Renting vs Buying Property while living abroad: Which is best for Financial Independence?

By Emily Roberts

For the Financial Independence Hub

Financial independence means different things to different people. It has an impact on your life planning and whether renting is preferred over buying property. If you’re planning to go abroad and live elsewhere like continental Europe, Eastern Europe, or south-east Asia, then plans may be different again.

In this article, we look at whether renting is better than buying when you’re financially independent (or working towards it).

What Does Financial Independence mean to You?

Financial independence is possible at various levels. People refer to it by different names including Barista FIRE, CoastFIRE, FI, and others.

One approach is to reach a modest level of financial independence to provide a minimal income from investments, and to let them grow from their current level for a decade or longer while working an easier, low-paid job. Another approach is to wait until you have enough and then retire, but with the occasional freelance or consulting gig too.

Financial independence doesn’t necessarily mean retirement, which generally speaking refers to stopping working as a primary source of income. Different strokes for different folks.

Advantages of Renting

When still working, renting comes out of your paycheck and reduces what you can invest for future financial independence. Some people decide to live and work abroad to reduce their living expenses, to allow them to save faster.

Renting in the US

Americans can rent places Stateside but have to be careful of the long-term leases and associated fees along with any restrictions on tenants.

Depending on the city, renting has become quite expensive, causing some to look abroad.

Renting Abroad

Renting abroad can save you considerable money compared to back home.

For instance, PropertyGuru provides rooms for rent in Kuching, Malaysia. They have rooms for under $100 a month, studios for greater privacy, and larger multi-bedroom apartments in newly constructed buildings too. Their team can locate suitable rental accommodation close to major facilities and transport links, so whether you’re working there, planning to retire, or just on vacation, they can find something suitable.

Advantages of Buying

Purchasing real estate is something that appeals to many people. When they don’t like the idea of not owning where they live, then they lean far more towards buying.

Owning property domestically is possible when the prices are affordable. Unfortunately, cities with the most jobs typically also enjoy robust real estate markets with high prices to match. Sinking most of the next egg into a home makes retirement difficult. The ongoing ownership costs aren’t cheap either.

Another option is to purchase a home abroad if you’re planning to live there in the future (or already do). It depends on the county whether that’s possible. In Malaysia, it’s possible to do it. The local authorities must approve such a purchase ahead of time.

For other international destinations, it’s only sometimes possible, and in some countries, it’s prohibited to prevent the property markets from rising too much.

Does still having a Job affect your decision?

When ex-pat jobs aren’t easy to come by, then renting is much more flexible. That way, you can take a job in another major city without difficulty. If you have already purchased a home there, then it’ll either need renting out or selling and you buying elsewhere.

Renting, either at home or abroad, is going to provide greater flexibility. If you’re working while already financially independent and letting your investments grow some more, then your location is static while working but it won’t be forever. Having the freedom of movement will be optimal.

Which is best for Financial Independence?

When financially independent and not needing to worry about finding a job, then it’s possible to put down roots. Doing so abroad is usually less expensive.

Attention must be paid to visas. You may have been issued a work-related visa and a working permit before. As a retiree, that will no longer be the case. Malaysia, for instance, has the My Second Home program for people who wish to retire there. Other countries often have something similar, but the requirements will be different for each country.

The international requirements for retirement visas can and do change, sometimes without warning. You could purchase a foreign home and then need to leave the country years later when the rules change. For retirees, renting can avoid putting money into the country and having to leave it behind or attempt to sell the home in your absence.

Staying flexible for the best of both worlds

Having a place of your own makes staying in a foreign country far more pleasant. After all, hotel rooms get old real fast. A place that’s yours provides consistency, even when everything else is fairly new to you.

The same feeling that it’s yours can be found with a rental or a home purchase. If you’re wanting to stay flexible, then marrying yourself to a single city doesn’t make sense. It’s better to rent somewhere that appeals to you but to still keep your options open in case the situation changes.

Being financially independent abroad as an ex-pat makes your money last longer. If your nest egg is smaller, it may allow you to retire versus being back home and still working to have enough. The affordable property markets in a country like Malaysia provide both renting and purchasing opportunities for people close to FI or aiming to become financially independent in the next few years.

Emily Roberts is a young writer who is passionate about literature and blog writing.