Last week I opened the books on our house sale. The €175,000 it looked like on paper, the €48,790 it actually was. And I promised you the harder question this week. Would I have been better off just renting?
I've done the maths now, and it's one of the most expensive lessons I've ever learnt. So let me hand it to you for free.
Everyone thinks buying is the smart thing, and that renting is dead money. I thought that too. Here are the two versions of the same five and a half years.
Version one, what actually happened. I paid €420,000 for the villa. Sold it for €595,000. On paper, €175,000 profit. But after all the fees and everything I spent on it, my real profit was €48,790. Forty eight grand.
Version two, the boring option. Say I'd rented a similar house instead, and put that €420,000 into a basic world index fund. Nothing clever, nothing risky, just a common investment, much like the one I actually sold to free up the cash to buy the house in the first place.
Today, that would be worth about €760,000. A gain of €342,000.
Of course, I'd have been paying rent the whole time. A house like ours was about €2,500 a month, so over five and a half years that's around €160,000 gone. Take the rent off, and I'd still be €182,000 up.
€182,000 from renting and investing. €48,790 from owning. Same money, same years, and one option was worth nearly four times the other. A difference of €134,000.
Now, three honest things before you go and sell your house.
That's a dollar-based return, so I'd have taken a currency hit somewhere along the way.
And to actually get it, I'd have had to sit through 2022 watching that €420,000 fall by 18 percent, while renting, with two young kids, and not touch a penny of it. Most people don't do that. I'm honestly not sure I would have.
And the house was never only money. We lived in it. Our second son was born while we were there. You can't panic-sell your own home at four in the morning, and that's worth something that doesn't show up in any of these numbers.
So I'm not telling you renting always wins, or that you should sell up. I'm not a financial adviser, and this is one deal, in one country, over one five-year window. But if you're moving abroad and you've already decided that buying is obviously the sensible thing and renting is dead money, run both numbers first. Because I didn't. And the boring option would have been worth a lot more financially.
If you're weighing up buying versus renting abroad and want to think it through, hit reply and tell me where you're at. I read every one.
Talk soon,
James Hopkins