Should I buy a house?

[lyzwad]

Hi all! Before I start I'd like to just say that MJ's books changed my life and personality and I'm forever grateful for that.

I live in Poland (Europe), I'm 28 and I've recently launched a business after 10 months of preparation. Simultaneously I work full-time, but it's to soon for me to quit since I don't have sales yet, and I can work on my business during my 9-5 job, plus it provides me with cash which I can put directly into this investment. With my wife, we rent small apartament (33sq meters = 355 sq ft), and we were thinking about buying a house.

Pros? We could rest more effectively, have some yard to chill, we could have a dog and have some more space. Cons? We would have to take a mortgage for this endeavour + I assume that since a house is a liability, our daily living costs would increase (heating, commute, there is always something to buy or fix, etc.)

Let me just bring up our cash flow - we don't have any debt and liabilities, we don't have nor plan to have children. We have around $65 000 in cash, since we save bigger part of our salaries. We earn monthly around $3000/each after tax ($6000 in total). Now we're paying $420 for rent and utilities. If we decided to buy a house we would spend around $200 000 - $220 000 for that, taking a mortgage for 15 years, paying monthly for that around $1000 in total + utilities.

I read UNSCRIPTED recently for the third time just to look for the answers on this problem. I wonder if having a mortgage is in the slowlane basket, even if it doesn't drain you completely from your money. Of course having debt is bad, however MJ always says about pragmatism and not being a prisoner in your own life being too thrifty. I've never taken any loan or even leased a car and I'm simply afraid of doing so, but maybe it may benefit me overall. There are no etrepreneur minds in my real life, unfortunately, and I really can't listen to the slowlaners and their shitty advices anymore on that topic.

So, what would you do?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[apollo_web]

If it were me buddy, I would focus on building your cash flow, get sales cranking in until you can comfortably buy a house and take on a new liability without thinking about it.

I had a similar issue and realized I hadn't built enough rocket fuel in my business to warrant releasing a large portion of my savings.

You have a very low overheads at the moment and it's working for you both, why change it?

If it were me I would put 1 year of living expenses aside to give you that feeling of financial independance without having to buy a house. Essentially this acts as 'f*ck you money' where you don't have to take jobs or roles you don't want to because you're desperate for the money.

Then I'd use the rest of it along with 100% of your focus on getting your fastlane up to speed. If you don't get it up to speed then even if you had bought the house you wouldn't be in a house much better position.

Imagine if you had a fastlane business rocketing, 1 year of living expenses set aside, AND your house downpayment... How would it feel moving in then?

Most of society locks themselves into a mortgage with no mobility, large overheads and chain themselves to having no options.

Just echoing my thoughts

 

[Digamma]

Here's something you should consider.

Buying this house will get around 220k in equity stuck into it, plus reduce your cash flow month to month.

Is there a scenario where this bites you in the a$$?

What business are you running? What are the numbers on that?

• Is there a scenario where the business requires you to get cash fast?
• Are you going to need a heavy cash infusion to scale?
• Once you quit and focus on the business, will your personal cash flow be enough to sustain the house?

Overall, starting a business and buying a house while the business is not humming yet is a lot of risk. But the house is also only 36 months of your combined income, and the expense a sixth of it.

At the end of the day, evaluate the outcomes, size up the risk, and decide.

 

[Brewmacker]

Try comparing the mortgage repayments to your current rental payments. When I bought my first apartment it was actually cheaper than renting. FYI I live in the Netherlands.

Rent is always inevitable, & yes with renting you are flexible in that at any moment you can move where you want.

On the other hand, buying a property is expensive (ca. 10% here in NL). If you manage your expectations and think small, you can match your mortgage repayments to your rent. The equivalent break-even point compared to paying rent in this situation is around the 24 month mark. I think it is even way better quicker now with the very low mortgage intrest rates (could be 18 months). You can calculate that yourself.

The advantage is, that you would be spending that same cash on rent anyway, but the disadvantage is you have just tied your self down for 1.5-2 years.

