#fabhome

Bottom Line: 

Unless you know for sure the home you are purchasing is the "one" - and you will stay there for at least 3 years or so, renting is a cheaper option than purchasing, contrary to popular belief. Add to this the convenience of being able to move whenever, and the time saved with paperwork (taxes, admin and all the rest). 

Real Estate investment is not that easy, despite the fact that, yes, overall prices keep rising. Your property may not be that “liquid” (in general simply because you do not want to downgrade or move far away when selling your place) - and renting is in general not profitable if you do not get specific tax breaks or own a large portfolio over a long period of time. Purchasing and selling alone represent a ton of work to optimize profitability. Add to this the hassle of managing rentals.  

Below some “actual common sense” remarks while I finalize a “real world simulation” for an apartment in Paris and a house in LA. 

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It is never easy to realize the truly deep pieces of propaganda we’ve grown up around - adding to this the cultural factors. 

One of the biggest -- powered by the multi-billion-dollar lobby of the International Association of Realtors Who Want To Take Your Money -- is the belief that "you must own a house". Yes, realtors make a lot, lot more selling a place than renting one, and earn at least 5 times more per hour spent when they sell. 

And the "common-sense" thinking that you will hear a thousand times: "Why throw away your money in a rental when you could OWN the same place with the same monthly mortgage?”

Yes, why? 

Renting is still considered, if not suspicious, at least a “loser’s option”. Nevermind that a lot has changed since people had no more than 2 jobs in their lives, and were tied to a specific place to be able to make a living. 

Buying a house for yourself is not the "best investment" you can make”: its main advantage is being able to renovate the place to your taste. This, arguably, is a big deal if you are confident you will stay for many years to come, although just 5 years down the road, the “amazing decor and floorplan” you spent 2 years finalizing...may seem dated already. 

Plus, who can be certain today that they won’t need to move, for professional or personal reasons? I’ve always considered purchasing my own place very risky, and I have always rented at pretty discounted prices to landlords who initially were certain they could get 30% more money per month for their “trophy”. Keep in mind a simple fact: your stuff is a LOT more valuable to yourself than to someone else, and not that many people outside of very tense markets will love your interior design dream from 2006. 

Those who say "I’m doing it for the tax benefit" are never really able to know how much they are saving, let alone rely on the fact those savings will last forever. In France, ownership actually has a major chance of increasing your taxes - big time. 

People love to trumpet how low their mortgage is. Want to know the actual amount they pay when they factor in taxes, insurance, maintenance, etc? Take the monthly mortgage and add 50% - yes, 50%, so you really are NOT paying a month’s rent - as a general rule of thumb for how much you’ll actually pay. 

Pretty much everyone keeps being pressured into buying a house from parents, friends, the whole society, and of course, the media (remember they need advertising. Men are not that obsessed with watches and cars, that they would need mens magazines to only be made of pieces about them. And no, no one really buys $15,000 couture jackets either, despite GQ’s best advice). 

In this New York Times article, you see exactly how the propaganda war is waged.

Let’s see if we can count the number of pieces of propaganda to buy a house. What they say: "...the house on Livingston Street seems to taunt him every time he walks by" - What they mean: You’re an embarrassment if you don’t own. What they say: "He cannot stop dreaming of a better life for his family as he imagines the extra space inside and his children and dog playing outdoors once he weeds the yard" - What they mean: You are a bad parent if you don’t own a house. What they say: They are "squeezed...stuck...trapped" - What they mean: Who the hell would want to rent? Only losers. What they say: "But even as the market continues to improve...it is leaving millions of Americans unwillingly stuck in rental housing."- What they mean: When housing prices increase, it is always a "good sign". (Um, sir, would you say that prices “improved” if the price of eggs went up? Or gas? Or toothbrushes? Shh... This is the American Dream!) What they say: "The nation’s homeownership rate has been falling for eight years, down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004" - What they mean: More Americans should own houses. 

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After all, there are still people who buy cars while living in a large city, and who will pay 5 times more (I’m talking about a regular car, make it 15 times more for a trophy car) than being chauffered everywhere, anytime, just because they want their “own car”. Even when I lived in LA, since I was going far only twice a week, it was A LOT cheaper to bike, and Uber around. But yes, I felt almost guilty leaving my parking spots empty, despite the parking hassle, the traffic, the tickets... 

So if you want to buy a house, buy a house -- but run the numbers on the largest and most important purchase of your life, understand its real cost, time included, and its risk. Of course, it often makes sense if you include the “emotional factor” - but it’s not, in general, “the best investment ever”. 

The “sharing economy” trends (AirBnB to simplify) are changing the whole ecosystem. Understanding what it means today and in 10 years is crucial.