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Should I buy or rent my first home?

Post Series: Road to home ownership

To buy or to rent, that is the question

This was the first thing I asked myself. While most [Belgians] believe buying your own home is the best way to go (but not all, more on that later), I wanted to keep an open mind, so instead of just assuming buying was the best for me, I tried to find out how it really was for my situation.

There are quite a few articles and resources on this subject but unfortunately, a lot of them are focussed on the American market. It’s possible to make some basic calculations using that info but because housing is heavily influenced by a government through tax breaks I couldn’t rely on it.

While a lot is for the American market, luckily this question also gets asked a lot in Belgium, on multiple forums and sites I could find quite a bit of information about the (hidden) costs of home-ownership and the downsides of renting. I even found a (simple) simulator by AXA.

Making choices
Making choices is always difficult.

Unsolicited advice

In search of my own place, I’ve started talking to friends and colleagues about my search. I shared how difficult it is to find what I want I even questioned if it was really the best idea to buy.
This sparked some older friends and colleagues to give me some friendly but (unsolicited) advice on their beliefs. Especially how the Belgian housing market is a bubble ready to burst, meaning I shouldn’t invest in owning my own house or apartment.
While there have certainly been some (news) articles about this topic (Mooijman, 2017) and it seems to make sense at first glance given the continuous rising housing prices, but at least research (De Lange, 2014; De Smet, 2017) indicates that this is more of a feeling than a fact.

That said, there are definitely up- and downsides to owning or renting a place of your own. All of these can be found online with general guidance. This is great, but that doesn’t help me if it doesn’t fit with my situation.

Time to do some thinking and self-reflection to decide what I need (and want).

Home ownership: 4 reasons

Before getting into the four reasons why I should (not) own my own home, I should already say that I have two hard requirements if I were to buy.

  • Location: a 25km radius of Brussels with a preference for good train connections to Brussels, Leuven, and Antwerp. This leads me to the area of Mechelen.
  • Budget: ~€300,000. Based on calculations and an initial talk with my house bank and taking my own savings into account, that is the limit I have set for my self. Give or take €10,000.
  • Other: at least 2 bedrooms (one would be used as a workspace), a guest toilet downstairs a large enough bathroom, and a garage.

To own

Moneybox

Green 1My biggest reason for buying straight away is the financial advantages it gives me in the long run. My house actually becomes a piggy bank. It will be worth more in the long run (although no one can guarantee that). On top of that, I can always rent it out after a short while. Though I need to be careful with this so since there is a government incentive when it’s my first and only home. The government gives tax deductions but as we know these things aren’t set in stone so when push comes to shove, the government can and will change the rules of the game. So I should make use of it while I still can. Heck, they already changed it recently.

Long term

Green 2

When I pay off my mortgage after 15 to 20 years, the house is all mine! I no longer have anything to do with the bank and live almost for free. Almost because, well, I still have other costs (gas, water, electricity, maintenance, taxes, insurances). These costs continue as usual and will still take a bite out of my budget.

Short term

Green 3

Another advantage is related to freedom. With my own home, I can do whatever I want. The building, for example. Do I want to change the kitchen? Let’s do it. I don’t have to ask the landlord for permission.

And when the renovation increases the value of the house, I don’t suddenly start paying for it anymore. I pay for the mortgage and it won’t change. Though to be frank, I don’t plan on doing any major changes, that’s why I’m looking for a house that fits me and my girlfriend as much as possible. I will most likely install a split unit airo though. I get warm very quickly which makes it very difficult to fall asleep during the summer.

Another thing I can easily do is paint the walls, or do some minor home automation improvements that will make my life easier. As an IT’er I love work with electronics and implement things that can automate tedious tasks. I won’t be able to do this when I rent.

Freedom of choice

Green 4

There is a wide range of properties for sale. I have an extensive choice of types of homes and places to live.
Though this is diminished quite a bit because I already have a location in mind and looking in that area plus taking my preferences into account the options aren’t as many, especially if it has to fit into my budget of ~€300,000.

