Invest all my savings in a house?

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Tjiftjaf
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Invest all my savings in a house?

Post by Tjiftjaf » Mon Nov 13, 2017 10:19 am

Hi there,

As a 25 year old I am considering buying a house with my girlfriend. Therefore I was just wondering what your point of view is on this. Combined I have about 50K that I can invest in the house. 25K of this are in actively managed funds (my parents managed my money before I turned 18 :oops: ) and another 25K is in index funds.

I live in Belgium and people here typically try to buy a house a soon as possible and invest all their savings in it. Note that Belgians typically also don't have debts like student loans etc. like most Americans have. I am also debt free at this moment. However, I personally feel that it would be a better idea to use only the 25K that are in the actively managed funds as down payment for the house and let the 25K in the index funds grow for my retirement (this is a risky portfolio, composed for the long-term).

I would very much like your opinion about this. Would you invest all your savings in the house? And what is your opinion about buying a house in general? Would you prefer renting?

Many thanks! :sharebeer

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Invest all my savings in a house?

Post by Sandtrap » Mon Nov 13, 2017 10:22 am

This is a very popular topic. You can do a search on the forum and come up with excellent posts asking the same question.
Like this one:
viewtopic.php?t=227270
It also has links to prior threads with the same question.

Personally, at age 25 with a girlfriend and house funds saved up. I would rent until my career was solid, my marriage was solid, and I had financial areas like emergency savings, and other things in place. Once all of that is in place, I would purchase a home. I would pay cash if mortgage rates were too high and my overall financial picture could absorb it, or put a substantial down payment and invest, if my overall financial picture demanded that approach.
But everyone is different and would take different options.
Last edited by Sandtrap on Mon Nov 13, 2017 10:28 am, edited 1 time in total.

MotoTrojan
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Re: Invest all my savings in a house?

Post by MotoTrojan » Mon Nov 13, 2017 10:27 am

I would not split a house until I was married but that's just me. Maybe you buy and she pays a reasonable rent?

H-Town
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Re: Invest all my savings in a house?

Post by H-Town » Mon Nov 13, 2017 10:48 am

Don't do it. Terrible idea.

technovelist
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Re: Invest all my savings in a house?

Post by technovelist » Mon Nov 13, 2017 10:49 am

thangngo wrote:
Mon Nov 13, 2017 10:48 am
Don't do it. Terrible idea.
+ 1 million euros.
In theory, theory and practice are identical. In practice, they often differ.

soccerrules
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Re: Invest all my savings in a house?

Post by soccerrules » Mon Nov 13, 2017 10:52 am

Sandtrap wrote:
Mon Nov 13, 2017 10:22 am
Personally, at age 25 with a girlfriend and house funds saved up. I would rent until my career was solid, my marriage was solid, and I had financial areas like emergency savings, and other things in place. Once all of that is in place, I might purchase a home.
slight change to Sandtraps comments, but essentially the same. I would not rush out and buy a house right now. Keep saving as much as you can and see what happens in the next 2-4 years.
Don't let your outflow exceed your income or your upkeep will be your downfall.

Carefreeap
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Location: SF Bay Area

Re: Invest all my savings in a house?

Post by Carefreeap » Mon Nov 13, 2017 11:07 am

Tjiftjaf wrote:
Mon Nov 13, 2017 10:19 am
Hi there,

As a 25 year old I am considering buying a house with my girlfriend. Therefore I was just wondering what your point of view is on this. Combined I have about 50K that I can invest in the house. 25K of this are in actively managed funds (my parents managed my money before I turned 18 :oops: ) and another 25K is in index funds.

I live in Belgium and people here typically try to buy a house a soon as possible and invest all their savings in it. Note that Belgians typically also don't have debts like student loans etc. like most Americans have. I am also debt free at this moment. However, I personally feel that it would be a better idea to use only the 25K that are in the actively managed funds as down payment for the house and let the 25K in the index funds grow for my retirement (this is a risky portfolio, composed for the long-term).

I would very much like your opinion about this. Would you invest all your savings in the house? And what is your opinion about buying a house in general? Would you prefer renting?

Many thanks! :sharebeer
Are you Belgian? I ask because we lived in Germany for three years. A big difference between the Europeans I met and Americans is that Americans on average move a lot more than Europeans. Also the transaction costs for buyers is significantly higher for buyers than sellers. As an example, the buyer typically pays for the real estate fees in Europe, not the seller.

What kind of career are you in? Are you likely to have international relocations or stay put, start a family and stay put?

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Pajamas
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Re: Invest all my savings in a house?

Post by Pajamas » Mon Nov 13, 2017 12:31 pm

I think of a house or apartment as a shelter, a necessity like food and clothing, not as an investment. I would expect to make money from investments in the form of dividends and capital gains, but I expect to have to pay for a place to live as well as to maintain it, so housing is primarily an expense. Savings I think of as money being held for a specific purpose and it may provide interest but not much more than enough to cover inflation, if that.

That is not answering your question directly but might help you think of it in a different context.

A few things you should think about:

Are you settled in life and know that you will want to live in the same place for the foreseeable future? Or could you be moving for school or work?

Is it less expensive to buy or rent where you live?

Do you feel comfortable making a major purchase with your girlfriend? What are your plans if you buy a house together and your relationship with her changes in the future?

Buying is generally much more of a commitment than renting.

mega317
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Re: Invest all my savings in a house?

Post by mega317 » Mon Nov 13, 2017 1:57 pm

Tjiftjaf wrote:
Mon Nov 13, 2017 10:19 am
However, I personally feel that it would be a better idea to use only the 25K that are in the actively managed funds as down payment for the house and let the 25K in the index funds grow for my retirement
This is anchoring bias. Absent tax consequences, there is no reason that 25k couldn't be in index funds tomorrow. You need to determine how much you need to save and how much house you can afford. You should completely ignore the numbers 25k and 50k when making those determinations.

Tjiftjaf
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Joined: Wed Oct 04, 2017 5:59 am

Re: Invest all my savings in a house?

Post by Tjiftjaf » Wed Nov 15, 2017 3:16 am

mega317 wrote:
Mon Nov 13, 2017 1:57 pm
Tjiftjaf wrote:
Mon Nov 13, 2017 10:19 am
However, I personally feel that it would be a better idea to use only the 25K that are in the actively managed funds as down payment for the house and let the 25K in the index funds grow for my retirement
This is anchoring bias. Absent tax consequences, there is no reason that 25k couldn't be in index funds tomorrow. You need to determine how much you need to save and how much house you can afford. You should completely ignore the numbers 25k and 50k when making those determinations.
Love this one. Thanks!

Tjiftjaf
Posts: 7
Joined: Wed Oct 04, 2017 5:59 am

Re: Invest all my savings in a house?

Post by Tjiftjaf » Wed Nov 15, 2017 3:16 am

thangngo wrote:
Mon Nov 13, 2017 10:48 am
Don't do it. Terrible idea.
Why? :happy

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