home or invest

[coolwave]

As I'm coming back from living abroad with a large sum of money I'm wondering if it's best to buy a home outright or to invest the money or both.

 

[Craig]

Depends where, depends how much money. But your timing is a bit awkward.

The U.S. has come through an unprecedented residential real estate boom, and some areas of the country are beginning to experience a bust ... see many other discussions in this forum on the same topic.

There are some areas where I think you'd be fine buying a home, still getting a decent rate on a fixed rate loan, and investing the rest. I would definitely NOT put it all in the home. Nashville, TN is growing nicely, and homes are appreciating here, and some other SE areas will prosper ... but FL looks iffy, for example.

Generally, you may be better off renting, and watching for foreclosure bargains in many areas ... keep your powder dry for now.

 

[brewer12345]

I think Charles covered the money side of it pretty well. But there are lots of non-monetary considerations, especially if you are married and/or have kids. I personally think that the non-monetary stuff should trump some of the monetary stuff in this case, although it is wise to consider the implications of any chice you make.

Case in point: There is a house in our neighborhood that is for sale for the second time in about 18 months. It is wildly overpriced for the area, but I suspect that the owners are flippers who overpaid last year and then proceeded to dump a lot of money into the place. I see no interest in the property, and it looks like the owners haven't been around in a week or better as the stuff that came down in the yard from Ernesto's passing is still there and the grass is a little tall. It wouldn't shock me to see the house in foreclosure in a year or so. On a whim, I asked DW if she would consider moving if the house became available at fire sale prices. Much to my amazement, she said yes.

 

[coolwave]

Ok, I'll try to clarify.

I'm 33 years old, single but moving towards marriage. No kids. I'm Canadian.

Depending on where I locate to, I have enough cash to outright buy a home (smaller city), or make a downpayment of at least 50% on a home in a large city (where property is booming).

In either situation, should I just make the smallest downpayment possible and try to invest the remaining (RRSP mutual funds) or should I buy the home and then contribute larger amounts to my RRSP monthly as I won't have mortgage payments.

As you can probably tell, I'm not a financial whiz, but I'm starting to make an effort.

 

[LOL!]

With that added information coolwave, the answer is still,"It depends."

 

[Ed_The_Gypsy]

You are  coming in a little late to the party.  Real estate in Alberta, Toronto and BC has really come up.

Beware if you are, for example, in the oil business and coming to Calgary.  Your job may disappear at the same time the local housing market collapses (because everybody else's job has disappeared).  It has happened before.

I personally don't like the idea of having a lot of money tied up in illiquid real estate, even a home.  If you want to own, consider buying the smallest place you are comfortable with to minimize your risk.  Invest the balance elsewhere.

If you don't need to work, or if you can work anywhere, you have more flexibility.   

When we move to a new place, we rent for a year or so and study the local market.  We buy something in a desirable neighborhood that has potential and needs a little work.  This has worked very well for us. 

Take your time before sinking a lot of $ into a house.

My opinion.

Ed

 

[coolwave]

Thanks Ed. That's the kind of logic that I need to feel better in making a decision.
For some reason, I always think of renting as throwing money away.
I always hear that Alberta will boom for at least another 10 years.

 

[ccaccc]

I've always gone by the rule of only paying the minimum on our house (after 20% equity has been achieved and PMI is dropped). Extra funds should be put in mutual funds with a good track record. You will earn 9-13% most likely, compared to the 6.5% that you would be saving by putting extra cash into your home equity.

 

[Ed_The_Gypsy]

I always hear that Alberta will boom for at least another 10 years.

Well, it might. I hope so. I work here.

Come over and make up your own mind. If I am wrong, you should be prepared to move quickly. Even so, I wouldn't buy a $$$$ house. It is like a game of musical chairs.

Good luck,

ed