Investment Advice: Buy house or Invest money

A house is more than an investment. It is where you live. There is no guarantee that the price will appreciate but likely will if given enough time. The rule of thumb is that you should not buy a house if plan to live there less than 5 years.

You should also start investing. Make sure you invest enough in your 401k to get your match. If possible, increase your contribution when you get a raise. The money you invest in 20s will have a greater impact on your retirement than the money you invest in your 50s.

 

I have five rental properties but I don't believe in taking on debt to invest. The only exception to this would be if you could find a duplex for a reasonable price and rent half while living in the other half. Keep in mind that usually the cheaper the property is the better the return is on rent.

It's awesome that you don't have any debt, now you just need to avoid the temptation to increase your monthly nut (what it costs you to live). All your friends are going to be doing it. Just keep in mind that you can live like you are rich now or be wealthy later. Most people don't get to do both.

Run your life like a business - question each cost and always look for places to improve revenue. Until you reach at least $250K in investments the amount you are saving will probably dwarf the return on your investments, so keep fine tuning the business, that's where your ROI will be.

 

Save and invest; you gotta figure most people in a place like NYC do, because you can't own property there for less than $500,000. Home prices can stagnate for multiple years on end, and if you have to move for work you could be in a constraint financially. If you do buy a house, try not to go more than 1.5 times your income, get a thirty year and put in extra on the monthly payments to get equity more quickly and allow you to sell at a lower price or get an improvement loan to optimize the value. Also, if you're in Houston, don't buy a condo, HOA fees could be as high as your mortgage payment.

 

Debt has been absurdly cheap. Rates may start going up but it will still be cheap. Taking on debt to invest in a rental house is fine IF it's a solid choice otherwise - right house, neighborhood, math makes sense conservatively, etc.

That said there's all kinds of ways and strategies to invest. Get a diversified portfolio geared towards growth. If there's room for a rental property in there, it might make sense since you'll be able to get cheap leverage (debt) with a hard asset (eg your not likely to get a large personal loan to put in REITs l) but unless you are super crazy/interested/excited about building a actively managed real estate portfolio it might be more trouble than it's worth.

 

If you think you have the time to manage a rental property go for it. But it's a headache. If you're just out of college you might want to wait a few years, accumulate some savings, get comfortable with your job, find a place of your own to live in, etc... you'll want to wait for the market to fall (if you're local to Houston it's already falling). You also need to find a great rental prospect.

As someone who owns a rental I'd say invest for now. But it depends on you. Don't worry about taking on debt, rental properties are a business and almost every business borrows money to launch. Nobody will look at your mortgage as debt, they'll look at your positive monthly income flow as a whole.

 

Invest in the stock market. S&P 500 index funds.

Don't waste your time at your age renting out properties -- that is a levered investment (which naturally involves higher risk) and also a major pain in the ass that will distract you from your primary professional goals. You have an opportunity cost in the form of focusing on doing well at your main job, whatever that might be.

 

Investing seems a lot easier than putting up with renters.