Should I sell my house to buy an apartment?

February 14, 2024 | 03:00 pm PT
Should I sell my house to buy an apartment?
Properties in HCMC's eastern area. Photo by VnExpress/Quynh Tran
Switching to an apartment might temporarily improve living conditions, but it will not maintain its value in the long term as houses do, the expert said.

Question from reader Minh Nhi:

I am 29 years old, just got married and have plans to have a child in 2026.

I have a VND3 billion (US$ 122,825) four-story house in Ho Chi Minh City’s District 12 that I currently rent out for VND3.5 million per month. Currently, I am renting a house in Go Vap District for VND5 million per month for convenience and proximity to my parents.

I am self-employed and my current income is around VND30-40 million per month with no dependents. My monthly expenses are about VND10-12 million. Additionally, I have a savings of VND1 billion.

With interest rates as low as they are now, I want to sell the house in District 12, borrow an additional VND1 billion, to invest in real estate.

With a total budget of around VND5 billion, I am undecided on the optimal option.

One option is to buy land or a house in Go Vap at around VND4.5-5 billion. Another option is to invest in suburban land and continue renting a house.

The third option is to buy an apartment in Go Vap.

I hope experts or experienced readers can advise me on the optimal choice while still maintaining a balanced quality of life for a young person like me.

Thank you!

Advice from real estate consultant Le Quoc Kien:

Your own capital is VND4 billion, including a house worth VND3 billion in District 12 and VND1 billion in savings. Each month, your reserve and savings, after deducting living expenses, amount to about VND23-33 million, including 6% per annum interest from the VND1 billion savings.

You have very good finances that allow you to consider improving your quality of life or investing to increase your assets in the long term.

Regarding leverage, you should borrow about VND800 million, an amount that will not affect your quality of life.

Your total budget would be about VND4.8 billion.

Option 1: Buy a house worth VND4.5-5 billion in Go Vap

This option fits your current budget. The total value of your real estate assets would increase from VND3 billion to VND4.8 billion and you would save VND1.5 million per month from the difference between your current rental income and house rent, though this is negligible.

After purchasing the house in Go Vap, your net income would increase to VND26.5-36.5 million per month but you will have to pay VND9 million per month for the loan and save VND1.5-11.5 million.

This means you have about VND13 million to spend on monthly expenses.

However, you no longer have the VND1 billion savings.

In terms of real estate value, the growth potential of properties in Go Vap is lower than those in District 12.

This option improves your living conditions at the cost of your savings and the potential gains from the house in District 12.

Option 2: Invest in suburban land and continue renting

For suburban real estate investments, you should only invest a maximum of 30% of your assets.

Consider using only the VND1 billion savings or borrowing up to an additional VND800 million to purchase suburban land.

The house in District 12 should be kept as a fallback in case the investment fails.

Your monthly financial structure would then include an income of VND30-40 million, loan payment of VND9 million, and savings of less than VND10 million.

So you also have about VND13 million to spend on monthly expenses.

This option increases the total value of your real estate assets from VND3 billion to VND4-4.6 billion.

You not only retain the District 12 property but also acquire suburban land with good growth potential if it is located in areas that will soon be developed.

If you buy land in faraway areas, you should carefully consider its legal and development planning to avoid losses.

After selecting an area, do thorough price research to avoid overpaying.

Selling the District 12 house and investing all capital in suburban land while continuing to rent is very risky as your living environment remains the same but you will then have a child living with you.

Your finances in the coming years will be more challenging due to bank payments reducing your savings to a minimum level.

In the current economic conditions, you will have to wait a very long time to achieve good profits from suburban land.

Option 3: Buy an apartment in Go Vap and a suburban real estate

You could buy a budget apartment for VND1.8 billion in Go Vap using your savings and a VND800 million loan.

The house in District 12 could be sold to invest in one or two suburban land plots.

If you choose a mid-range apartment at around VND3 billion, you will likely have to sell the District 12 house for it, then use the VND1 billion savings and VND800 million loan to invest in suburban land.

This option improves your living space, especially with a child coming.

The total value of your real estate assets increases from VND3 billion to VND4.8 billion.

With this option, your family's monthly financial structure includes an income of VND26.5-36.5 million (VND30-40 million if you keep the District 12 house for rent), loan payment of VND9 million and savings of VND1.5-11.5 million (VND5-15 million with the District 12 house).

This leaves you with about VND13 million for monthly expenses.

Please note that in the long term, the value of the apartment in Go Vap District may not increase as much as your District 12 house.

Moreover, you may struggle financially without your savings and rental income from the District 12 house.

However, overall, this would be a suitable option for upgrading your living conditions and investing in real estate.

*The question and answer were translated into English by AI.

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