So I already have a place to live and have started buying cheap, worldwide ETFs.
However next year I’ll gain access to some money that I had in a locked down savings account and I’m wondering how to invest it.
I’m trying to decide if
A: I just buy more ETFs with it and expect them to grow 5 or 6% conservatively with no work at all
B: Use it as a roughly 15% downpayment on an investment property ( plus like 5k paperwork and closing costs ). It might only generate 4 or 5% returns but currently loans here are at 2% or possibly just below so it’s affordable leverage.
Hey @David_Dinis!
They’re both good options! Investment real estate and index funds are the only two ways I invest. A couple thoughts:
- 15% is a really light down payment. Most banks won’t even give you a loan for 85% on an investment property. They usually want to see a 30% down payment. Plus a 15% down payment is risky. Let’s say you buy the place and the bad thing happens: There’s damage to the place or the market takes a turn. Renter moves out, home price drops by 20%. Now you’re under water, have a huge expense on your hands and can’t even sell it without losing your entire nest egg and writing a big check at closing. Ouch.
- Investment real estate is starting a business. You need to deal with tenants, maintenance, taxes, bookkeeping, leasing, etc. It can utilize leverage and potentially provide great returns as well as diversification out of the stock market. But it’s still a lot more work than clicking a few buttons to buy some ETFs.
So, there isn’t a right or wrong answer, but do know what you’re signing up for! 
Second this. RE is not a hands-off investment! Plus everything Jeremy says re: down payment, unit vacancy, repairs etc. In my (limited and poor) experience with an investment property I would def say go with index funds unless you’re fully aware of what you’re getting into and have RUN THE NUMBERS. If so and you want to go for it, RE investing can be super profitable. Also remember all the hidden costs of RE transactions including closing costs, realtor fees, interest, taxes, insurance—and also repairs and remodels etc etc
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Thank you both so much for taking the time to reply.
@Jeremy So here most banks allow you to get a mortgage with 10% even if it’s not your main residence. I’m thinking it’s safer to do the smallest down payment possible and keep the rest in cash for all the bad things you mention like repairs, vacancies, taxes etc.
I am also only looking at properties that I could afford to pay the mortgage even if I have no tenant for a few months. Can you go a bit more into how you’ve invested into real estate?
I’m aware that it’s a lot of extra work but compared to a “regular” job it’s minimal, has good returns and offers some diversification as all my other investments are in stock index funds.
Also there’s a psychological factor. If I ever get to retire early, it feels safer to get some rent money every month than just withdrawing money every year from a pile of ETFs.
@thberry10 thank you, I’m taking them into account. This is a great starting point: https://www.youtube.com/watch?v=T_7vhsSBi7c&ab_channel=BiggerPockets
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