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I am a programmer in my mid 30's, work remotely and am single. I have about 250K EUR to invest with a goal of having a return on my investment of about 10-15%. I have the following two options. Which of the following would you consider a better/smarter one:

Option 1:

I could buy two studio apartments in the center of a European capital city, like Berlin or Lisbon (with healthy tourism) and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals). I could fetch somewhere between 900-1200 EUR per month for renting out the apartment. My monthly costs would be no more than 300 EUR.

Option 2:

Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month.

Option 3: Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money?

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    Really for someone to help you make a decision you will need to divulge alot more information like the prices of each option, your income, your other expenses, any other short term, medium term and long term goals you might have. No one can answer this question in its current state. – Victor Dec 14 '14 at 21:08
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    You say you want the maximum return on your investment. That's probably putting all your money in lotto tickets. The risk is rather high, though. You'll want to clarify what level of risk you are comfortable with. – ChrisInEdmonton Dec 14 '14 at 22:16
  • 10-15% That seems a bit high, but certainly achievable. Neither option alone in its entirety is a better/smart one. Probably a mixture of all or 2. Your question is quite open ended. If you put in more details, you might get a better answer. – DumbCoder Dec 15 '14 at 9:52
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You are in your mid 30's and have 250,000 to put aside for investments- that is a fantastic position to be in.

First, let's evaluate all the options you listed.

Option 1

I could buy two studio apartments in the center of a European capital city and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals).

To say "European capital city" is such a massive generalization, I would disregard this point based on that alone. Athens is a European capital city and so is Berlin but they have very different economies at this point.

Let's put that aside for now. You have to beware of the following costs when using property as an investment (this list is non-exhaustive):

  • Time cost looking for occupants (repeated if you are looking to rent out short term)
  • Property maintenance costs
  • Property taxes
  • Time and frustration potentially going after occupants defaulting on payment

The positive: you have someone paying the mortgage or allowing you to recoup what you paid for the apartment.

But can you guarantee an ROI of 10-15% ? Far from it. If investing in real estate yielded guaranteed results, everyone would do it. This is where we go back to my initial point about "European capital city" being a massive generalization.


Option 2

Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month.

If your life plan is taking you down the path of having a family and needed the larger space for your family, then you need the space to live in and you shouldn't be looking at it as an investment that will give you at least 10% returns.

Buying property you intend to live in is as much a life choice as it is an investment. You will treat the property much different from the way something you rent out gets treated. It means you'll be in a better position when you decide to sell but don't go in to this because you think a return is guaranteed. Do it if you think it is what you need to achieve your life goals.


Option 3

Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money?

Let's say you are 35 years old. The general rule is that 100 minus your age is what you should put in to equities and the rest in something more conservative.

Consider this:

  • 100 minus 35 = 65% equities (or something equally aggressive)
  • Leftover 35% on bonds (or something else conservative)

This strategy is long term and the finer details are beyond the scope of an answer like this. You have quite some money to invest so you would get preferential treatment at many financial institutions.


I want to address your point of having a goal of 10-15% return. Since you mentioned Europe, take a look at this chart for FTSE 100 (one of the more prominent indexes in Europe).

enter image description here

  • 5 years ago (Dec. 14, 2009): 5196.80
  • Today (Dec. 14, 2014): 6300.63

You can do the math- the return is no where close to your goals. My objective in mentioning this: your goals might warrant going to much riskier markets (emerging markets). Again, it is beyond the scope of this answer.

  • Thanks for such a detailed answer. I added some more information about the on the rental property e.g. city and return on it. – sageofmage Dec 16 '14 at 18:42
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To be completely honest, I think that a target of 10-15% is very high and if there were an easy way to attain it, everyone would do it. If you want to have such a high return, you'll always have the risk of losing the same amount of money.

Option 1

I personally think that you can make the highest return if you invest in real estate, and actively manage your property(s). If you do this well with short term rental and/or Airbnb I think you can make healthy returns BUT it will cost a lot of time and effort which may diminish its appeal. Think about talking to your estate agent to find renters, or always ensuring your AirBnB place is in good nick so you get a high rating and keep getting good customers. If you're looking for "passive" income, I don't think this is a good choice. Also make sure you take note of karancan's point of costs. No matter what you plan for, your costs will always be higher than you think. Think about water damage, a tenant that breaks things/doesn't take care of stuff etc.

Option 2

I think taking a loan is unnecessarily risky if you're in good financial shape (as it seems), unless you're gonna buy a house with a mortgage and live in it.

Option 3

I think your best option is to buy bonds and shares. You can follow karancan's 100 minus your age rule, which seems very reasonable (personally I invest all my money in shares because that's how my father brought me up, but it's really a matter of taste. Both can be risky though bonds are usually safer). I think I should note that you cannot expect a return of 10% or more because, as everyone always says, if there were a way to guarantee it, everyone would do it. You say you don't have any idea how this works so I'd go to my bank and ask them. You probably have access to private banking so that should mean someone will be able to sit you down and talk you through. Also look at other banks that have better rates and/or pretend you're leaving your bank to negotiate a better deal. If I were you I'd invest in blue chips (big international companies listed on the main indeces (DAX, FTSE 100, Dow Jones)), or (passively managed) mutual funds/ETFs that track these indeces. Just remember to diversify by country and industry a bit.

Note: i would not buy the vehicles/plans that my bank (no matter what they promise, and they promise a lot) suggest because if you do that then the bank always takes a cut off your money.

TlDr, dont expect to make 10-15% on a passive investment and do what a lot of others do: shares and bonds. Also make sure you get a lot of peoples opinions :)

  • For what it's worth, my own long-term target for retirement savings has been "at least 8%". But that's money I don't have to withdraw when the market is down and I've had a fairly long horizon (getting shorter now), so my actual average has been higher. – keshlam Nov 4 '15 at 14:00
  • Is that inflation adjusted? If so well done! – fishlein Nov 5 '15 at 8:09
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"Are there other options I haven't thought of?"

Mutual funds, stocks, bonds. To buy and sell these you don't need a lawyer, a real-estate broker and a banker. Much more flexible than owning real estate.

Edit: Re Option 3: With no knowledge of investing the first thing you should do is read a few books. The second thing you should do is invest in mutual funds (and/or ETFs) that track an index, such as the FTSE graph that was posted. Index funds are the safest way to invest for those with no experience. With the substantial amount that you are considering investing it would also be wise to do it gradually. Look up "dollar cost averaging."

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That your asking is a good first step towards taking control of your future. But truly, you must seek the advice of a personal consultant that is much more in tune with your finances that anyone out here in the public will be. You can get this type of advice locally, or if you want something online, I suggest oDesk or something similar to find a large pool of people and to efficiently find the right person for suited for your situation.

  • oDesk to find a local financial planner? – JoeTaxpayer Dec 15 '14 at 3:34
  • I suggested oDesk to find a qualified candidate online as an alternative to locally. – OldGreg Dec 16 '14 at 0:21

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