I have $100K after selling my house. Should I buy another house or invest the money?
Filed Under: Home Ownership, Sensible Investing
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Q. I am 40 years old with 1 child in college 16 yrs old. I have $100,000 after selling my house. I work 4 days per week and earn 616.00 gross should I buy back into the market or am I better of to invest my money and rent.
Josie’s answer: Good question and would love to have a crystal ball. There is so much talk that the property will stagnate in the next year or two, and of course it depends on where you plan to buy (some areas seem to be doing OK).
From a purely numbers perspective, there is plenty of research to suggest people are better off renting than buying, but only if they invest the difference.
Most of us don’t have the discipline to do this.
From my perspective, I prefer to be a home owner as it gives me a sense of security. I hate the idea of a landlord telling me what I can or can’t do, plus they can increase the rent on a whim, as well as being in a position to give notice to leave.
I also like the security of knowing that I will own a house in retirement.
Therefore, I believe you should seriously look at the possibility of owning a property, assuming you plan to stay for the long term.
My main concern is that you may find it difficult to get a loan, based on your income and may struggle to service it.
Consequently, you may be feel pressured to increase or work hours or take in some boarders to help pay the mortgage (I am assuming you will be buying solo!)
Security of owning a home may not be important to you. As you would be aware as an ex-home owner, there are lots of expenses such as rates, and the inevitable maintenance issues (and not forgetting interest payments which can go up and down).
If you decide to invest your $100,000, you need to think about your goals and the time frame in which you are prepared to invest, i.e. do you want to invest for 3, 5 or 10 years?.
There are some excellent managed funds, which will give you exposure to a wide variety of asset classes, e.g. cash, fixed interest, property and shares, both Australian and international, but you generally need to be committed for at least 3-5 years.
No point going down this track if you change your mind in a year or two and decide to use the money as a deposit on a home as the investment is not guaranteed.
Cash management accounts and term deposits are offering good deals at the moment and I recommend you start your research by going to www.ratecity.com.au
Wishing you happy money organisation.
Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs.
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