This week’s book learning is part 2 of a 5 part series on Personal Finance and Investing inspired by 3 books – The Investors Manifesto by William J Bernstein, I Will Teach You to Be Rich by Ramit Sethi, and The Millionaire Teacher by Andrew Hallam. (Part 1)
Buying a house and investing in real estate are two different things. Houses are purchases, not investments. That said, it probably makes sense to buy a house if you are certain you’ll live at the place for 10 years or more.
Points to note
– The costs of a house are much higher than just the sticker price – add in property tax, realtor fees, renovation, and maintenance
– In expensive cities, renting can work out to be a better long term strategy
– Buying and selling real estate is a different ball game – tread with care as you are up against professionals with a nose for value
– Pro Tip on real estate deals: Divide how much you pay for the property by how much it rents at. If you can pay off the property in 10-14 years, you’ve likely gotten yourself a good deal
Recommended steps if you decide to buy a house
– Put down 20% as down payment
– Take a 30 year fix rate mortgage (long term mortgages with option of paying larger amounts)
– Don’t make monthly payments more than 30% of your gross income
Sketch by EB
The conventional advice on investment is to buy a house. Our personal finance gurus recommend we think about our decision and ensure it makes sense for us instead of just taking the plunge because everyone else is doing so.
So, what do they recommend for long term investing? Coming up next week..
A Learning a Day 