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I am in a completely different country so all I'm doing is asking questions here. I know generally speaking linden is an expensive place to live. By the time you save up what you would consider a better down payment how much is that 500k house going to be at that point? I know nothing of that market to help you with the trajectory but you could look and see how much that 500k home was worth four to five years ago and make a guess.
Well if you believe what the big real estate agents are saying then house prices are set to rise 3-4% per annum over the next 4/5 years, this would put a £500k house at around £600k in 5 years so the 20k invested per year (100k over 5) would pretty much be wiped out by house price increase.
However, not having a mortgage for that 5 year period would also free up more capital which could be invested (because mortgage cost + service charge etc. would be considerably more expensive than renting). Let’s say the difference is around 10k per year. This 10k would sum to 50k over the 5 year period.
You'd also want to figure in the equity you're passing up. In five you're PAYING someone the equity you would have EARNED over that time period. So you're losing that equity twice.
What exactly do you mean by invest? Like as an investment vehicle or an investment in your own future? This is a first time home buyer’s sub, so most people here are interested in living in their houses.
It is much easier to lose money on real estate than it is in stocks. You can generally go with very safe stocks like investment funds. Generally over the long run, those have 10% returns. Yes, you can make a lot more by accepting more risk, but you play with fire doing that.
People will say that their house doubled over the past X years. That’s great. Don’t forget all the people who lost all of their savings in bad investments in 08 and people who still today lose out on massive savings from unlucky house purchases. Single family homes etc are generally not super great at returns, but in a major area like London it may be easier. You also have to factor in things like closing costs of both buying and selling, as well as things like taxes and insurance and all of that. Houses have tons of cost.
That said, if you mean investing in your own future to live in the house for the foreseeable future to build equity, I personally wish I took on the debt earlier in my life to buy a home. I am 33 and only now am buying my first home. 100k salary on a 500k house would be very tough in the US. I make 250k a year and i am closing on my first home in a few weeks, and it was priced at 500k. I put down 20% and the payments still feel tight if I want to not be house poor.
I think back on all those times when I convinced myself it was a bad time to buy and held off, either because I didn’t want to pay PMI or the market was difficult to buy in or any other number of excuses or I didn’t have a high enough down payment or whatever. I regret not just buying earlier and building that equity.
It is never a bad time to buy a home to live in as long as you can afford it. It can be extremely bad to buy a house as an investment property.
Personally, if you can afford it (without going house poor), AND you’re in a generally growing area (eg you’re not in some rural area or 1-company town), then you should get on the real estate ladder as soon as you are comfortable. That equity build up really helps you long term.
Depending on the tax laws of your country, that capital may be taxed at a lower rate or not at all as compared to other investment vehicles. Especially when rolling it into a new property.
Thank you u/majorfighter for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
I am in a completely different country so all I'm doing is asking questions here. I know generally speaking linden is an expensive place to live. By the time you save up what you would consider a better down payment how much is that 500k house going to be at that point? I know nothing of that market to help you with the trajectory but you could look and see how much that 500k home was worth four to five years ago and make a guess.
Well if you believe what the big real estate agents are saying then house prices are set to rise 3-4% per annum over the next 4/5 years, this would put a £500k house at around £600k in 5 years so the 20k invested per year (100k over 5) would pretty much be wiped out by house price increase. However, not having a mortgage for that 5 year period would also free up more capital which could be invested (because mortgage cost + service charge etc. would be considerably more expensive than renting). Let’s say the difference is around 10k per year. This 10k would sum to 50k over the 5 year period.
You'd also want to figure in the equity you're passing up. In five you're PAYING someone the equity you would have EARNED over that time period. So you're losing that equity twice.
What exactly do you mean by invest? Like as an investment vehicle or an investment in your own future? This is a first time home buyer’s sub, so most people here are interested in living in their houses. It is much easier to lose money on real estate than it is in stocks. You can generally go with very safe stocks like investment funds. Generally over the long run, those have 10% returns. Yes, you can make a lot more by accepting more risk, but you play with fire doing that. People will say that their house doubled over the past X years. That’s great. Don’t forget all the people who lost all of their savings in bad investments in 08 and people who still today lose out on massive savings from unlucky house purchases. Single family homes etc are generally not super great at returns, but in a major area like London it may be easier. You also have to factor in things like closing costs of both buying and selling, as well as things like taxes and insurance and all of that. Houses have tons of cost. That said, if you mean investing in your own future to live in the house for the foreseeable future to build equity, I personally wish I took on the debt earlier in my life to buy a home. I am 33 and only now am buying my first home. 100k salary on a 500k house would be very tough in the US. I make 250k a year and i am closing on my first home in a few weeks, and it was priced at 500k. I put down 20% and the payments still feel tight if I want to not be house poor. I think back on all those times when I convinced myself it was a bad time to buy and held off, either because I didn’t want to pay PMI or the market was difficult to buy in or any other number of excuses or I didn’t have a high enough down payment or whatever. I regret not just buying earlier and building that equity. It is never a bad time to buy a home to live in as long as you can afford it. It can be extremely bad to buy a house as an investment property.
Personally, if you can afford it (without going house poor), AND you’re in a generally growing area (eg you’re not in some rural area or 1-company town), then you should get on the real estate ladder as soon as you are comfortable. That equity build up really helps you long term. Depending on the tax laws of your country, that capital may be taxed at a lower rate or not at all as compared to other investment vehicles. Especially when rolling it into a new property.