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Mister_ultra
@Mister_ultra
1Mo·

Sale to raise equity capital


As we are about to start the house project, I have held another sale to generate equity.


Since my handyman skills are about the same as those in the GIF, personal contribution / muscle mortgage will help us very little. Therefore, the deposit has to be attacked on a smaller scale.


However, the emphasis is really on "on a smaller scale" - all in all, I'm trying to keep the equity as low as possible and take out more credit and encumber the deposit as little as possible.


There are certainly enough opinions on this and the argument that the interest expense saved represents a tax-free, risk-free return is entirely justified.


For me, it is a "yield bet". The market yield is around 10% p.a. nominal, i.e. excluding the effects of inflation. With an interest rate of just over 3% for building loans, it would be a bad deal for me to liquidate my deposit for this.

If something changes after the fixed interest rate and the interest rate on the loan is 8%, for example, you can always switch in the future.


As we all know, the accounts are settled at the end.


#etfs
#immobilien

attachment
21.11
Xtrackers MSCI World ETF logo
a vendu x120,41 à 112,32 €
13 524,78 €
90,60 %
13
13 Commentaires
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Epi@Epi
1Mo
In principle, I would agree with these considerations.

But since when has the market yield been 10%pa? More like half.
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Mister_ultra@Mister_ultra
1Mo
@Epi For my consideration, I have assumed the nominal market return, i.e. not adjusted for inflation.
"The average stock market return of the S&P 500 is about 10% annually - and 6% to 7% when adjusted for inflation" (https://www.sofi.com/learn/content/average-stock-market-return/#:~:text=The%20average%20stock%20market%20return%20of%20the%20S%26P%20500%20is,years%20with%20much%20lower%20returns.)

Why nominal and not real? If I were to use the real return, I would theoretically also have to discount the loan installment / loan interest rate by inflation for a clean comparison - after all, €1,000 in interest charges in 2035 is not comparable with €1,000 in interest charges in 2024.
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All-in-or-nothing@All-in-or-nothing
1Mo
@Mister_ultra But to speak of "market return" for the average return of the S&P 500 is also a bit far-fetched🤔. At least the MSCI World or similar should be used for "market return"...
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Mister_ultra@Mister_ultra
1Mo
@All-in-or-nothing That's right! However, 73% of the MSCI World now consists of the USA.

Personally, I have an even higher US quota of around 82%. In my opinion, the remaining 18% are also heavily dependent on the US, for example TSMC or MercadoLibre, which are even listed on the NASDAQ.

Nevertheless, you are of course right and I have of course made it easy for myself. The yield can also be completely different, inflation can be significantly higher/lower,...
But I didn't want to be too precise. Whether it ends up being 9% or 10% nominal doesn't make a big difference for my considerations :)
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Epi@Epi
1Mo
@Mister_ultra 10%pa since 1993 in the SP500. That may be true, but those were also boom years for US large caps.

"Market return" is more like 7%pa (exl. inflation) since 1970 in the ACWI. So rather 4-5%pa.
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Mister_ultra@Mister_ultra
1Mo
@Epi You're right, of course, and it's clear that returns over the next few years could be well below the average of recent years/decades!

If this were to happen, my "bet" would of course be less successful.

As I have a significantly higher US share, I am planning or calculating with the higher return of 9-10% (7-8% real).
Nevertheless, the 5-6% bottom line would still be just fine if the interest rate on the loan is around 3%.

Unfortunately, I won't be able to say whether it worked out or not for another 10-20 years 😂
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Nostradonkey💩@DonkeyInvestor
1Mo
Everything done right. If you want to live in your own home, it makes the most financial sense to invest as little equity as possible and to aim for the lowest possible monthly payment, even if it takes 45 years to pay off (any money saved must of course go into the deposit). Here are a few more coins for the donkey stable in the garden
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Mister_ultra@Mister_ultra
1Mo
@DonkeyInvestor They are definitely well laid out. Maybe there are also 2 carrots in there 😂

Absolutely! From a rational point of view, owning your own home is definitely not the best choice. But in this case, I'll allow myself a little irrationality. And there's also a happy wife. That brings the highest return 😄
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Christian@christian
1Mo
Good luck 🍀
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Mister_ultra@Mister_ultra
1Mo
@christian Thank you! :)
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Pezi@Pezi
1Mo
The decision can also turn out like the GIF 😏
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Mister_ultra@Mister_ultra
1Mo
@Pezi absolutely! That's why the accounts are settled at the end.

However, the interest rate is fixed for the time being, so something can only go wrong if the nominal return on the markets is below 3%. Then it would be better to save the interest costs.

If the interest rate is, for example, 10% after the fixed interest rate, you can still throw everything out of the deposit and reduce the remaining debt.

I therefore see the main risk as being that the market yield will be significantly lower in the next few years. It can happen, without question. But I remain optimistic here :)
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Pezi@Pezi
1Mo
@Mister_ultra is like many decisions in life.... you only know whether it was good or bad later...
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