It is a really nice feeling that after this break-even point, and assuming positive growing housing market, you can consider roughly 50% of every mortgage repayment as an untouchable savings account. This you can turn into cash later when you sell the place (ignoring capital gains or losses).

When I started earning more money I bought a bigger house & with agreement from the bank put the small apartment on the rental market. Now someone else is paying 100% of the mortgage for me and the property has gained an average 2.3% per year in market value (actually it shot up 18% last year so pretty skewed average).

It is hardly fast lane millionaire but I shudder at the thought of all the money I would have wasted if I was still renting 8 years later.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[lyzwad]

Thank you guys for your thoughts! It really helps me. To give you some more info on my business - I sell men’s leather belts. I’ve recently lauchned after 10 months of preparation, haven’t sold anything yet and working on marketing - to make the brand recognizable. Marketing in fashion business demands cash infusions, but I don’t feel that it would be overwhelming - unless I decide to go very hardcore with this. To sum up - I’ve invested around $5000 to this moment and I assume to put the same amount in the promotion in the next 6-8 months.

Your advices regarding proportions of mortgage to actual earnings were really useful. I think it is the matter of finding the „sweet spot”, where monthly payment is not too big to cope, especially when the business would require more capital or time. What do you think - where to set up that sweet spot in my case? It might be hard to meet rental payments, since these are super low...

 

[JordanK]

Have you ever considered 'house hacking'? If you haven't heard of the term then I would encourage you to research it. Basically you would go ahead and purchase an apartment/house/duplex in a popular area either with locals or tourists. You live in one units or room and rent out other units/rooms in the house to pay your mortgage and in some cases even make you a profit.

There are a number of options depending on your priorities... for example..

If you don't like sharing common spaces with others outside your family then look for a duplex or a house which is divided with separate entrances and living spaces.

If you are in a tourist area and don't mind playing a more active role then you could rent on booking.com or airbnb netting you a lot more per night than a long term guest would bring in. I myself live with students from September to May and then rent on AirBnB during the summer.

 

[lyzwad]

Thanks @JordanK! I will definitely consider this option. After your insightful advices I think in the medium term I'll focus on looking for a cheaper house or a flat which will create as small liability as possible. Althoug,h matching the monthly payment ($1000/mo for 15years) with my actual rent ($400) would be hard (UNLESS I take a mortgage for 30 years, but then interests are doubled). Overall, a couple years for now I would at least have a property, and should I decided to rent until I'm wealthy/unscripted I would just pay the rent to the landlord, with no extra benefits. To sum up - maybe going as modest as possible is the way here.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Mill0006]

If it were me buddy, I would focus on building your cash flow, get sales cranking in until you can comfortably buy a house and take on a new liability without thinking about it.

I had a similar issue and realized I hadn't built enough rocket fuel in my business to warrant releasing a large portion of my savings.

You have a very low overheads at the moment and it's working for you both, why change it?

If it were me I would put 1 year of living expenses aside to give you that feeling of financial independance without having to buy a house. Essentially this acts as 'f*ck you money' where you don't have to take jobs or roles you don't want to because you're desperate for the money.

Then I'd use the rest of it along with 100% of your focus on getting your fastlane up to speed. If you don't get it up to speed then even if you had bought the house you wouldn't be in a house much better position.

Imagine if you had a fastlane business rocketing, 1 year of living expenses set aside, AND your house downpayment... How would it feel moving in then?

Most of society locks themselves into a mortgage with no mobility, large overheads and chain themselves to having no options.

Just echoing my thoughts

I agree with Apollo_Web. Currently you are only paying $420 per month for rent. Purchasing a house would only make sense if the mortgage for the house was the same that you're paying in rent or cheaper. Use the money that you save each month to keep building your nest egg and business.

 

[Tourmaline]

No.

Even if the mortgage was less than rental you are still tying up a lot of capital that should be used towards business or other fastlane ventures.