An article published yesterday in Folha de São Paulo caught my attention. According to a survey by reporter Ana Luiza Tiegh, the minimum rate of financing for the acquisition of real estate has risen to a level that makes the decision of many people between renting or buying a property even easier.
The acquisition of a property is a desire of many. The justification for acquisition is the most varied.
Just yesterday I was talking to my friend Leonardo and he asked me: “And you, aren’t you going to buy an apartment and renovate it or are you going to keep renting?”. I replied that I would continue with the rent, as I would rather earn money in the financial market with the value of the property, as it yields more.
He, who also works in the financial market, replied: “I believe. But building a house the way you want to live has its benefits…”
I have received this argument from several people. I have no way of counter-arguing this justification. So then I asked about your baby.
In fact, this is not a plausible justification. If you want to renovate a property, almost all homeowners would be willing to negotiate a cost-sharing. Make a 10-year contract putting a refund clause in case the landlord asks for the property back.
Make no mistake, your renovation after 10 years will be of little relevance to the value of the property.
Many people think that rent is money thrown away. The problem with this argument is that the comparison is not being made properly. And that’s what I’m going to talk about in connection with Tiegh’s article.
According to Tiegh, the minimum rates of banks to finance the acquisition of real estate have risen and are between 8% and 10% per annum + TR. What Tiegh didn’t consider is that in addition to this rate, there are still other costs such as insurance that will make the rate rise by at least another 1% per year. As the TR should become around 1%, this means that the effective cost is currently between 10% and 12% per year.
Imagine that you are interested in a property, whose value is R$ 500 thousand.
You have two alternatives, ask someone to buy this property and pay a value of R$ 1,942.00 for the rent or ask for the money to a bank and pay for the “rent” of this money the amount of R$ 3,450.00 per month.
That’s the decision you need to evaluate. Either you “rent” money from someone who buys the property for you, or you “rent” money from the bank and you buy the property.
Note that in both cases you are renting money from a third party. However, in the second alternative, you will pay double the value of the property throughout the entire contract.
Therefore, consider carefully when deciding to purchase a property financed at current mortgage rates. Renting can be an even better financial decision.
Michael Viriato is an investment advisor and founding partner of Investor’s House
(Follow and like De Grão em Grão on social networks. Instagram.)
If you have questions or suggestions for topics that you would like to see commented on here, please feel free to send them by email.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
