Best investment : House or Car or Other ?

Rouxenator

Rouxenator

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What would you consider to be a good investment ?

Recently someone said :

  • A prime -2 interest rate is nothing special. For the record, I purchased my car at a fixed 5 percent - and there's a guaranteed buy back.
  • Houses are not the awesome investment tools every South African seems to think they are. Some of the biggest tragedies in the sub prime crisis is the complete erradication of wealth by effectively reducing the value of people's homes.
  • If you are bonded then you will probably not realise a profit in real terms. The installment you're paying @ 7k per month over 20 years equates to R1.4 million.
Click to expand...

So this made me think, what is the best investment you can make? I have always thought of cars as a value depreciating asset and if you buy a car you will end up losing in the long run. If you pay for it via finance you lose even more.

Since we all have to stay somewhere and have to pay rent each month I figured instead of saving and paying rent I would much rather pay a little extra for a place to stay but at least I own it (or will in 20 years time). Even if property values drop at times you can be sure that in the long run they will increase in value since real estate is limited.

Then there is things like stocks, gold and other precious metals and business ventures. Are these better and safer ?

Which do you consider to be the best investment to make? (taking into account you need to pay rent each month).
 
Unless you want to sleep in your car a home is the best option. Once you have a paid up property it's time to look into other investment opportunities.
 
a Car is a liability, not a asset. The same to a house, except if it generates an income for you.
True, better to pay for your own place than helping someone else pays for theirs.
Cars are only used to take you from point A to B. Does not matter how old it is, as long as it still does this reliably, i'd rather spend the money on property.
 
kit kats.

look at the price of kit kats twenty years ago compared to today. if i had bought some kitkats back then i wouldve been rich, even if i had to take out a loan and live off scraps every month i wouldve done it. because they have gone up in price by a factor of 30.

*to those who cant comprehend sarcasm, replace the word "kit kat" with "house" in the above paragraph for it to make sense.

(dons flame suit in expectation)

(in case you think i am trolling, here is my correct answer)

you cant escape the system, every cent is borrowed into existence, which wouldnt be so bad by itself, except that you have to pay interest on the borrowed money, so someone else has to take out a loan somewhere else for the borrowed money you are going to pay as interest on your borrowed money to exist....with me so far?

what this means is that there is no way of standing still. you will work your arse off, all your life, and then die. house price inflation of the last 10 years aside, (soon to be reversed), the con is that "houses laways go up in price" (as do kit kats) but is it not a bit more like "my money is constantly devaluing because of inflation?"

exercise for the astute reader
find price of house in 1930
find out avergae wage in 1930
work out the multiple.

repeat for the year 2000

conclusion?

(note, i exclude 2000 to 2007 because it is irrevelant when looking at long term projections. the easy money has dried up and wont ever be back, so just accept that reality)
 
Makes sense, but still, mans primary need since the stoneage has been a place to stay. So you are going to fork out something per month for your cave, no matter what.

Even if houses depreciated it would still be smarter to rather pay installments than pay rent - because in the end you have something to show for your cash.
 
It doesn't really matter much if the price of your house has depreciated.
It only matters when you sell it or if you have more than one house, and the others are investments.
 
There is some upside in that inflation takes some of the edge off housing payments with a long term mortgage. Even if you end up paying 1-2 mil over the expected price of a home, after 20 years your payments are a lot smaller in real terms because inflation has depreciated the value of money.

A car is not an investment by any means. The best you can do is mitigate the loss on the resale by buying wisely - an investment by definition is a profit maker. I drive a 20 year old BMW, and I'm pretty sure I'll be able to sell it for more or less what it cost me two years ago. It still doesn't make it an investment.

The best investment is not your home or your car - it's an actual financial instrument such as a tax deferred annuity savings scheme. Reason being, you will see real (not theoretical - i.e. living in a house that is 'now worth more' when every house is worth more so all you can do is scale down the size of the house to make money) returns on your money.
 
Unless your car or house is made of gold or platinum, they both bad investments.
But it also depends on what you need them for, a house is an investment because you need shelter, a car can make you money depends on how you use it... and can sometimes be more important than a house.
 
I guess you are right, especially if your car is a camper van so you do not need to pay for a place to say anyway. You can basically just pay for your Winnabago.
 
