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1) When Does a software engineer start financial planning for retirement since the our Career span is only 15-20 years on average.
2) How much and which schemes to invest to mitigate the risk?
3) How much do we need for retirement?
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Subject Expert
Can I get a commercial loan without 25% down?
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In most cases it’s better to buy than rent and to buy as soon as you’re able. You don’t need to wait to put 20% down. If you have enough for at least 5% and can afford the monthly payments that’s what you should do.
Most people use the strategy of buying a starter home to then sell it after a few years so they can use the equity of their first home for a down payment on a bigger home.
When you rent, you put in a security deposit and get that returned once you move out. When you buy you put in a downpayment. Once you move out by selling your home, you get your original downpayment back plus all the equity that appreciated on your home. It is significantly more money than a security deposit.
I had put down a 12K downpayment about 7 yrs ago but if I sell now, I’d get that back plus over 300K in equity. There is no way I’d be able to save that much in 7 yrs had I continued to rent. If you’re going to live in the same city/area and not relocate out of state soon, buy and lock into your investment sooner.
This article is helpful in deciding how much to put down. Most people don’t put 20% down on their first home and ROI is greater the smaller of down payment you do. https://themortgagereports.com/18520/20-percent-downpayment-risk-mortgage-interest-rate#should
I also like this from Michael Bluejay. Very good for beginners “How to Buy a House” https://michaelbluejay.com/house/
If you’re able to make the switch from renter to owner with reasonable comfort you owe it to yourself to do so. You will thank yourself later for the equity and stability.
My starter home gained $300k in equity in just a few years so potentially biased but definitely a fan of a starter home
Oh yeah! $150k in Sacramento for me from 2018.
Same question I’m struggling with
It ultimately comes down to how long you expect to be in the starter home. There are people that will tell you that you should just buy because they have gain X amount of equity over X years. But most of these people have only experienced home ownership in the last 10 years when prices did nothing but go up.
There are a lot of transaction costs to consider when purchasing or selling a home.
Yep. RE investing is a long game. It’s something you don’t see pay off until you’re about 5-10 years into the home.
I just bought my retirement home But will rent in the city where I have to work until I retire. Don't want to get priced out of where I ultimately want to be.
Subject Expert
Highly dependent on a lot of details:
- your credit score
- your ability to put together a down payment
- your loan terms
- the amount of “rent” you would be paying
- the quality of the home you buy / the amount you end up making In repairs
- the upgrades you put in between when you buy it and when you sell it
- the way the market trends between now and then
- your tolerance for being responsible for every little repair or maintenance item
- what you would do with your money otherwise (either from rent vs mortgage differential and/or from the down payment)
In general, buying a house or even a condo should come out far ahead over at least a 1 or 2 year period. Remember, your mortgage is a fixed rate (or should be) while rent tends to trend upwards. Paying down principal is basically a forced savings account, albeit at a very low interest rate (basically the inverse inflation rate).
That being said, some of the wealthiest people rent because the returns they can get on their money far outweigh the amount of money they would be “tying up” in a down payment. So even for those with a lot of money, sometimes renting is a better option.
I wanted to buy a house around March last year but all of my offers (30-40) were declined due to much higher and other insane offers. I stopped for a bit and continued in November. My first offer was accepted immediately. I closed on my first home in January. As of now, the value has gone up by 30k+. I would have never been able to save that much money in just 4-5 months. For reference, I only put down 3% and paid the closing costs. My interest rate was 3.0%. The house cost 185k. It has 3 beds 1.5 bath, a big back yard, a deck, and a finished basement. I offered 190k but also asked for 2.5k worth of repairs. The seller accepted. I'm still very happy that I made that purchase because I get to decide everything from decorations to big purchases around the house. Because it's my house. I recommend buying a house as soon as you can if you can afford even just 3-5% of down payment and of course the mortgage.
P2: it's in Kansas City, Missouri. You can look around the suburban areas too. Johnson County has better surroundings but also higher price. I'm in Jackson County.
We bought our starter home in 2016 with the intention of staying at least 5 years. You don't save much compared to renting at the beginning of your mortgage (payments are mostly to interest) and the closing costs can be sizable, so plan to stay X years until it would be a wash financially compared to renting.
That said, I never could have expected my $200k home to increase to ~$300k in value. For purchasing our "forever " home, that gives me a financial boost that I would never have been able to save on my own in the same amount of time.
No. Just did that. Love my starter home, but I miss renting so much. Stay renting and stay focused on saving. If your in a place like NYC, renting most of the time is super similar to owning, just smaller.
Super similar to owning?
Everything depends on personal preference however buying is typically better than renting just compare it to a car. Just like renting a place when you lease a car you don’t own it it’s not yours and it never will be you have to give it back at the end of the lease so when you rent a place and then you leave you take your belongings with you but you can never go back to that rental property because if you leave it someone else is likely going to rent it now if you buy a car you own it same with a house it’s yours it is better to buy in my humble opinion than rent I don’t believe in renting I don’t believe in leasing the only time I would ever lease a car would be to keep the payment low if I was definitely going to buy it
also think of this perspective while it is more difficult than say investing in a large rental complex because some people do rent and prefer it I personally don’t and wouldn’t ever rent I would prefer to buy my own house that’s why I’m waiting to do so but if you were to buy what you call a starter home you can buy a reasonable place cheap clean it up get with a contractor and fix up necessary things and replace important things to increase the value of the place and then you can rent it out for a premium and collect profits as soon as that place is paid off. However my recommendation would be to rent your starter home through a brokerage when you move into your “forever home” this way you aren’t burdened with everything yes you’ll more than likely have to pay the agent a portion of the monthly rent but at least they’ll be there to help you out with some potential issues if any may arise. And if you happen to have a crappy tenant at any point it becomes beneficial for that as well. Some things different from state to state but I feel most things are similar throughout the industry.