Real Estate
I think one of the big moments of life is when someone buys his or her first home. I am living on rent at the moment, but I realize that this is not a very smart way of living. In the end, the rent I pay is a pretty high expense, which is generating a passive income for my landlord. So in the end, I am helping my landlord in gaining wealth.
One of my main commitments is to own real estate, in any of the following two forms:
- for private purposes, or
- for investment purposes
Buying real estate and then living in it would surely reduce my costs in the long run. Still, on the short term, or as long as the mortgage has to be paid (if any), I would be confronted with mortgage payments, additional interest payments, and then various taxes. However, if everything goes well, I would have my own home, paid off, after a certain number of years. Consider this: if I would be paying rent of 800 Euros for the next 25 years, that is a total rent of 240,000 Euros. I could purchase a nice home for that money. And I have not even included inflation in this calculation. Still, I would have the risk of not being able to pay my mortgage, meaning the bank would confiscate my home. On the other side, I would be debt-free in 25 years from now.
The financially better alternative is to buy real estate and then letting someone else pay the mortgage. I’d consider this as a long term-investment, where the monthly profit is only small as long as the mortgage has not been paid for. But after that, I could make a real profit from it, also considering inflation; inflation does not impact my mortgage payments, but it does impact the rent I can ask from my tenant.
Currently, I am still far away from buying real estate, especially considering the fact that the past few crises have made banks more cautious and requiring higher down payments.
