Rent a house or buy/build? How did you decide?

I am a fan of "Betongold": bought a condominium in 1995 for 245,000 DM (!) and recently sold it for 295,000 €, so a return of over 100%. For me, that’s okay.

We want to build because then we can live according to our own ideas and not, like now, constantly have to chase after the landlord because maintenance simply isn’t done (the balcony of the apartment above us threatens to eventually fall onto our terrace, and we have been nagging about it for over 2 years), the heating is acting up again (and then we are cold, not the landlord), I also landscaped the garden myself because I want to live nicely (and if we move out, that is a profit for the landlord, I’m left empty-handed). If I do something on my own property, I do it for myself.

Another argument for rent-free living in old age: money that I don’t pay increases my available capital. So, if for example I rent and own a condominium as a capital investment and rent it out, then I have to pay taxes on the rent received. The rent I don’t pay on my own property is an “income” that does not have to be taxed. Considering the pension problem, I personally fear that we will have to expect many more cuts, and then the one who is fine is the one who has simply made sure to have fewer expenses; the one who has more income will just get fleeced more.

Maintenance: I am now 51, will be 52 when our house (hopefully!!!) is finished and I no longer expect any major maintenance during my lifetime. But of course, we will still have a little emergency fund for that. But even here: I do it for myself and exactly the way I want. That alone is an invaluable value for me.

I agree with those who say that a bit of craftsmanship skill is good if you want to build or become a homeowner. I sign off on that immediately. With two left hands and no understanding of the matter, as a tenant you are better off because then you only have to shout after the landlord when something is wrong (in my case: unfortunately not always with success). Or you simply have the necessary money to always get a craftsman. That works too.

And then location: we’re in the Munich commuter belt, where you simply find nothing or nothing suitable, and if you do, then at exorbitant rents and without knowing how they will develop. We can only build because we already have the plot; otherwise, there is hardly any building land here. We are a couple without children and want to live with enough space and some luxury. Single-family houses for rent are usually designed for families with children. What should we do with 2 children’s rooms? For us, a large bathroom with a sauna is more important. So we would have to search for a long time to find a rental house that suits us. And the rent would have to exceed our monthly installment by a large margin.

Assets??? As I said: we have no children and the last shirt has no pockets. When I kick the bucket, my account can be empty. And my heirs can then decide what they want to do with the place. I DON’T CARE. My pension has to be enough, and if I don’t shell out well over 1,200 euros a month for rent, then I’ll easily get by. And in 25 years I’ll be over 75, then I will only do maintenance if the heating no longer heats and water comes through the roof (and if I can fix that with a cheap solution, that will be enough for me). I don’t have to leave the house in top condition with my feet first.

What a fantastic contribution! That's how I see it too. At 60.

I am a fan of concrete gold: I bought a condominium in 1995 for 245,000DM (!), recently sold it for 295,000€, so a return of over 100%. For me, that's okay.

No, that is a return of about 3.75% p.a. (compound interest effect calculated back over 22 years). WITHOUT (!) inflation during that time, which still has to be deducted. So your return is 3.75% minus the annual inflation between 1995 and 2017. You end up under 2% p.a.

And there’s more: That would only be the case if the apartment had been paid 100% with equity from the start. The interest on your loan still has to be deducted from the under 2%. And possibly repairs over the 22 years as well...

I just want to make you aware of how quickly one tends to do naive calculations (100% return. In reality, you can’t just calculate from purchase price to sale price when a loan has been repaid in between).

Of course, you would have to calculate how your equity, which you invested for the purchase in 1995, would have grown until 2017 with an alternative investment – and that is not the easiest of Excel spreadsheets since equity increases annually due to repayments in an environment with changing inflation rates yearly. Especially because you have to compare it with a hypothetical rent, otherwise it’s pointless. Of course, the return on your apartment might also look better through such a comparison, no question.

Only: Without such a calculation, any statement about "concrete gold" is worthless, sorry.

Besides, you’re extremely lucky to be able to sell in a bubble while others have to sell at time X. And if the price isn’t that great then, you’ve burned money with property. In a boom, you don’t get as great a return as you thought, in a bad phase it easily turns negative and people get poorer. Yes, poorer through owning property. Nobody believes it because not many can calculate it...

That’s why I find the talk about old-age provision through a house dangerous for many people, sorry again.

Another argument for living rent-free in old age: money I don’t pay increases my available capital.

With that argument, you would have to become a landlord because someone else repays your loan and afterwards everything belongs to you. That creates capital. Otherwise, see above!

Maintenance: I am now 51, will be 52 when our house (hopefully!!!) is finished and I don’t expect any major maintenance in my life anymore.

Define "major." I wish you good health, unfortunately that conflicts with your wish...

We want to build because then we can live according to our ideas

Assets??? As said: we have no children and you can’t put the last shirt in your pocket. If I kick the bucket, I’m happy for my account to be empty.

That is very likeable to me and a good argument for the house. Just please don’t see gold where there is none.

With that argument, you would have to become a landlord, since someone else pays off your loan and afterwards everything belongs to you. That is capital. Otherwise regarding the statement: see above!

Never be a landlord again; I've done that for almost 20 years now. I don't need that hassle anymore. And as a landlord you hardly have any rights anymore.

No, that is a return of about 3.75% p.a. (compound interest effect calculated back over 22 years).

You are right, my mistake. What is more accurate: I have roughly quadrupled my equity with it (started with relatively little) without it causing me any pain.

I'll roughly assume around 50k because I actually see an investment with the apartment, which has to be deducted from the final price over 22 years. Then you'd have a good multiplication of the initial equity.

Minus interest costs, minus inflation, calculate it as compound interest over 22 years.

But it worked out for you and made you happy, so more power to you. The brand new youth today would say: "Treat yourself!"