To buy a flat vs invest?

[abim305]

Hey everyone,

Long time follower of this sub. Learned a lot, thanks!

I live in Berlin. I'm 33. I'm a non EU citizen but I have permanent EU residency.

I work as a free-lancer. I have about 170K euro saved up for a downpayment on a flat.

I plan to remain in Berlin for at least the next 5 years or more.

So a question I've seen posted here before, do I buy a flat to live in or invest?

The closing costs in Berlin amount to about 11.5% of purchase price. So it would be about 7 years until the value of my property has grown to overcome that initial hole I'm starting in. At least I hope!

I've been quoted with an interest rate of 3.85 for a ten year mortgage.

Or, do I continue to rent and put it all into ETFs etc...which I would hope grow by at least 6-7% a year.

My rent is about 1300 euro all in right now, with 3% annual graduation.

The mortgage would be 1350 a month (850 interest, 500 principle). Plus 210 HausGeld every month.

Then of course other costs like utilties, insurance and internet.

By year 8 the flat should hopefully be worth quite a bit more, especially considering the housing crisis in Berlin is clearly only going to get worse and worse.

My income fluctuates, but it seems to be going up each year and I'm confident it will continue to do so for now.

2023 - €13K / month

2022 - €8K/month

2021, 2020 and 2019 - €3-5.4K month

Before 2019 I wasn't as consistent and worked some part time jobs before my now job really took off.

Anyhow, would appreciate any thoughts and opinions!

 

[pol1905]

@abim305 curious...what do you do for work..?

 

[nathaniela]

@pol1905 Freelance musician. Check his history. Impressive netto numbers. Those are my life goal

I would definetly buy the flat. It might not explode in value, but it's a safe investment IMHO.

 

[abim305]

@pol1905 I'm a musician. I write music for Tv/Film/Commercials/Fashion shows

 

[arielovesjesus]

@abim305 Usually investing in ETFs gives much bigger return. Especially that the house prices in Berlin were fast rising for many years, so because of the regression to the middle they will likely slow down the growth rate now.

Anyhow use the calculator: https://www.finanzfluss.de/rechner/mieten-oder-kaufen/

 

[realarwen]

@arielovesjesus I like how there are completely opposite views on two comments on this thred. Conclusion: no one really knows.

My take: housing prices will keep increasing

 

[arielovesjesus]

@realarwen Likely they will, but not 7% per year after inflation

 

[ananymous]

@arielovesjesus Do global index funds rise 7% after inflation?

 

[esperanza20]

@ananymous no, only 5%, but it is till better than real estate prices growth (what is probably 1% after inflation)

 

[arielovesjesus]

@esperanza20 Depending how long time period you choose it's up to 7%

 

[arielovesjesus]

@ananymous Yep

 

[warpdrvr]

@abim305 Where did you get 3,85%? I got quoted 4,15% yesterday.

 

[abim305]

@warpdrvr MBS. I'm putting 35% down, thus the lower interest rate.

 

[matija]

@warpdrvr 4.11% here too. Crazy to see anything under 4% these days

 

[rebecca_27]

@warpdrvr Is that only the banks fixed interest rate? So it would be in total ~4% + ECB interest?

 

[skarforchrist]

@abim305 You can do both. That’s what I would do. I would put a down payment of 50k ish for the apartment and invest the rest. The apartment will pay itself over time but you will need a “pension” as well at some point.

 

[abim305]

@skarforchrist 50K would not be enough in this current climate unfortunately.

You need to put down 20% + to convince the bank these days.

 

[skarforchrist]

@abim305 Damn.. That’s crazy. My boomer side left that comment.

 

[compassionate_rn]

@skarforchrist That's decent advice in general, but I think real estate prices in big cities like Berlin are pretty high, such that you can't rally get much with just a 50K downpayment. I could be wrong, I'm just basing this on the fact that I've seen flats with 1 bedroom go for almost 1 mill in Munich.

I imagine it's similar in Berlin.

 

[ecgbeorht]

@abim305 Buy a house for security. Rent for flexibility. The "lost money" for rent is not really lost (flexibility; market prices tend to balance rent vs own).

Don't do either based on money. That logic is for investments.

Source: Ex-realtor.