Buying vs renting is one of those never ending debates but on the whole buying a house is still a better option than renting imo.
With rental prices climbing fast it's starting to make more sense to buy especially in the cities where renting can easily cost 50% of a bond repayment.
One also has to take into consideration that when one retires your income is generally going to shrink unless you were lucky enough to have enough spare cash to invest and the investments didn't go south.
If one purchases a house at the age of 30 and manages to pay it off at the age of 40 you're left with 25 years where you have a large amount of money to sink into other investment vehicles.

I cannot think of anything worse than being 65 years old, with a shrinking income and making rental payments that keep growing 7-10% every year.
 
That why I started an RA at the same time I bought the house. I should be putting away about R5.5k per month in my RA but at this stage R2k is all I can manage. Once the house is done I will focus more on the RA. Also got an Alan Gray STANLIB investment on the side but that is even smaller. But I guess you have to start somewhere if you want to secure your future financially.... A house makes a lot more sense for me than anything else.
 
Do some research about the coming Big Depression.

Trillions of fiat $ will unleash inflation in USA, leading to a flight form the dollar, which will crash the US economy.

Buy gold.
 
Paul_S said:
Buying vs renting is one of those never ending debates but on the whole buying a house is still a better option than renting imo.
With rental prices climbing fast it's starting to make more sense to buy especially in the cities where renting can easily cost 50% of a bond repayment.
One also has to take into consideration that when one retires your income is generally going to shrink unless you were lucky enough to have enough spare cash to invest and the investments didn't go south.
If one purchases a house at the age of 30 and manages to pay it off at the age of 40 you're left with 25 years where you have a large amount of money to sink into other investment vehicles.
Click to expand...

Indeed i think this thread essentially come down to the age old Buy vs Rent debate.

(Or Lease vs Buy when it comes to cars, there are people who's doing this...)

It's all about whether you can invest the money SAVED (by renting) somewhere that will GROW more than the house you could've bought.

If you rent for R4k a month, and could buy the place for R8k month and you DON'T invest the "extra" R4k then you're not gaining anything here..in fact now you're worse off. However if you took the R4k per month and can gain 30%+ growth per year on that for the next 20 years , you can argue renting is better...but ONLY if you do that.

Simply put: You must determine how much "cash" you will have after 20 years if you
a] Buy now and sold the place (taking into account interest rates / property value)
vs
b] Rented and invested the extra cash (taking into account inflation of rent / growth of investments)

Problem with renting is, people don't actually invest the "extra" cash, they live into it with short term spending, effectively they end up with nothing after 20 years. So there's a kind of stigma that renting is worse than buying primarily because of this....which is a wrong viewpoint ;).
 
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guys i see people always say the house is an investment... so where are you going to stay or what will you live in if you sell your house?
 
koeks said:
guys i see people always say the house is an investment... so where are you going to stay or what will you live in if you sell your house?
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- Move back in with your kids who look after you in your old age.
- Move to an old age home.
- Downsize to a smaller house.
- Sell the house(s) if you already have more than one house and just live in the one. Some people have holiday homes and a few other houses scattered around the place.
 
koeks said:
guys i see people always say the house is an investment... so where are you going to stay or what will you live in if you sell your house?
Click to expand...

Why sell your house ? Then you will have to pay rent again.

Either way, with or without a house, a good RA is the cornerstone of planning a long term financial future for yourself. If you have acquired a house before you retire you might get away with a smaller RA.
 
Rouxenator said:
Makes sense, but still, mans primary need since the stoneage has been a place to stay. So you are going to fork out something per month for your cave, no matter what.

Even if houses depreciated it would still be smarter to rather pay installments than pay rent - because in the end you have something to show for your cash.
Click to expand...

That's the thing: how do you define a good investment? Neither a car nor a primary residence is a good investment. Buying a house as a nest egg (which sadly is something many south africans do!!) is not a good investment. Good investments are usually defined as those that offer an inflation beating return. The fact of the matter is that there is no absolute good investment. An investment is a risk, and a risk is weighed against so many unknown factors that it is nigh impossible to predict. Even the world's best investors can get things horribly wrong. It's always best to invest in a wide portfolio of different things, and never tie all your money up in anything.

Investing is a lifestyle choice, it not only impacts on your lifestyle today, but determines your lifestyle in the future - after retirement. As a good acid test, ask yourself this question: if you were forced to retire today, will you survive and remain in your current lifestyle? Many people think they will answer yes in the future when they do retire, but unfortunately more often than not they're very very wrong. Either way, always seek professional advice when you want to invest, and never consider your primary residence an investment in your future.

As for cars - these are definitely not investments either, as they lose their value (depreciate) severely over time. Even so-called "investment cars" are not genuine investments...
 
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