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I need a flat for myself in 4-5 years. I live with my parents with whom I can live for the next 4-5 years. I have 3 months emergency fund saved. I am looking forward to buy a flat. I am confused in a few things,

  • Should I buy a house for just myself and my parents (2 bed room and a guest room) or should I plan for my parents and my future wife (3 bed rooms and a guest room )?
  • I want to be an active investor. I am 26. Shall I invest all of my salary paying for the flat every month or should I have savings for investment?
  • Should I also save for retirement for now? Ideally I want to, but the flat is pretty costly.

Edit: I am reading Automatic Millionaire right now. It says home should be one's first and most important investment. Before investing anywhere else. Do you agree?

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  • To answer the last question: I definitely don't agree, which makes the rest moot.
    – keshlam
    Oct 1, 2016 at 15:04
  • @keshlam: What is the logic behind your disagreement?
    – user4884
    Oct 1, 2016 at 15:05
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    See most of the past answers here about investment priorities, and about buying houses. A house you are living in is not an investment.
    – keshlam
    Oct 1, 2016 at 15:09
  • @keshlam: My father is a real estate agent. He says I should invest all my money in real estate as it pays back the most. I do get the Warren Buffet's idea of "Never keep all eggs in one basket" when he tells me that.
    – user4884
    Oct 1, 2016 at 15:20
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    Since you plan to have your parents live with you, and your father has given you advice, what exactly do you want to accomplish here? Most members here will tell you not to go on the path you propose. And most will say that while a home you live in is an asset, it's not an investment. I highly recommend reading more at this stack, it's been discussed. Oct 1, 2016 at 16:02

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I am writing this from a Canadian perspective, so some of my assumptions vis-a-vis mortgages and the housing market may not apply to Pakistan.

There are a probably at least 10 different responses to your questions, and each response boils down to risk/reward/effort.

Should I buy a house for just myself and my parents (2 bed room and a guest room) or should I plan for my parents and my future wife (3 bed rooms and a guest room )?

I did the latter. Think this through: if you buy a house now for just your parents and yourself, later on you have to buy another house and go through the rigmarole of selling your current dwelling. Work effort: buying a new house, selling the old one. Risk: what if you can't find a house in the future that aligns with your preferences vis-a-vis location, income, etc.? Reward: future wife will have more input into buying said new abode, happy wife, happy life. If you buy a house now for you and future wife, Work effort in the future: none. Risk: what if the wife doesn't like the house? Reward: potentially huge cost savings against buying a new house in the future. One less thing to worry about. One less expense post-marriage, etc.

I want to be an active investor. I am 26. Shall I invest all of my salary paying for the flat every month or should I have savings for investment?

You say you have three months of salary saved away, which is great. Personally, I would go with six months, but that is just me. I don't know what mortgage options are available in Pakistan, but one option would be to have a fixed mortgage, save any excess income after paying for the flat and your regular expenses, and then on a regular basis (say every 6 months or every 12 months) make a lump-sum contribution with whatever excess savings you have. True, you will not be paying off as fast, but this way you are also building a buffer just in case something happens which your three months savings cannot cover.

Should I also save for retirement for now? Ideally I want to, but the flat is pretty costly.

Again, risk, reward. Risks of saving for retirement now: you contribute less to the flat, so the interest rates on the flat may go up when your mortgage is up for renewal. Reward: you have started saving for retirement; as an active investor, starting early will provide for more opportunities for compounding . Risks of paying the flat off completely now: you have less for retirement. Con: flat is the biggest expense, so once paid off, makes future-you less stressed financially.

Edit: I am reading Automatic Millionaire right now. It says home should be one's first and most important investment. Before investing anywhere else. Do you agree?

There are number of theories on this. Some say that owning property is foolish. Some say not owning property is foolish. Again, risk/reward/effort. I do agree that owning a home is a huge investment, but mainly because the risk of not owning ones home means that in the future I may not have the means to afford a place to live. The reward is that I do not have to worry about future-me not having a place to live. Risk of not owning a home: I am homeless in the future. Reward: I can take excess funds for investing, and hopefully have an income stream in the future that can handle any rent requirements.

As I said: there is no one correct answer to your questions. Outline each question, articulate your risk/reward/costs for each, and take it from there.

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    I'm not sure it is accurate to say the risk of not buying a home is not having a place to live. You can always rent a place to live. Oct 1, 2016 at 19:25
  • @ChrisInEdmonton, good point - I have clarified. I was referring to not being able to afford a place to live. If you own, this risk goes away (or at the least is greatly mitigated).
    – tendim
    Oct 2, 2016 at 5:31
  • @tendim Only after the place is paid off, as many people who overbought during the housing bubble would testify. It isn't clear that making mortgage payments is any easier than making rent payments in the meantime.
    – keshlam
    Oct 2, 2016 at 20:02
  • Is there a bubble in Pakistan though?
    – tendim
    Oct 2, 2016 at 21:56

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