Practical Investments

My mother wants to spend future winters outside of Norway. She has specifically mentioned Canterbury in England as a desired location. She's English, so it makes sense. Canterbury would feel like home. However, my father is ninety years old and my mother is only a few years younger than him. Moving to a town with no immediate family close by seems like a risky venture. I have therefore suggested that she should come to Porto instead. My wife and I could find my parents a flat nearby. This would allow us to visit them, and they could come and visit us.

I've also suggested that I, or one of my brothers, escort them to and from Porto. At my parents' age, I think it better to have an escort to take care of things so that they don't have to worry about anything.

This plan has been well received, not only by my parents, but also by my brothers as well. It may come true, in which case everyone is better off. If my parents come to Porto for ten to fifteen weeks starting January, they will avoid the worst of winter in Norway, and my son, my family in Porto and I will be able to enjoy my parents' company.

A consequence of this, if implemented, is that it will change things around for everybody. Things that made little sense before are suddenly more interesting. In particular, it opens up for the prospect of buying a flat for my parents to live in. If my wife and I can rent out such a flat to my parents for several weeks every winter, the risk is reduced, and chances are that the flat can be used for other purposes too.  My brothers in law can stay at the flat when they come visiting from Lisbon or Paris. My children can use it when they come visiting from Norway. My stepdaughter has just turned 24. She may soon want to rent a place for herself. The place may also be rented out on Air B&B, or it can be used as a retreat for my wife to focus on her knitting projects.

Suddenly, a whole world of possibilities opens up. A flat in the vicinity of where we live has so much potential that it becomes an interesting prospect even if prices are a little elevated at the moment.

This is a world of difference from what my wife and I was looking into a few years back, and illustrates an important point when it comes to investments. My wife and I were thinking of buying a small place with a garden out in the country. We thought it a nice idea to have a summer house. But we ended up laying the plan on ice, and this turns out to have been the right move now that we have a clearer idea of what sort of conveniences we're actually looking for. A house in the country would have been an expensive luxury. A flat in the neighbourhood, on the other hand, would be a practical solution to a lot of things.

From this, we see that the value of an investment is divided into two parts. One is the pleasure and convenience that it brings. The other is the potential for profit. When the second point is the main reason for a purchase, the risk is elevated relative to when the first point is of greatest importance.

My experience is that practical investments, such as my house in Norway when I still lived there, is far more likely to yield a healthy return when sold than more speculative investment. The reason for this is that what's practical for me is likely to be practical for others as well.

However, house prices are elevated relative to gold at the moment, which means that gold shouldn't be sold for this purchase. The reason for this can be found in this post, where I concluded that gold serves best as insurance in scenarios where it is undervalued relative to real-estate. Instead of buying a flat by selling our gold, we'll seek a bank loan. My wife is currently employed at a relatively good salary. She owns an attractive flat, and she has no debt. It shouldn't be hard to secure a loan.

This means that by my own definition, we'll be investing in real-estate, rather than saving in it. We'll have to seek a return on this investment to cover at least some of the expenses related to it.

The hope is, of course, that any investment into a flat will turn a profit over time. However, this won't be our primary reason for buying it. If we do buy a flat, it will be mainly in order to make life better for ourselves and our nearest, and any future profit on this will be but a bonus. Had this not been the case, I would've dismissed the idea, because I'm a saver and to some extent an investor. But I'm not a speculator. I don't buy things on credit merely in the hope to make a quick profit.

What now remains to be done is to get a better idea of what's for offer in terms of flats in our area and at what price. If we find that buying a flat comes out little more expensive than renting a place, we'll seek to buy a place. If it turns out to be a lot cheaper to rent a place, we'll have to wait until a better opportunity comes around.

My stepdaughter