'They say buy, don't rent, but my portfolio says otherwise. Am I missing out?'

Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca, 

My partner and I have been living in Malta for ten years. It might sound like an unpopular opinion in the current climate, but we have intentionally chosen to rent our home rather than buy. Here is why:

1. By capping our rent at a peak of 19% of our primary income, we have been able to consistently invest between 30% and 35% of our earnings (with a goal of reaching 40%). We maintain a geographically diversified 60/30/10 portfolio which has yielded excellent returns over the years.

2. We already own two properties abroad. Our long-term plan is to retire in one and rent out the other as a short-let investment, as both are located in prime summer holiday destinations. The goal is to use our investment returns and rental income to fund a comfortable lifestyle.

3. While we are genuinely happy living in Malta and enjoy the lifestyle the island offers, we choose not to close the door on future opportunities elsewhere and with the rise of remote work, we might even be able to fast-track our retirement plans. In our case, "less is more" and we’ve always viewed local property ownership as a potential obstacle, both emotionally and logistically, to the flexibility we prize.

However, as a father, I often find myself reflecting on Socrates' wisdom: "The more I learn, the more I realise how little I know." Despite my continuous study of personal finance, I am not immune to the social bias that "buying is good, renting is bad." In a bullish market like Malta's, the FOMO can be real. Switching to a mortgage now would disrupt our compounding machine.

The monthly loan repayments would exceed our current rent, not to mention the hidden maintenance costs and the significant capital we would have to liquidate for a deposit.

I would love to hear your expert opinion on this. Are we truly "missing the boat" on the local real estate, or is our path of liquid, global diversification a more robust strategy for a modern family’s wealth?

Doubting Investor

Luca responds: 

I admire your discipline. The fact that this plan is working - not just in theory, but through actual application, with real numbers that make sense - is the best proof you could ever have.

You said you treasure flexibility above all else, and that in itself is a conscious choice that has led you to make decisions aligned with your financial goals. Remember, everyone has different financial goals, and those goals define a person's lifestyle and life priorities. There is no universal "correct" path.

That said, I won't deny that FOMO is powerful. So powerful that even when your choices are working, with actual proof behind them, it doesn't stop the doubt creeping in… especially when watching a booming asset you're not part of (at least in Malta).

In extreme cases, this kind of doubt has led people to abandon sound strategies entirely, with devastating results. Tulip Mania in the 1630s saw people mortgage their homes to buy flower bulbs, convinced the boom would never end. The 1929 crash was fuelled by ordinary investors borrowing heavily to chase a stock market that "could only go up." The dot-com bubble saw fortunes poured into companies with no foundation, simply because everyone feared missing the next big thing. Property is a fundamentally more stable asset than any of these - but the psychology of FOMO operates the same way regardless of what the asset is.

Without taking anything away from Malta's property boom, which remains real and ongoing, you mentioned that joining this market would require taking on a loan. My question to you is: are you prepared to change your lifestyle to make that happen? And do you believe that change would make you happier?

Because this isn't just a question of smart financial choices. It's a question of what makes us happy as people — and this is where I differ from many financial educators who focus purely on optimised finances. Smart financial decisions mean little if they don't contribute to your personal happiness, which is, in itself, a form of wealth.

So instead of worrying about missing the boat, I'd say this: if you try too hard to catch an idealistic boat, you risk capsizing a well-built system you already own.

I hope this helps.

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.