Haus123
2025-04-28 10:50:18
- #1
That only costs incidental expenses that are lost. From the 15-20 thousand, you make on average 40 thousand (maybe 30-35 after taxes) in the stock market in 10 years, which you then miss out on. Especially in the real estate market, the saying goes "back and forth, pockets empty" because of the high incidental costs.
I know that you preach the opposite method and apparently have successfully practiced it yourself. But: in the last 15 years, you obviously couldn't go wrong in the real estate market, and even the dumbest decision turned out to be golden. However, times have changed. Today, you practically pay no interest anymore; instead, the interest burden of a full financing (and even then the incidental costs are lost) is at least in the popular submarkets higher than the cold rent. At the same time, the historical anomaly that real estate prices rise at a rate comparable to stocks is unlikely to repeat itself. Ultimately, the leverage of borrowed capital remains to achieve a decent return, so that 1% return can indeed be turned into 10% return. You can do that, but it is certainly a riskier investment than a diversified stock portfolio.
The calculation is interest burden for the loan vs. cold rent, maintenance, and opportunity costs of the equity used. When, as in times of low interest rates, this interest burden is significantly lower, a quick purchase is of course sensible, at least if the interest rates are secured long enough. Currently, however, it is rather the case that especially in the sought-after markets, the interest burden is noticeably higher. If this is only marginal, a purchase with long-term interest rate security is still plausible, as rent is expected to rise. But that is only the financial mathematical perspective. The consumption perspective of ownership must be individually considered and evaluated.
That is why returns on current purchases can really only be achieved through future value increases, which are additionally leveraged by borrowed capital. However, leverage works both ways. Ultimately, it is a matter of philosophy. Those who have nothing have to gamble. Those who have little must not gamble. Those who have much can gamble. I consider myself to belong to the middle group in self-interest, as I want to secure my family’s existence first before moving on to "one may gamble" because surplus capital is available.
I know that you preach the opposite method and apparently have successfully practiced it yourself. But: in the last 15 years, you obviously couldn't go wrong in the real estate market, and even the dumbest decision turned out to be golden. However, times have changed. Today, you practically pay no interest anymore; instead, the interest burden of a full financing (and even then the incidental costs are lost) is at least in the popular submarkets higher than the cold rent. At the same time, the historical anomaly that real estate prices rise at a rate comparable to stocks is unlikely to repeat itself. Ultimately, the leverage of borrowed capital remains to achieve a decent return, so that 1% return can indeed be turned into 10% return. You can do that, but it is certainly a riskier investment than a diversified stock portfolio.
As a layman, I am completely lost here again. Is it better to continue paying rent for seven more years instead of paying down debt already?
With 500@ cold, that is 42,000€ lost.
The calculation is interest burden for the loan vs. cold rent, maintenance, and opportunity costs of the equity used. When, as in times of low interest rates, this interest burden is significantly lower, a quick purchase is of course sensible, at least if the interest rates are secured long enough. Currently, however, it is rather the case that especially in the sought-after markets, the interest burden is noticeably higher. If this is only marginal, a purchase with long-term interest rate security is still plausible, as rent is expected to rise. But that is only the financial mathematical perspective. The consumption perspective of ownership must be individually considered and evaluated.
The calculation is interest burden for the loan vs. cold rent, maintenance, and opportunity costs of the equity used. When, as in times of low interest rates, this interest burden is significantly lower, a quick purchase is of course sensible, at least if the interest rates are secured long enough. Currently, however, it is rather the case that especially in the sought-after markets, the interest burden is noticeably higher. If this is only marginal, a purchase with long-term interest rate security is still plausible, as rent is expected to rise. But that is only the financial mathematical perspective. The consumption perspective of ownership must be individually considered and evaluated.
That is why returns on current purchases can really only be achieved through future value increases, which are additionally leveraged by borrowed capital. However, leverage works both ways. Ultimately, it is a matter of philosophy. Those who have nothing have to gamble. Those who have little must not gamble. Those who have much can gamble. I consider myself to belong to the middle group in self-interest, as I want to secure my family’s existence first before moving on to "one may gamble" because surplus capital is available.