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I would like your input on how to best invest 100K€. This is all the money I have and I don't feel comfortable having this much money in my bank account. Now I am living in a student city where rent prices are relatively high and demand for rent is really big.

Initially I thought about taking a mortgage and buying a decent apartment for myself, but I don't want to spend 10K€+ on various mortgage fees (excluding interest rate), therefore I thought about buying a small 1 room relatively new studio and rent it out. The price for such studio is indeed around 100K€.

According to my calculations I could get around 500€ net each month from renting. I know that's not a lot of money, considering I might need to do repairs for my studio and perhaps deal with bad renters, but at least I know I have my money really secure. I assume having real estate in a good popular city is much more secure way of keeping money than having it in a bank account (I know nothing about stocks and other type of investments)?

I myself would live in a rented apartment as well, for which I would pay ~1000€+ a month. The reason I am not buying such apartment myself, is because a) I don't want to pay large initial mortgage fees and b) I want to stay flexible and have a possibility to change my location whenever I want.

P.s. I am single, have no debt and 26 y/o in The Netherlands.

  • I'm confused - you can't afford an apartment for yourself without a mortgage but you can buy a rental with cash? – D Stanley May 7 '17 at 13:38
  • @DStanley I can't afford apartment I would like to live in (I will live in 1000€/month rent apartment, which costs 200K€+). I can afford 100K studio, but it's too small for me live in, but I can rent it out, and rent myself bigger apartment. Sorry for confusion. – user1880405 May 7 '17 at 13:41
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    When you say 100K is all the money you have, do you mean it's all you have to invest, or that it's literally all you have? Also, could you tag your question with which country you are living in? – Hart CO May 7 '17 at 15:42
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    @HartCO That's literally all the money I have, but I also have a job in a field with lots of demand. It's Netherlands. – user1880405 May 7 '17 at 15:48
  • I would go so far as to say any investment strategy that involves putting all the money you have into a single investment is not a good idea. – BrenBarn May 7 '17 at 22:03
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I assume having real estate in a good popular city is much more secure way of keeping money than having it in a bank account

Not at all! Many things can go wrong with rental property. Renters can be late on rent, they can cause damage to property, you can have unexpected repairs. I'm not saying that you should just let it sit, but rental property is not risk-free my any means.

Are you prepared to be a landlord as a part time job (for 500/mo?). Rental property is not passive income - it takes work to maintain. You can outsource this to a property manager, but that eats into the 500/mo that you are estimating).

I want to stay flexible and have a possibility to change my location whenever I want.

That's a perfectly reasonable reason not to buy a home, but what will you do with the rental when you move? It will still need maintenance, you'll still need to interact with renters, etc.

I'm not saying you shouldn't do this, but I get the feeling that you are not fully aware of the risks involved in rental properties.

  • Thanks for answer. Well, being landlord for a small new studio is fairly easy I assume. I don't think there is much work, especially if I get good tenants. Now even if I get unlucky with tenants, still my money is secure in a way that even if there is some economic crash, I still have my property, and in worst case I can simply live there. Now keeping money in a bank is more risky, isn't it? Any other type of investment will also be more risky I assume. At least the property will always be mine. – user1880405 May 7 '17 at 14:00
  • @user1880405 Why is keeping money in a bank more risky? Doesn't DNB guarantee up to 100K in deposits? – xiaomy May 7 '17 at 16:25
  • Yes there is a guarantee for up to 100K, but I mean if the € would lose it's value. Or am I being overly paranoid? Oh and also in The Netherlands, you pay 1.2% of wealth tax just for having this kind of money on your bank account, so having money on the account long term is out of the question. – user1880405 May 7 '17 at 16:43
  • It actually sounds like tenants are responsible for a lot of repairs there that in the US would be on the landlord, so it might be a bit easier there to landlord from a distance. – Hart CO May 7 '17 at 20:04
  • @user1880405 What about property tax for owning a studio? And BTW a lot of people thought putting money in real estate was safe till 2008. Housing market certainly can (and will at some point) crash, probably more likely than a big retail bank going out of business. Perhaps you have a different view, but I think putting all eggs in one basket is not prudent. – xiaomy May 7 '17 at 21:06
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I don't know enough about taxes and real-state in the Netherlands to be super helpful in determining whether or not a rental property is a good investment. One thing for certain is that there's some risk in spending everything on a rental property. It's wise to have some buffer, an emergency fund of 3-6 months expenses. If things got dire, you'd still need to live somewhere until your tenant was gone, and you'd want to be able to handle any major repairs that crop up. So, even if it is a good idea to buy a rental property, you should probably wait until doing so doesn't leave you without a healthy buffer.

As for owning a rental, you described a scenario where you'd get 6% income on your investment each year if there were zero expenses associated with owning the property. Are there property taxes? Is there a monthly cost to maintain the building the apartment is in? Are rental incomes taxed more heavily than other investment income? Just be aware of the full financial picture before deciding if it's a worthwhile investment.

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