9Mon
Hi Donkey, unfortunately I missed your article. I only came across it today.
First of all: as you already mentioned, the information is very individual. In this respect, I would like to share my experience (from my family, I am the only tenant of all my relatives up to second cousins).
My parents built their own house in 1995. 260m2. They sold it in 2020, exactly 25 years later, as in your example. They didn't need an estate agent, there was much more demand from 5-minute word-of-mouth advertising in the supermarket. They had a burst water pipe three weeks after moving in - the entire basement flooded. Otherwise in the 25 years: nothing. The advantage of new houses: basically very little breaks. The maintenance reserve was the (generous) nest egg, but it had already been there before (when I was still a tenant). But it was never needed, except for wood protection varnish for the garden fence, etc. - Things that some tenants of houses would probably have to do themselves.
Interest costs are very individual, I think. My parents got a free loan of 50,000 DM from my grandparents, but paid off the house - and the parents' loan - in 2003 after 8 years. But there are also people who stretch out their repayments over 50 years (I don't know whether this is still possible today; in any case, it used to be the case that you were only through when you retired).
But the biggest point for property is probably freedom. I'm talking about detached houses with a distance to the neighbor of > 10m. Of course, you can also rent them - but if you run the risk of receiving a notice of termination for personal use in your letterbox at some point, will you lay out the garden the way you want it? Install your dream kitchen for €15,000 or a home theater? Especially in a new build, you can furnish the house exactly as you wish. My cousin took over my grandparents' house and moved two walls straight away. I think that's what buyers value more than tenants.
My parents sold their first house, which had become too big, in 2020 and then had a new bungalow (120m2 living space, 600m2 plot) built instead. The "old" house was worth €30,000 more than the new one, so the increase in value was manageable.
What strikes me above all: from my point of view, the financial component of the decision "rent or buy" only comes into play when it makes up a substantial part of the salary, i.e. especially in large metropolitan areas. My aunt (industrial clerk, formerly with a shower manufacturer, with an automotive OEM for 15 years) and my uncle (trainer at the local public utility company) built a house in their early 20s. 140m2, because they hadn't planned to have children from the outset. They paid off the house in their early 30s. Of course, my aunt missed out on career opportunities (she was supposed to take up a position in middle management, which she held on a deputy basis, but would have had to move to the FFM area and complete a degree at the same time). So definitely a disadvantage of a house. However, since my uncle (as the lower-earning part) is very happy with his employer, there was never any question of changing jobs. They feel so comfortable in my home town that they don't want to move away anyway. They go on vacation 8 weeks a year (2 weeks unpaid) and can also take city trips without vacation days by working from home.
I think these are often simply lifestyle decisions. Do I want to remain flexible and keep the option of experiencing other cities as a resident? Do I want to try out new jobs that might require me to relocate? Do I want to be able to change flexibly according to my space requirements?
Or do I want a "haven of peace" that belongs to me, from which I can't be driven away and which I can set up / change according to my own ideas? With all the associated disadvantages.
But it's also a bit of a question of "city or country". In the (well-connected) village, it is still reasonably affordable to buy in many places (building often fails due to a lack of designated building land) and not very lucrative to rent. Where I come from, 90% lived in an EFH; I knew practically no other form of housing. Even if the husband worked in manufacturing and the wife worked part-time at the local supermarket, older properties were affordable.
Years ago, I found a similar question to yours for the American market.
https://earlyretirementnow.com/2016/03/23/real-estate-buy-or-rent/amp/
A friend of mine (from Brazil) has migrated to the Netherlands. He has the problem that renting is becoming much more difficult. He pays a lot (in Amsterdam). Buying would be much more lucrative because the government encourages it (his own housing loan is tax deductible, but not for renting to others). Of course, such policy adjustments can also throw any financial plans out of kilter.
First of all: as you already mentioned, the information is very individual. In this respect, I would like to share my experience (from my family, I am the only tenant of all my relatives up to second cousins).
My parents built their own house in 1995. 260m2. They sold it in 2020, exactly 25 years later, as in your example. They didn't need an estate agent, there was much more demand from 5-minute word-of-mouth advertising in the supermarket. They had a burst water pipe three weeks after moving in - the entire basement flooded. Otherwise in the 25 years: nothing. The advantage of new houses: basically very little breaks. The maintenance reserve was the (generous) nest egg, but it had already been there before (when I was still a tenant). But it was never needed, except for wood protection varnish for the garden fence, etc. - Things that some tenants of houses would probably have to do themselves.
