Author Topic: Rent vs. Buy a House Decision for FIRE Families  (Read 1394 times)


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Rent vs. Buy a House Decision for FIRE Families
« on: August 17, 2021, 11:54:01 PM »
I'm interested in how the rent vs. buy decision and variables are different for FIRE families living abroad looking at a primary residence. If you're drawing down on average 4% of your investment portfolio per year (plus inflation), would you analyze the rent vs. buy simply if you can rent for less than 4% of the equivalent purchase price of the house, then rent, otherwise buy? Or are there other factors or ratios we should be considering?

My wife and I currently rent a 3 bedroom house for around $730 USD including lawn care, pool maintenance, and typical repairs to the house. To purchase a comparable house, it would cost around $240k USD plus closing costs. However, we would then have to take on the joys (costs) of ownership (i.e. taxes, insurance, repairs/maintenance, etc.).

We live in SE Asia in a country where the property market is highly illiquid as there is a glutton of supply without much demand. Refinancing costs are relatively high (~5-9%), so borrowing against the house would be pretty expensive if you needed access to the equity.

We don't know if we will live here full time for the rest of our lives (currently in our mid 30s), but it could serve as a "base" camp as we travel the world (post COVID) and would give us the ability to drop in and out part time as desired.


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Re: Rent vs. Buy a House Decision for FIRE Families
« Reply #1 on: August 18, 2021, 01:37:38 PM »
It isn't as simple as just 4%. Buying a house is more than just a financial transaction, as you describe.

Unless you have the intention of owning a place for a long time, buying seldom makes sense. That is true in the US, Europe, SE Asia, etc...

For places where the rent yield on a property is insanely low, I would always choose to rent. For example in Taiwan we were paying about $36k/year in rent on a property that would sell for $2 million+. 1.8% yield. You can do better than that with TIPs or Ibonds.

Assuming you want to stay in place for the long term and rent yield is reasonable, the main reason I would consider buying in a country that uses a different currency than I am invested in is to combat currency risk and inflation risk. High growth developing countries often have high inflation. Currency swings could be large. Your rent could increase 2x or more in short order. If you want to stay, that could be a problem.