The Accumulator
Registered User
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- 4
Hi everyone.
I am a 32-year old Irish expat in the middle east. I currently have no debts, and am investing around 60-70k per year in a Bogle-esque portfolio of cheap Vanguard Europe ETFs. In addition, I have an emergency fund of 20k euros in cash. So far I have a net worth of 70k euros; this is increasing at a rate of 5k per month, so I am rapidly accumulating. My strategy so far is to keep the 20k emergency fund in cash and deploy everything else into the ETFs, which are weighted 75:25 stocks to bonds.
But lately, I've been thinking of buying a 2-bedroom apartment back in Ireland, in Cork. My friend has been living in the building for three years and speaks very highly of it, and I have been in the building a few times when visiting him. It has a good location and attracts reasonably well paid to well paid young professionals.
Why would I buy an apartment in Cork if I'm living in the middle east? I can think of a few reasons:
Thanks!
I am a 32-year old Irish expat in the middle east. I currently have no debts, and am investing around 60-70k per year in a Bogle-esque portfolio of cheap Vanguard Europe ETFs. In addition, I have an emergency fund of 20k euros in cash. So far I have a net worth of 70k euros; this is increasing at a rate of 5k per month, so I am rapidly accumulating. My strategy so far is to keep the 20k emergency fund in cash and deploy everything else into the ETFs, which are weighted 75:25 stocks to bonds.
But lately, I've been thinking of buying a 2-bedroom apartment back in Ireland, in Cork. My friend has been living in the building for three years and speaks very highly of it, and I have been in the building a few times when visiting him. It has a good location and attracts reasonably well paid to well paid young professionals.
Why would I buy an apartment in Cork if I'm living in the middle east? I can think of a few reasons:
- I get paid in a dollar-pegged currency. With the euro as low as it is, I will get an excellent exchange rate if I borrow the money from a local bank, convert it to euros via my discount brokerage, and send it to Ireland.
- Although the property is first and foremost an investment property, if my wife and I did relocate back to Ireland, we would have a place to live (we don't particularly want a house as our needs are quite simple).
- My wife and I will never be able to buy a property as easily as we can right now due to our strong cash flow (we currently invest 63% of our income per annum, so we have a lot of bandwidth).
- The purpose of the property (in a scenario where we would rent it out) would be to give us part of our required monthly income during retirement. (We're not looking flip it)
- Cork is a location I know well and there are employment prospects there for me if ever we decided to leave the Middle East.
- Although I would propose to borrow the whole amount required to purchase the property (the equivalent in my currency of 150k euro), I would get a reducing interest rate and aggressively pay it down within 24 months. The cost (in terms of interest) would be around 8 to 9k euro.
- There would be an opportunity cost, namely, if we borrow to buy the apartment, we would aggressively pay it off. But to do so, we would not be able to contribute to our stock ETFs. So that's a big opportunity cost.
- There is the stress of taking on a debt for two years.
- There is the pain in the neck of managing a property from afar - though I could probably get my friends to help out with that.
- There is the fact that unlike a diversified portfolio of ETFs, property is not very liquid.
- There are costs - maintenance, vacancy, management fees, property tax, rental income tax - associated with the property that frankly do not exist for me with my stock ETFs.
- Finally, there is a slim possibility that my wife and I won't be returning to Ireland to retire.
Thanks!