Owning home and asset allocation/portfolio management

[73 Reds]

2 minutes ago, Castanza said:

I mean you build ZERO equity when you rent. A house should cost like 3% a year in maintenance over the long term. It’s easy enough to set aside and emergency fund park it in a a High Yield account, Bonds or even equities and come out well ahead. 
 

@SharperDingaan I agree on the most people spend way too much on their first house. I get it in some markets, but for most a house is a utility…lower mortgage frees up more cash to invest while also forcing some savings on an appreciating asset. Plus you can always leverage the equity or rent it out and move to a nice house once you build some wealth. 
 

Im not old, but my advice to people in their 20s is buy cheap vehicles and a small affordable house that is maybe 2-3x your salary or combined salary. 

+1  That all fits within the theme of living below your means until you can't outspend your means and until that time don't spend too much on depreciating assets. 

[This2ShallPass]

1 hour ago, Castanza said:

Im not old, but my advice to people in their 20s is buy cheap vehicles and a small affordable house that is maybe 2-3x your salary or combined salary. 

This is definitely the safe path. But 20s is also the best time of your life as an adult. I don't advocate taking debt to finance your lifestyle but being frugal is also unnecessary in my opinion. What's the point of having more money than you need in your 60s if that comes at the expense of doing things you enjoy in your 20s.

 

Also on paying of mortgage early, it makes sense most of the time. But when mortgage rates were at 2.5%, I told my friends you will never see that again in our lifetimes. It was the cheapest long term loan anyone will ever give you and it was not smart to pay it off. There are any number of things you could do without taking lot of risk that gives you >2.%5 CAGR over a 10-20 year timeframe. I also think about it as net debt vs. paying off your mortgage. To me having 500k in a CD earning 4% and having $1M mortgage is better than having 500k 2.5% mortgage. 

 

 

 

[Castanza]

4 minutes ago, This2ShallPass said:

This is definitely the safe path. But 20s is also the best time of your life as an adult. I don't advocate taking debt to finance your lifestyle but being frugal is also unnecessary in my opinion. What's the point of having more money than you need in your 60s if that comes at the expense of doing things you enjoy in your 20s.

 

Also on paying of mortgage early, it makes sense most of the time. But when mortgage rates were at 2.5%, I told my friends you will never see that again in our lifetimes. It was the cheapest long term loan anyone will ever give you and it was not smart to pay it off. There are any number of things you could do without taking lot of risk that gives you >2.%5 CAGR over a 10-20 year timeframe. I also think about it as net debt vs. paying off your mortgage. To me having 500k in a CD earning 4% and having $1M mortgage is better than having 500k 2.5% mortgage. 

 

 

 

By all means live up your 20s and have fun but my point is there is still a need for balance. Again it’s rational vs reasonable. The difference lies in the subjective landscape of each individuals personal situation.  

[Aurelius]

Bought a home some 13 years ago. Proved to be a fantastic investment. 

40% downpayment; interest only loan. 

Refinanced within 3 years = got the downpayment plus a bit out. Net investment negative! Present LTV 40%ish. 

Home up appr. 150%. Tax free if/when I sell. 

Yearly expenses have been less than half compared to renting. And still are.

Fantastic neighbourhood; great city. Neighbourhood has improved while living here and will continue to do so - although not at the same rate. So will the city. 

 

Of course this opportunity not present for current buyers. 

Easy to take for things for granted, but important to reflect and be grateful. 

Edited October 21, 2025 by Aurelius

[Milu]

1 hour ago, Aurelius said:

Bought a home some 13 years ago. Proved to be a fantastic investment. 

40% downpayment; interest only loan. 

Refinanced within 3 years = got the downpayment plus a bit out. Net investment negative! Present LTV 40%ish. 

Home up appr. 150%. Tax free if/when I sell. 

Yearly expenses have been less than half compared to renting. And still are.

Fantastic neighbourhood; great city. Neighbourhood has improved while living here and will continue to do so - although not at the same rate. So will the city. 

 

Of course this opportunity not present for current buyers. 

Easy to take for things for granted, but important to reflect and be grateful. 

Yes the tax free aspect for both capital gains and imputed rent are a big advantage to owning primary residence, at least in Ireland where we don't have many tax free investment options outside of a pension. Main costs are mortgage interest and maintenance cost.

 

 

[Kizion]

12 hours ago, SharperDingaan said:

Thing is ... this isn't most people. Most will buy too much house, too early, and pay too much for it .... leaving barely enough cash to pay the mortgage, everything else hand to mouth, pray you can flip the place at a higher price, pray that nothing breaks, and run the asset into the ground. Lacking discipline, renting is often the better option ....

 

I should be more grateful that my partner in crime is happy with a less expensive house. I've colleagues that are buying houses that are multiple 100kEURs more expensive than ours, while I cannot understand their monthly repayment could be significantly higher than ours. Meaning that they put up themselves these additional 100kEURs when they are around 35. Opportunity cost is huge. 

 

Recent example was 350kEUR more expensive vs. our house (70% more expensive vs. our house) - if you would invest this for 20 years at 6%, you could buy this expensive house for "free" 

[Red Lion]

2 hours ago, Kizion said:

Recent example was 350kEUR more expensive vs. our house (70% more expensive vs. our house) - if you would invest this for 20 years at 6%, you could buy this expensive house for "free" 

Doesn’t the house appreciate too? And do you mean 6% after tax? 
 

Because if a house appreciates at 4%, you return 6% pretax, it’s probably not much difference either way right? 

[SharperDingaan]

Three things learnt along the way .....

 

(1) House needs change as life changes ... kids arriving/departing, retirement, etc. Buy the future house (a decade out) today, as a fit for purchase new build, and rent it out - while living mortgage free in the existing one. Highest quality upgrades at the time of build, include the landscaping, build a fund to re-roof, re-window, replace the carpet, replace the HVAC/ appliances, update the kitchen, and repaint when you move in. Tomorrows otherwise unaffordable custom built house, often bought today at 50c in the dollar, or less 

 

(2) On inception of the 25yr mortgage, calculate the duration, and use it as the target retirement date. If you can use savings, stock/bond market gains, etc. to pay off the remaining principal on the target date ... you have essentially hedged your interest rate risk. Inflation will also have built a good chunk of your equity gain; market and neighbourhood improvements are bonus.   

 

(3) Pay up for the best Postal Code, as the houses are luxury goods, prices will change with the global economy, and many will be beneficiaries of money laundering. That corporately owned house is often a sweetheart offshore sale and leaseback at an intentionally higher price ... so help yourself, but recognise that you're really trading liquidity. Today's cash rich sheikh may well be tomorrow's cash poor bum ..... in need of a cheap quick sale 

 

SD 

 

 

[Kizion]

2 hours ago, Red Lion said:

Doesn’t the house appreciate too? And do you mean 6% after tax? 
 

Because if a house appreciates at 4%, you return 6% pretax, it’s probably not much difference either way right? 

 

No taxes in BE for gains on a house. 

But you definitely right, I neglected the appreciation, I myself don't count on 4% gain on RE but still would result in difference of 350kEUR.

Edited October 21, 2025 by Kizion