Interest costs are very individual, I think. My parents got a free loan of 50,000 DM from my grandparents, but paid off the house - and the parents' loan - in 2003 after 8 years. But there are also people who stretch out their repayments over 50 years (I don't know whether this is still possible today; in any case, it used to be the case that you were only through when you retired).
But the biggest point for property is probably freedom. I'm talking about detached houses with a distance to the neighbor of > 10m. Of course, you can also rent them - but if you run the risk of receiving a notice of termination for personal use in your letterbox at some point, will you lay out the garden the way you want it? Install your dream kitchen for €15,000 or a home theater? Especially in a new build, you can furnish the house exactly as you wish. My cousin took over my grandparents' house and moved two walls straight away. I think that's what buyers value more than tenants.
My parents sold their first house, which had become too big, in 2020 and then had a new bungalow (120m2 living space, 600m2 plot) built instead. The "old" house was worth €30,000 more than the new one, so the increase in value was manageable.
What strikes me above all: from my point of view, the financial component of the decision "rent or buy" only comes into play when it makes up a substantial part of the salary, i.e. especially in large metropolitan areas. My aunt (industrial clerk, formerly with a shower manufacturer, with an automotive OEM for 15 years) and my uncle (trainer at the local public utility company) built a house in their early 20s. 140m2, because they hadn't planned to have children from the outset. They paid off the house in their early 30s. Of course, my aunt missed out on career opportunities (she was supposed to take up a position in middle management, which she held on a deputy basis, but would have had to move to the FFM area and complete a degree at the same time). So definitely a disadvantage of a house. However, since my uncle (as the lower-earning part) is very happy with his employer, there was never any question of changing jobs. They feel so comfortable in my home town that they don't want to move away anyway. They go on vacation 8 weeks a year (2 weeks unpaid) and can also take city trips without vacation days by working from home.
I think these are often simply lifestyle decisions. Do I want to remain flexible and keep the option of experiencing other cities as a resident? Do I want to try out new jobs that might require me to relocate? Do I want to be able to change flexibly according to my space requirements?
Or do I want a "haven of peace" that belongs to me, from which I can't be driven away and which I can set up / change according to my own ideas? With all the associated disadvantages.
But it's also a bit of a question of "city or country". In the (well-connected) village, it is still reasonably affordable to buy in many places (building often fails due to a lack of designated building land) and not very lucrative to rent. Where I come from, 90% lived in an EFH; I knew practically no other form of housing. Even if the husband worked in manufacturing and the wife worked part-time at the local supermarket, older properties were affordable.
Years ago, I found a similar question to yours for the American market.
https://earlyretirementnow.com/2016/03/23/real-estate-buy-or-rent/amp/
A friend of mine (from Brazil) has migrated to the Netherlands. He has the problem that renting is becoming much more difficult. He pays a lot (in Amsterdam). Buying would be much more lucrative because the government encourages it (his own housing loan is tax deductible, but not for renting to others). Of course, such policy adjustments can also throw any financial plans out of kilter.
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@KevinC Thank you for sharing your experience. I'm completely with you: buying or renting is first and foremost a lifestyle decision - and then you have to look individually at what this decision costs you and what you're prepared to spend on it.
I come from a similar rent-to-own situation to you and therefore always wanted to buy. But it doesn't fit in with my lifestyle, which is why I started doing the math. I'm quite happy that it's not worth buying in my region 😅. However, if conditions change or the portfolio becomes so large at some point that a property offers diversification, my opinion may change again.
I come from a similar rent-to-own situation to you and therefore always wanted to buy. But it doesn't fit in with my lifestyle, which is why I started doing the math. I'm quite happy that it's not worth buying in my region 😅. However, if conditions change or the portfolio becomes so large at some point that a property offers diversification, my opinion may change again.
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•9Mon
@DonkeyInvestor I'm still undecided too. It used to be perfectly clear to me to buy. Today... my heart would probably bleed if I had to touch my portfolio (not a healthy attitude, I know 😃 ).
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