We are looking for our Dream House

“The open floor encompasses four spacious bedrooms with room for sleep, study and storage … Here is one of two bathrooms and there is the stylish gourmet kitchen … other highlights include a charming fireplace, just look at the exposed bricks … every detail was quality crafted and carefully selected … And here you see the expansive living room opening up to the wonderful garden with beautiful old trees …”

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(painting by the author)

You may have guessed it. We met with some real estate agents last week and read a ton of property descriptions. I have been running numbers since then. Now, my head is aching and my eyes are burning!

As I have written in my first blog post, my wife and I have not yet been engaged in real estate investing, but buying our first house is an exciting goal we pursue.

I have always loved houses with big gardens, it reminds me my childhood, when I visited my grandparents who live on the countryside. The idea of living in a house is quite deeply rooted.

Besides the emotional aspects, buying instead of renting might also make sense for us from a financial standpoint. As consequent savers we could certainly put some bargaining power in place, when it comes to negotiations for a mortgage. I have to say, though, that – if feasible – I would prefer to finance as little with a credit as possible.

The buy versus rent question is really a tough one, there are so many individual aspects to be taken into account. Real estates can be great for wealth accumulation, but as it is always with investments: it is only rewarding unless you overpay.

And there is something that concerns me a lot: in Liechtenstein and Switzerland, home prices have litterally skyrocketed in the last decades. Scarcity of building plots has always been a price driver and of course record low interest rates had a tremendous impact. Can you imagine, how many times I heard the phrase “if you want a fine house, you must be willing to pay at least one million Swiss francs” (the Swiss franc currently trades more or less at parity to the USD). Particularily annoying is that phrase being accompanied by a slightly arrogant tone of voice. And just to be clear: one million would be the price for a dull normal house, we are not talking about a beautiful mansion or a farm with several acres of land. No big garden, just some hundred square meters to stretch my legs.

That’s not what I am looking for! After all, these houses are made of bricks and stones, not of gold. Just let’s think for a moment: One million is a lot. Invested conservatively and prudently in income-generating assets allows you to immediately become financially independent (of course always on the condition that you keep a down to earth lifestyle). You can travel around the world, don’t need to work for money, you can just follow your personal projects … the list with options is indefinite (see my blog post Financial Independence is not just for millionaires)

There is another phrase I heard several times: low interest rates make it really cheap to buy a house, renting does not make any sense for you, each month you are throwing money out of the windows.
Fair enough, it is true, that the interest payments for a mortgage would cost less than our rent. But you have to bear in mind, that record low interest rates are the cause for these high real estate prices. I cannot see the point in taking on a lot of debts due to high  real estate prices and pretend that I made a bargain just because the annual interest payments are low. Again: if interest rates were not that low, homeprices would not be that high and less credit would be needed.

Basically, I am a proponent of owning real estates. But not at any price or any condition. And there is no way, that we will make any investment to the substantial detriment of our financial flexibility.

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(drawing by the author)

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