ruin), for 200k in some viliges in 'region' you can buy a house that is ready to move in...

So let's not assume 1mil is needed, maybe OP can find something really much, much cheaper, and if he does, he might be able to actually afford easily (basically up to almost 600 000 with data provided by him is possible)
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Old 27.04.2020, 18:19
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

Is it such a good time now to buy a house ? Is there a bubble going on ? What will the fallout of the coronavirus do with house prices ?
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Old 27.04.2020, 18:30
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

2000 francs a month seems very expensive for Ticino. Friends of ours moved there in January 2019 and it is much cheaper to rent a place than in Basel.
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Old 28.04.2020, 09:36
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

Quote:
I took these 3 things out of your post.

You might have the 200K to put down, you however have nowhere near an income that would allow an 800K mortgage. I'd guess you can do half of that max (and don't forget the extra costs involved with buying) putting you in the market for houses of around 600K max.

Often people do forget that even tho they have the downpayment, they just lack the income for the loan.

I'd say forget about it for now.
Agree. No way is $1m affordable or even sensible. With a 'low' income and life savings sunk into the deposit, there's absolutely no financial capacity to account for any contingency that can come up as part of home ownership. What if financial crisis leads the bank to make a cash call of 100k or more? A heating overhaul costing 30k? IMO, way too much risk.
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Old 28.04.2020, 10:06
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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Agree. No way is $1m affordable or even sensible. With a 'low' income and life savings sunk into the deposit, there's absolutely no financial capacity to account for any contingency that can come up as part of home ownership. What if financial crisis leads the bank to make a cash call of 100k or more? A heating overhaul costing 30k? IMO, way too much risk.
I see, your point makes sense for sure, I would like to just understand if, instead of being alone, I had a partner, that let's say, makes around the same, so we bring home 160-180k per year.
Considering the same amount in savings, 200k, would in this case be a smart financial decision to invest in a house of around 1million?

I'm trying to figure out if it's even worth go this path, or I should just invest all my money at 2-4% return yearly and go with rent.

I also read people suggesting buying a property to rent it out, but then, what are the numbers there? is there a calculator or guide to check how much would be worth renting out something, considering the price of the estate, interest rate and so on.

I'm a bit clueless in this stuff but I'm eager to learn and make the best financial decision
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Old 28.04.2020, 10:13
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I see, your point makes sense for sure, I would like to just understand if, instead of being alone, I had a partner, that let's say, makes around the same, so we bring home 160-180k per year.
Considering the same amount in savings, 200k, would in this case be a smart financial decision to invest in a house of around 1million?
That is a big if. You need to find a partner that you trust and can live with. Do not look for a partner, so that you can make a financial commitment. I say commitment rather than investment because you are signing up for a loan together, not just making an investment. You are putting down 20%, they are putting down 0% and the bank is putting down the rest, for which they want repaying.
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Old 28.04.2020, 10:40
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I see, your point makes sense for sure, I would like to just understand if, instead of being alone, I had a partner, that let's say, makes around the same, so we bring home 160-180k per year.
Considering the same amount in savings, 200k, would in this case be a smart financial decision to invest in a house of around 1million?

I'm trying to figure out if it's even worth go this path, or I should just invest all my money at 2-4% return yearly and go with rent.

I also read people suggesting buying a property to rent it out, but then, what are the numbers there? is there a calculator or guide to check how much would be worth renting out something, considering the price of the estate, interest rate and so on.

I'm a bit clueless in this stuff but I'm eager to learn and make the best financial decision
Personally, I'd want to have at least 100k-200k beyond the 20% deposit as well as pulling in 100k in savings annually over 2 or more income streams to be comfortable with taking on a million in debt.

Frankly, at current yields, you're probably only getting <2% return so <6% over the long term with leverage (assuming interest rates stay low for a substantial period of time). I wouldn't consider it a great investment, but it is guaranteed rent savings assuming nothing goes wrong.

The problem is that you have all your eggs in one basket. I wouldn't want a single house to be more than 30% of my assets.
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Old 29.04.2020, 02:05
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

A house might be too big and too much work for you now.

Well done on saving up 200k - you would be surprised how many people can't do that, even on higher salaries. There are many things you can do with it. Do you pay into your Pillar 3 account? You could invest it in an index tracker fund, DIY on Interactive Brokers, or buy a smaller apartment that you could then rent out for a side income when you need a bigger place.

Personally, would put the 200k down on an apartment or 2 apartments that could generate a side income. By your age I had a handful of rental flats generating more than my salary. I've scaled that back now i'm in my 40s.

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I also read people suggesting buying a property to rent it out, but then, what are the numbers there? is there a calculator or guide to check how much would be worth renting out something, considering the price of the estate, interest rate and so on.
You pay around .95% interest yearly, 5 year or 10 year fixed on the amount you borrow, simple interest in Switzerland. Look at similar properties and what they rent for. Take off expenses: communal building fees and agency fees and that's what you make before taxes and repairs and maintenance expenses. Tenants pay charges like water usage and fire service in CH.
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Old 29.04.2020, 09:40
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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A house might be too big and too much work for you now.

Well done on saving up 200k - you would be surprised how many people can't do that, even on higher salaries. There are many things you can do with it. Do you pay into your Pillar 3 account? You could invest it in an index tracker fund, DIY on Interactive Brokers, or buy a smaller apartment that you could then rent out for a side income when you need a bigger place.

Personally, would put the 200k down on an apartment or 2 apartments that could generate a side income. By your age I had a handful of rental flats generating more than my salary. I've scaled that back now i'm in my 40s.



You pay around .95% interest yearly, 5 year or 10 year fixed on the amount you borrow, simple interest in Switzerland. Look at similar properties and what they rent for. Take off expenses: communal building fees and agency fees and that's what you make before taxes and repairs and maintenance expenses. Tenants pay charges like water usage and fire service in CH.
Thank you for the answer!
If I don't go with the House buying route, the idea of buying 1/2 properties to rent out seems the most appealing one.
Could I ask you more informations about this, or a pointer where I can find more info?
Mainly about:
-how can I know if the price of the property is right, based on how much it would rent out for? Is there a magic number I need to look for?
-what are some hidden expenses? Or the ones that you talk about are all I can expect? and if you talk numbers, could you show me a classic example, for a flat that costs X to buy, and rents for Y, with yearly Z expenses, so I have an idea of the return.

Thank you very much
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Old 27.04.2020, 20:02
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Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin

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I'm confident I will always have/find a job in Ticino.
I remember that! Four of us worked in IT, we thought the same, now at 54 - 60, none of us have worked in a few years... If we had not worked as contractors in the late 80s and 90s and had a chance to build up good reserves, we'd be in difficulty now.

Find a cheaper place to live and build up your reserves for the day, you will not have a job or you get tired of it and want to get out early or are forced out.
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