Through sites such as zimmo.be or immoweb.be I can easily filter and even set a mail alarm whenever a property goes on sale.

Not to own

My money is "stuck"

Green 1The majority of my money and future money will go into this house or apartment.
It’s a commitment for multiple years which means that I won’t be able to put my money into my trading account. This has an impact on my return, especially f the stock markets declines and there are new opportunities to invest in, I won’t be able to, or it’ll at least take longer to get a decent amount.
Though a recent study actually suggests that homeownership can actually yield a greater return (Brockmans, 2019).

Mortgage monthly payments often (much) higher than rental fees

Green 2

Since the investment I want to make is around the €300,000 figure my monthly mortgage payments will most likely be around €1,000 (give or take €100). This will almost definitely be higher than the monthly rent I would have to pay for a (smaller) apartment located closer to my job.

Many (unexpected) costs

Green 3

Buying a place costs a lot of money. I will have to apply for a mortgage, but even then, since banks prefer to have at least an LVR (Loan-to-Value ration) of 80% or lower (with the NBB pushing for even stricter rules) (Nationale Bank van België, 2018), it’ll still cost a lot of money.

I’ll also pay a large amount of tax and additional costs when I buy. I can do the calculations already by going to notaris.be and plug in my data. For a house of €300,000, the costs will be between €34,195.96 and € 34,558.96.

Overview of notary costs when buying a house
When buying a home worth €300,000 the additional costs add up to ~€35,000!

These costs aren’t small and they are forever lost. No one can predict whether I will earn it back in the short term due to a rise in house prices.

Maintenance

Green 4

I already mentioned costs prior but maintenance is worth mentioning separately since I will have to carry costs for the maintenance of my house myself. No landlord I can call for leaks and other problems. And I have to pay for it yourself.

I’ve come across the following percentage when it comes to maintenance: at least 1 percent of the value of the house per year. But they vary quite a bit from one type of house to another and from one owner to another.

I’ve read averages ranging from €2500 euros to €5000 annually. These are averages, so those amounts will vary enormously from house to house. That maintenance includes a lot of things. From the standard exterior painting to the replacement of the central heating system. Everything in and around the house needs occasional maintenance.

So I need a good contractor or handyman, or and more likely, learn how to do things myself.

Renting: 3 reasons

My preferences when it comes to renting are relatively straightforward.

  • Location: Brussels
  • Budget: <€1,000/month
  • Other: One dedicated bedroom, a large enough space to store sports equipment and an area for a bike and car.

To rent

Security

Green 1

When it comes to renting, the advantage lies mainly in the financial security that I will have.
I pay the rent and don’t have to worry about the maintenance costs of the building.
I know what the rent (and shared costs) is and also that it will increase a little bit each year (this is, of course, a disadvantage). But even if your house needs major maintenance, it’s at the expense of the landlord.

Lower extra costs

Green 2

Next to only paying rent and maybe a fixed monthly shared expense, I also pay less for insurance. The insurances related to the property are paid for by the landlord. As a tenant, I also pay less tax than a homeowner. For example, I will only pay the user part of the water board tax.

Flexibility

Green 3

With a rental home, I can be pretty flexible though it’s not as flexible as I thought at first. There are fixed terms: indefinite, >9 years, <9 years, and short term, i.e., 3 years or less. I can cancel 3 months before the end of the term but not sooner unless stipulated in the contract signed by both parties.
If I want to rent for a shorter period of time than 3 years, which could be realistic in my situation, I have to be clear about this beforehand.

So while I’m definitely not “stuck” to a mortgage, It’s not as flexible as say an American rental agreement. This has its downside, less flexibility but the upside is that I also can’t be kicked out (unless I vandalize the apartment of course).

Not to rent

Paying off the mortgage of the landlord

Green 1

The number one drawback for me is still that I will never see the money I pay in rent again. Yes, I get something in return, a roof over my head and the benefits mentioned, but the money I pay in rent is, in a sense, “lost”.
After thirty years I probably pay a lot more rent than now because of indexation but what do I  get for the increased rent? Nothing, I still won’t have my own house.

