LukeSnedden.com

A friend of mine asked me for some advice the other day. Their question was:

“Do you think we should go travelling, or settle down and buy a house?”

Where I’m from it is pretty normal to do an “OE” (Overseas Experience). Usually this entails getting a two year work Visa in the United Kingdom mainly in London and using the London base as a spring board to explore Europe. Some people do their OE’s in other parts of the world (I did mine in North America) but for the majority, it is in the UK.

However a few friends of mine have gone in the opposite direction and settled in New Zealand and bought their first home at an early age. The friend who asked for my advice is 23 and she is well qualified to go to the UK, get a good job and have a blast!

I thought I might list some pro’s and con’s for each decision, I can’t make up my mind at this point as I can see the benefits of both. Hopefully by the end of this list I will be able to stop sitting on the fence.

Pro’s of the Overseas Experience:

• Experience of other cultures
• Meet new and interesting people
• Create larger more diverse networks
• Get a great tan at a beach in the Mediterranean
• Get a great Raccoon tan at a ski field in France or Switzerland
• Visit historic landmarks
• See that the world is bigger than their 30 square kilometres that you live in
• Have time to holiday in places that your hometown is too far away from
• Work for a large multinational
• Get a wealth of experience in a field which you might otherwise not get exposure to
• Be able to participate in some economic arbitrage. (Save some money and bring it home)

Cons of an Overseas Experience:

• Time away from family
• Difficult times in big economies narrow down opportunities for jobs
• You spend all of your savings on travelling
• The work experience that you might get is not relevant to any industry at home.

Pro’s of buying a house:

• Get into the housing market early
• Right now the market is declining in NZ and in the rest of the world, you might be able to pick up a bargain which will appreciate at a greater rate when things do turn around
• House purchase is a form of compulsory saving for later in life
• If you get a mortgage while you are young you have the ability to pay it off at a young age, an age when you are still able to travel
• Provides a base for your future family
• Possible income stream if you rent it out
• Able to leverage your purchase to buy more investment properties
• A solid long term savings aid
• Shows a lender that you are grounded and are able to provide meaningful security for that business venture

Con’s of buying a house:

• Ties you to one place/suburb/city
• Ties up significant chunks of income
• May inhibit your ability to travel
• If you pick the wrong time you may be servicing a mortgage with negative equity

I think that she should do a little travel even if it means going for six month to see places and meet people.

On the flip side if she gets on the property ladder now she may be able to travel later when the market bounces back and rents have risen. The rise in rents might mean she has a cash flow positive situation and is able to rent her house out and travel, the best of both worlds really.

What do you think?