Opinion – Grain in Grain: Why do I live on rent and am I happy with this personal and financial decision?

Whenever I discuss the issue of renting and buying, I get both praise and criticism. Some get very angry with my opinion, but this is the place for brainstorming. I clarify below some points of view that I have on the subject and that can reassure you if you have a property or if you don’t.

First, I am not against buying a property, nor do I carry the banner that property is not a good investment.

On the contrary. Property is an investment. However, the vast majority do it wrong. So it ends up becoming a bad deal.

Every investment must be evaluated with a balance in which there is a return on one side and the risks on the other. Property is indeed a risky investment.

Anyone who says that real estate is risk-free doesn’t understand the risk they took or doesn’t know what they’re doing. Saying that a property is risk-free is similar to a colleague who was starting to invest in stocks and said to me: what is the risk? I just won.

Obviously, the simple fact of just having won does not eliminate the risk of the asset.
If real estate had no risk, banks would not limit the maximum to be financed to 80% or 90% of the value. After all, if it is a 10-year loan and the property always goes up, why do banks only finance a maximum of 90% of the value?

Risk comes from uncertainty about future returns. Who can say precisely how much you will earn from investing in your property?

But, that doesn’t mean you shouldn’t evaluate the prospects of the property you want or own.

This is the second crucial point. Property is an investment and you need to evaluate the return perspective and the risks involved in the one to be acquired and even in what you have today.

However, if you don’t know how to assess the return and risk outlook, you need to at least do the math below.

As I have already written here in this column (see here), it is necessary to calculate whether it is better to rent or buy. I believe that more than 90% of people who own a property have never done the calculation, either before or after having acquired it.

This account is the third key point I would like to share. She’s the main reason I don’t buy and prefer to rent.

I have lived since 1999 near the Avenida Paulista region. I’ve owned a property and lived in it for 3 years. I bought it with my FGTS, sold it at a profit and put it back into the financial market.

The purchase was justified more to withdraw the money from the FGTS than in relation to other applications, it yielded little as it currently does.

But those who think that by not buying just need to pay the rent money are wrong. I’ve always saved more than the rent to have enough to buy my property. I will explain this tomorrow.

So, today I have the value of the property I live in invested in real estate funds. The monthly dividends are more than double the rental value of the property I live in.

So, with the monthly dividends, I pay the rent and still save money for my retirement.

But they could be applied in CDBs at IPCA+6% per year currently and would already be an excellent alternative.

This is the fourth important factor to highlight. If there is an alternative that gives you more return with similar or lower risk, you need to consider both alternatives.

Perhaps having possession is something more relevant to you. Therefore, the financial part would be secondary. To me, possession means nothing. I place greater weight on financial return and flexibility.

Before they criticize me for my profession. Yes, I have been working in the financial market for almost 25 years. Therefore, I do the math and evaluate the return and risk of all my investments, including real estate. In my case and in many that I see, it is better to rent. But, of course, there are situations where buying may be better.

I emphasize that if real estate was always the best investment and without risk, the bank would not finance the purchase for you. They would buy and rent for you to live in. However, in the risk-return balance, they prefer to earn interest on the financing.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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