Indexation of the rent or even just increase in rental price

Green 2

My rent will follow the indexation every year by default. So I pay more each year for using the same building. When that goes on for years, I will have less and less money left for myself.

On top of that, the landlord is allowed to increase the rent as long as he informs me between the 9th and 6th month before the current contract comes to an end. As a renter, I would be entitled to disagree but then it will go to the justice of peace to judge if the rental increase is justified. Two reasons are accepted: Due to new circumstances, i.e., the neighborhood becomes more desirable or changes to the building to improve liveability.

Dependant on the landlord

Green 3

I get to deal with a landlord. That might be nice when it’s a good one but it won’t be strange if I end up with a “bad” landlord. You know, the one that does nothing about maintenance and will only see me as a dairy cow to pay off his mortgage.
Furthermore, for (major) renovations, permission from the landlord is required. So I can’t just install a split air-conditioning unit which to me is important especially with the increasingly hot summers. I should thus look for a house that fits my needs but then that plethora of choice quickly disappears. Especially in Belgium where air conditioning is not really a thing.

Cutting the Gordian knot

There are clear ups and downs to both options for me. For owning the biggest downside is the mortgage and the annual maintenance cost. When it comes to renting, it’s the monthly paying-for-your-landlords-mortgage rent that is the biggest downside for me.

Another element that puts me off from renting, but more precisely renting an apartment, are the shared costs on top of the rent. I haven’t added it here since it’s more related to an apartment and not so much a renting since you don’t have this when renting a house.

After weeks of going over it all and putting up- and downside next to each other like this, I decided to buy and own my own place! this of course means I accept the downsides and take them into account when deciding what I want.

Receiving the keys to our own home
Always a big moment, receiving the keys to your own place. Hopefully that is not too far away for me.

This was my breakdown as I go through the journey of finding my own place. Do you agree with the positives and negatives I list here, or did I miss something?

Please fill in the poll and leave a comment sharing your (past) experiences while you were looking for a place of your own.

What kind of housing do you live in?

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Mr. FightToFIRE

Writer at Fight To FIRE
I'm the owner and the main writer of FightToFIRE, a personal finance blog focussing on Financial Independence and Retiring Early. During the regular working hours, I'm a developer for a major financial institution in Belgium. During my off-hours, I write. do some weight lifting and other stuff to keep me healthy and fit.
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This Post Has 5 Comments
  1. Hi
    Thank you for your blog, there are some very interesting nuggets in there!

    On the questioning you have; it all depends on your goals and lifestyle.
    Do you see yourself in the place for a very long time (More than 5 years if you want somehow to have a ROI) Will your family extend? (eg. girlfriend, childs?) Will you still have the same job in 5 years (and so will the location be the same?)

    A few of these reasons have let me decide the following: buy investment properties and rent the place were I live.
    I have bought my first appartment, which is now under rent. And rent a beautifull 4-gevel woning, which I can leave whenever I want if the situation (work, family) requires it.

    Yes the house is not mine, but if it doesn’t fit me anymore I just leave. No strings attached (except the 3 year contract, but even this can be stopped with minor penalties)

    Buying a home can be seen as an investment, only if the home you buy has all the criterias that match a proper investment. This is mostly never the case since 1) You want a place which is the best place ever! (Large, good location, etc..) 2) You max out your loan budget (You talk about 300k this is a lot of money that is blocked for quiet a long time)
    3) With the best house, you want the best equipment, so more costs their as well 4) Yearly, a place costs approx 1% of the value, the higher you go the more costs you have

    It all depends on goals and lifestyle you want to have; but owning one big property (300k) which is your residential place (so a very low investment vehicle) doesn’t seem a good option for FIRE with the explanations you provided. For 300k you can buy several investment places(Between 2 and 4!) and have a very nice place that you rent.

