LebGeeks

Guitaret

Member

Financial/Investment advice needed

Need your opinion on this financial decision.
I am a male in my 30s, moved 1 year ago to a city in Western Europe (a bit expensive, but not in the top European ones in terms of cost of living).
I pay around 30% of my net salary on rent and I am very frustrated by this fact, I feel like I am burning money, only helping a rich old landlord become richer.
I have to say that I am even more sentimental about this because I owned my place before coming here, I didn't pay rent to anyone, and my net salary is all mine.
My idea of solving this is buying a small place I can afford, not because I want to buy, and not because I am sure I will live here for the next 10 years, but because this is my best idea of me beating the rent & the inflation hell.

6 months from now, I will be able to come up with the down payment, my mortgage will be 40% of my income (more than I pay for rent) but since I am buying a small place, the loan period will be only 10-14 years. Real estate loans go for 3.6% at the moment. Surely, I will live in this place, hence I will be saving the rent amount and a chunk of the registration fees.
After 10 years the small place will be mine, I would have beaten inflation (judging by the real estate prices)
If I keep renting, after 10 years I would have a bigger savings account for sure, but probably 50% of it would go to inflation.
My only hesitation is that I am not 100% sure that I want to live in this country, but even still, I can rent it out in the future (super east to do that in this part of Europe)

What do you think? or can you recommend an alternative investment or approach? I am old school, I don't know how to invest except in real estate.
Thank you

rolf

Member

Re: Financial/Investment advice needed

I pay around 30% of my net salary on rent and I am very frustrated by this fact, I feel like I am burning money, only helping a rich old landlord become richer.

I stopped reading right there. You are privileged - try London where people pay half of their salary for a miserable room with no windows and where you have to have a managerial position or be a successful entrepreneur to afford a small flat.

You have to wait in line for your turn there are people who worked for a dozen years until they could afford to rent a flat as a couple.

Blame the Lebanese mythical view about Northern Europe where basically everything falls into your lap and the government gives you a flat or other delusional ideas. If you are legally registered you could be eligible depending on the country and situation to get assistance for your accommodation and living expenses.

PS: Don't worry too much about your landlord getting rich he is paying taxes and expenses from his side. Just make sure he fulfills all his duties and strictly respects all your rights so that you have a fair relation.

Last edited by rolf (September 12 2023)

Guitaret

Member

Re: Financial/Investment advice needed

I stopped reading right there. You are privileged - try London where people pay half of their salary for a miserable room with no windows and where you have to have a managerial position or be a successful entrepreneur to afford a small flat.

Hey rolf, I see your point there, but let's not forget that the 50% remaining from a London salary equals my whole salary where I currently lives  So fair is fair after all.

But I do agree, that the big European cities are overrated, and you only get this knowledge slap (I mean punch) once you live there.

But I don't see your overall point regarding my main question (as I got the impression you live/lived in Europe): Invest or no? Any alternative you recommend?

Last edited by Guitaret (September 13 2023)

RandomMemory

Member

Re: Financial/Investment advice needed

I stopped reading right there. You are privileged - try London where people pay half of their salary for a miserable room with no windows and where you have to have a managerial position or be a successful entrepreneur to afford a small flat.

Hey rolf, I see your point there, but let's not forget that the 50% remaining from a London salary equals my whole salary where I currently lives  So fair is fair after all.

But I do agree, that the big European cities are overrated, and you only get this knowledge slap (I mean punch) once you live there.

But I don't see your overall point regarding my main question (as I got the impression you live/lived in Europe): Invest or no? Any alternative you recommend?

Overrated how. Been living here and it's nothing but great. If you are paying 30% of your rent then that's not expensive at all.

xazbrat

Member

Re: Financial/Investment advice needed

If you are in a stable country, even if you move later on, you can still sell the place, or at least rent it (become a landlord lol) and recover your costs that way.  It is a good habit to get into finding sources of passive income and a rental would be a good way of doing this.

And even though your payments would be higher as a percentage of your income, you may be able to recover some of it back depending on the local tax regulations.  IMO, if you are sure that the property is going to hold its value, then by all means go for it.  If you are not sure, then don't do it obviously, but paying it off in 10 years is a pretty sweet deal IMO for only 40% of your net income.   In the US, people pay 40% or more of their income on houses and still need 30 years to pay them off.

