Why You Should Buy Property, Not Rent

The Local just published an interesting article titled “Why you should rent property in France (rather than buy)” to which I’d like to provide the other side of the proverbial coin.

The article’s opening line is “Renting could make much better financial sense and save you a lot of hassle.” But, without even reading the rest of the article, everyone, and I mean everyone, knows that paying rent is money going into the landlord’s pocket, paying his mortgage and expenses, rather than contributing into your own investment. That, in itself is a pretty poor use of your own money. And then there is the hassle side of things, which could be true unless you have a bad landlord and find that dealing with him and the woes of the apartment are a seriously big hassle over which you have no control.

Another point the article makes is about being unsure of your long-term plans and if you want to stay in the country forever. I’d say that’s true of any location you choose to live. My motto is “never say never; never say forever,” so one should never think in terms of too long a future stretch without being able to change course at a whim. Property ownership doesn’t mean “forever.” If you were to choose to live elsewhere, your choices would be to rent the property or sell it, depending on the market and the potential capital gain, good or bad. May I emphasize the word “gain” — Paris in particular has been a very strong market with increases of 5% to 10% annually, so even ownership during five years could yield a substantial appreciation and big bucks in your pocket.

Sure, there are taxes and fees associated with home ownership, but don’t think that the renter isn’t covering those costs. Of course they are. Renters traditionally pay the “taxe d’habitation” (council tax), anyway. Landlords pay the taxe foncière (property tax), but face it, they don’t rent in order to lose money. They calculate the rent to earn a profit.The article is right, however. If you don’t have the money, then you don’t have the choice — rental is your only option. But that’s not a good enough reason to consider that renting is more of an advantage than home ownership!

Also, most tenants have to pay their own utilities, so that’s an expense the landlord no longer has. Of course, the maintenance of the property is the landlord’s expense, but remember, he’s the one who benefits from the appreciation and the better maintained the property, the better the appreciation.

One negative item in the article against home ownership that really makes me smile is how an owner should attend the yearly homeowner association meetings. (It’s not mandatory, btw.) Guess it’s hard for me to think that this once-a-year responsibility toward maintaining your property is such a big deal. While earning all that money, wouldn’t it be normal to make a little effort?

When purchasing a property, yes, there are closing costs, but ownership for at least two years (in Paris, in particular) will cover those costs, plus having a tenant helps you pay for them even quicker. One thing for sure that the article is right about, is how France favors and protects the tenants over the landlords. This is perhaps the only valid reason for not wanting to own property in France, but if you’re a smart landlord, your problems will be minimal. Being smart means only renting with real assurance that the rents will be paid and there are lots of ways to do that.

If freedom is what you want, then no, don’t own. As the saying goes, “A rolling stone gathers no moss.” But, then you gather no security, either, and all your money went into someone else’s pocket. Is that what you really want?

Footnote: When I first moved to France, I rented my apartment. Shortly after, the landlord wanted to sell and because I had first right of refusal as the tenant, I chose to buy it. That was in the year 2000. Today, I could sell that same apartment for almost five times what I paid for it. Over the course of the years, as the property increased in value, I took four “equity release” loans (similar to a line of credit) to purchase four additional properties. Three of those properties were rentals, and the rental proceeds of the three covered the costs of the five loans. The total value of those five properties were 15 times the value of the first apartment (at the time of the purchase)! I sold two of those properties a few years later and realized a substantial gain while substantially reducing the debt. But, best of all that, I created a security for my future that could never have been achieved otherwise.

Don’t believe the author of The Local’s article (there’s no by-line). That person will never get rich thinking that way and neither will you.

A bientôt,

Adrian Leeds
Adrian Leeds Group

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