    I can be wrong depending on the place/opportunity you will find of course!
    Good luck

    1. Hey random Belgian :),

      Thanks for your feedback.
      You are bringing some very interesting points. Care to elaborate on them? More precisely, how you decided on which apartment to get and especially how this impacted your (first) mortgage?

      300K is the amount but the actual mortgage amount is probably going to be closer to 200K thanks to support from family.

      My goal is still FIRE and actually looked into property investment and renting, but I didn’t see a proper way to get there through an apartment. Let me elaborate. I might be was biased because I don’t like that I have shared costs every month when getting an apartment. On top of that, if I’m not mistaken, you need to stay in your first and only apartment/house if you want to make full use of the tax deductions, so I’d rather aim for a house straight away that I can rent out in a couple of years. That’s why I’ll be looking for a place near Mechelen that has a good public connection to Brussels, Leuven, and Antwerp. I’ll go over those things in the coming weeks when I talk about what I’m looking for in a home.

      Maybe you can give some additional tips if you want you can always contact me through mail.

      Greetings,

      Mr.FightToFIRE

      1. I will post here for the moment, since there is no “secret” and I like to read the comments of other readers of your website, so I’m contributing too 😀

        1) Easier said than done but the ideal investment property should be completely detached from your “want” of living inside. You should aim for pure market demand and ROI. In Belgium, the overall rent price is fairly similar in all cities. You have some minor differences, but in overall it’s the actual buying price that has serious differences and not the rental. With having that in mind, you should aim for properties at a very low buy price, since the rental difference between a 80k and 200k appart is fairly similar (we talk 50-100€/month rent difference, but a very high difference in loan (300€/month)

        2) Depending on the region, yes, tax deduction are important. Not paying(most or at all) the registration fee is the most important one. In Brussels and flanders, you will not pay out approx. 20-25k for your first property, if you live in it. This is great and should be used, if it doesn’t completely break point 1) that I’ve explained. If you are paying 50k extra for your first dream house, ok you have spare some money with the tax deduction but you have lost it in acquisition price.

        3. Yes an apartment has shared costs and should be carefully examined (syndicus “health”, how are the co-owner meetings going etc..) but for a house the costs are very similar. These are maybe not yearly but will add up sooner or later. This point is to be considered depending on the opportunity you find out

        4. I’m considering garages box as my next investment. I’ve not completely decided yet but I see some serious advantages; 1) Boxes can be used for all other stuff than cars 2) Few rental problems 3) Lower acquisition price for similar rentability
There are some drawbacks but the advantages outweight them

        Happy to hear your thoughts on this

        Regards

        1. Hey Belgian,

          Haha, yeah true, share the knowledge 😉
          1) That’s interesting to know, I’ll do some research as well about the average rental prices.
          As far as the mortgage goes, since I’d like to stay around the 200K – 250K for an apartment, the mortgage should be pretty low. I’ll probably see for 100K to 200K. If I would go for an apartment, I’d like to get one in Brussels which should also be a good place to rent out (to expats).
          2) Fair point. I don’t want to spend too much, especially with housing prices already being very high.
          3) Oh, thx for reminder. I should indeed look closely at the shared costs. And another fair point about those costs. It’s more in your face with an apartment but as you said and as I even point out in my comparison, you have maintenance costs anyway.
          4) I have a colleague who invests in this and he already has like 10. He started 5 years or more ago. More and more people are jumping on this. De Tijd has some interesting articles about this in fact, maybe you can read them: https://www.tijd.be/netto/vastgoed/is-het-wijs-uw-spaargeld-in-een-garage-te-parkeren/10110990.html
          I’m also looking into this but first my own home 😉

          Thanks for sharing once more.

  2. One last thing…

    Some phrases from Warren Buffet:

    Buy when everyone else is selling. “We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend … Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

    Don’t buy when everyone else is buying. “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance,” Mr. Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.

    — end of quotes
    These quotes would encline me checking out garages instead of housing, since everyone is mostly buying housing right now due to low rentevoeten.

    Food for thought

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