Guitaret

Member

Re: Financial/Investment advice needed

If you are in a stable country, even if you move later on, you can still sell the place, or at least rent it (become a landlord lol) and recover your costs that way.  It is a good habit to get into finding sources of passive income and a rental would be a good way of doing this.

And even though your payments would be higher as a percentage of your income, you may be able to recover some of it back depending on the local tax regulations.  IMO, if you are sure that the property is going to hold its value, then by all means go for it.  If you are not sure, then don't do it obviously, but paying it off in 10 years is a pretty sweet deal IMO for only 40% of your net income.   In the US, people pay 40% or more of their income on houses and still need 30 years to pay them off.

Thank you xazbrat

sero

Member

Re: Financial/Investment advice needed

just note that 3.6% is not fixed
Look at mortgage rates in USA and Canada 3 years ago and compare it to now for example.

Also you'll lose on profit if you rent out your apartment while abroad (taxes, maintenance, service fees, management fees...)

I would invest my savings (safe and simple ex: S&P 500, Gold...) and buy a property in cash (or high down payment) when i'm more settled

rolf

Member

Re: Financial/Investment advice needed

Hey rolf, I see your point there, but let's not forget that the 50% remaining from a London salary equals my whole salary where I currently lives  So fair is fair after all.

Fair? In the world we live in?

Just keep in mind that in cities with expensive real estate, commute would be equally expensive, so are expenses such as restaurants, food delivery, drugs (necessary to forget about your noisy smelly flatmates and hearing the mice running inside the walls, or your miserable job that you can't quit).

So depending on your situation you may be able to buy more stuff like clothes, cameras, etc. It's a weird situation. Based on my experience if I had to chose between living in a expensive city in a one room apt with questionable privacy and being able to put some money aside, or living in a less stressful, quiet place with more space and less rats, I'd pick #2. Living conditions in London can make Beirut look good sometimes - if only you could breathe the air of Beirut and have a little quiet at night - which we know are terrible problems here...

But I do agree, that the big European cities are overrated, and you only get this knowledge slap (I mean punch) once you live there.

But I don't see your overall point regarding my main question (as I got the impression you live/lived in Europe): Invest or no? Any alternative you recommend?

It depends on your goals.

If you want to own property then I've heard USA would be a good country for that. Possibly Canada or Mexico as well, you'll have to do your research.

Last edited by rolf (September 21 2023)

tricky

Member

Re: Financial/Investment advice needed

If you want to own property then I've heard USA would be a good country for that. Possibly Canada or Mexico as well, you'll have to do your research.

Owning a property in Canada is a pretty bad idea. Due to high tax and properties are very expensive.

Guitaret

Member

Re: Financial/Investment advice needed

I would invest my savings (safe and simple ex: S&P 500, Gold...) and buy a property in cash (or high down payment) when i'm more settled

I wonder what is the best way to invest in S&P from Europe...

samer

Admin

Re: Financial/Investment advice needed

I would invest my savings (safe and simple ex: S&P 500, Gold...) and buy a property in cash (or high down payment) when i'm more settled

I wonder what is the best way to invest in S&P from Europe...

You buy an ETF that tracks the S&P 500. Any broker available to you in Europe will have a few of those. Use something like brokerchooser.com to find a good broker that serves your country of residence. You can probably also buy an ETF directly via your bank, but their fees tend to be higher than a dedicated broker.

xazbrat

Member

Re: Financial/Investment advice needed

I would invest my savings (safe and simple ex: S&P 500, Gold...) and buy a property in cash (or high down payment) when i'm more settled

I wonder what is the best way to invest in S&P from Europe...

You buy an ETF that tracks the S&P 500. Any broker available to you in Europe will have a few of those. Use something like brokerchooser.com to find a good broker that serves your country of residence. You can probably also buy an ETF directly via your bank, but their fees tend to be higher than a dedicated broker.

And just to expand on Samer's point, you can find ETF's for just about any index as well as commodities and other services.  And if ETF's aren't an option right now, many mutual fund families will allow you to use dollar cost averaging so you can spend a certain sum each month (say $200) and you can begin to build a nest egg.  Mutual fund families will have ETF's or other index funds so you should be able to find some that suit your purpose.  Just pay attention to the fees and the breakdown of dividends and capital gains so you can get an idea on how that would affect you taxwise.  In the US for example, dividends are taxed as ordinary income while capital gains are taxed between 15 and 20%.