Diversifying Your Wealth: Property plus Financial Investments

Diversification: moving beyond the simple buy or rent question

Between 2012 and 2022, French property prices rose by around 25 %, while the CAC 40 with reinvested dividends more than doubled. Focusing only on real estate or only on financial markets exposes you to significant risks. The key issue is no longer just “buy or rent”, but how to diversify your wealth between property and financial assets.

The buy-or-rent.net simulator (acheter-ou-louer.com in French) lets you compare different scenarios using a crucial parameter: the investment rate (taux de placement), i.e. the yearly return on your savings if you do not put everything into property. Understanding and using this investment rate correctly is essential for any portfolio diversification strategy.

Why combining property and financial investments matters

1. Property: tangible but highly concentrated

Owning your home has clear advantages: stability, no rent, mortgage leverage. But a home purchase often accounts for 70–90 % of household wealth, which creates several risks:

• Local risk: if your city declines (jobs lost, less attractiveness), your net worth falls with it.
• Liquidity risk: selling can take 6–12 months or more.
• Hidden cost risk: property tax, maintenance, charges, and annual increases in all these items.

As a rough benchmark for a 300,000 € existing property:

• Notary fees: 7–8 %, i.e. 21,000–24,000 €.
• Agency fees: 3–5 %, i.e. 9,000–15,000 €.
• Renovation works (DPE/energy rating, updating, cosmetics): often 10,000–30,000 € depending on condition.

These one-off costs are substantial compared with a diversified ETF portfolio, where entry fees are typically 0–1 %.

2. Financial investments: return potential but volatility

Financial savings (cash accounts, life insurance, ETFs, index funds, bonds, etc.) offer:

• High liquidity (you can sell relatively quickly).
• Geographic and sector diversification.
• A potential investment rate that can exceed the mortgage rate.

Current rough ranges (early 2026, non‑guaranteed):

• Regulated savings / cash accounts: around 3 % gross in France.
• Life insurance euro funds: 2–3 % gross.
• Global equity ETFs (long term, not guaranteed): historically 6–8 %/year on average, with strong volatility.

In the buy or rent simulator, the investment rate models these potential returns so you can compare buying a home versus renting and investing.

The investment rate: core to any "buy or rent + invest" strategy

1. What the investment rate means in the simulator

The investment rate (taux de placement) is the average annual return you expect from your financial portfolio (after fees, before tax) if you decide to:

• Stay a tenant and invest your available cash (deposit, difference between rent and mortgage payment, etc.).
• Or buy, but keep part of your savings invested instead of using it all as down payment.

On buy-or-rent.net you can test, for example:

• A conservative investment rate: 2 % (cash, short‑term bonds, euro funds).
• A balanced rate: 4 % (mix of euro funds and defensive ETFs).
• A dynamic rate: 6 % (equity‑heavy ETF portfolio).

2. Numerical example: rent & invest vs buy now

Assume a household with 60,000 € in savings, hesitating between buy or rent:

• Target property price: 300,000 € (existing home).
• Mortgage: 25 years at 3.6 % interest, borrower insurance 0.3 %.
• Current rent: 1,100 €/month, indexed each year to inflation (assume 2 % annual rent increase).

Scenario A: buy with a 60,000 € down payment

• Notary fees (8 %): 24,000 €.
• Agency fees (4 %): 12,000 € (often embedded in the asking price, but they are real).
• With 60,000 € down, you roughly finance the remaining 228,000 €, depending on how fees are handled.

The monthly mortgage payment (principal + interest) will be around 1,150–1,250 €/month (ballpark), to which you must add:

• Property tax: say 1,200 €/year (100 €/month), with annual reassessment risk.
• Maintenance / building charges: for example 150 €/month on average.

Total monthly cost: around 1,400–1,500 €/month, before factoring in inflation or property tax revaluation.

Scenario B: keep renting and invest the 60,000 €

• Rent: 1,100 €/month (rising 2 % per year).
• Invested capital: 60,000 € at your chosen investment rate.

If the investment rate is 4 %/year, compounded over 25 years:

Future value ≈ 60,000 × (1.04^25) ≈ 60,000 × 2.66 ≈ 159,600 €.

With an investment rate of 6 %/year:

Future value ≈ 60,000 × (1.06^25) ≈ 60,000 × 4.29 ≈ 257,400 €.

The buy or rent simulator then compares this financial wealth with your home equity (sale value – remaining mortgage – selling costs) after 20–25 years. Depending on the investment rate, the “winner” can flip completely.

Mixing property and investments: practical diversification ideas

1. Example 1: smaller down payment, larger portfolio

Take the same household with 60,000 € in cash.

Strategy 1: maximum down payment

• Down payment: 60,000 €.
• Mortgage: roughly 240,000 € (price + fees; details depend on structure).
• Financial portfolio: 0 €.

Advantage: lower monthly payment. Drawback: nearly all wealth is locked in the main residence.

Strategy 2: moderate down payment + investments

• Down payment: 30,000 €.
• Mortgage: roughly 270,000 €.
• Financial portfolio kept: 30,000 € invested at a 4 % investment rate.

The mortgage payment is higher, but:

• 30,000 € remains invested and can grow over 20–25 years.
• Your wealth is diversified: property + financial assets.

Over 20 years at 4 %/year, 30,000 € becomes:

30,000 × (1.04^20) ≈ 30,000 × 2.19 ≈ 65,700 €.

On buy-or-rent.net you can model both strategies by changing the down payment and investment rate, and see the impact on total net worth. The tool won’t tell you what to do, but it quantifies the trade‑offs.

2. Example 2: rent longer to invest more aggressively

Another approach is to rent a few extra years, invest heavily, then buy later.

• Monthly saving capacity: 500 €.
• Starting savings: 10,000 €.
• Assumed investment rate: 5 %/year.

You invest 10,000 € initially, plus 500 €/month for 5 years. Simplifying with annual compounding:

• The initial 10,000 € becomes ≈ 10,000 × (1.05^5) ≈ 12,763 €.
• The monthly 500 € payments represent 6,000 €/year, invested on average for 2.5 years: future value ≈ 30,000 × 1.13 ≈ 33,900 € (rough approximation).

After 5 years, total capital is about 12,763 + 33,900 ≈ 46,600 €. This can serve as a larger down payment later, while your rent kept your flexibility. With the buy or rent simulator you can check whether this delay improves or hurts long‑term net worth, depending on property price growth, inflation, and rent increases.

Key parameters to combine with the investment rate

1. Mortgage rate vs investment rate

When your expected investment rate is higher than your mortgage rate (3.6 % in our example), then, in pure math terms, it can make sense to:

• Avoid putting all your cash into the down payment.
• Borrow more.
• Leave part of your savings invested.

But this also increases risk (market volatility, no guaranteed returns). The buy or rent simulator helps you visualise these choices, but it is not personalised financial advice.

2. Annual inflation and purchasing power erosion

Annual inflation of 2–3 % erodes money’s purchasing power. It affects:

• The real value of your investments (a 3 % return with 3 % inflation ≈ 0 % real return).
• The real burden of your mortgage (good for borrowers if incomes rise too).

In the tool you can input annual inflation to check whether your investment rate really beats inflation and creates value in real terms.

3. Property tax and its yearly revaluation

French property tax can range from 450 € to more than 5,000 €/year depending on the city, often with annual revaluation. Over 20 years, if your property tax rises from 1,200 € to 1,800 €:

• That’s +600 €/year, or 50 €/month of extra cost.
• Money that could otherwise have been invested at your investment rate.

When you compare buy or rent outcomes, include these recurring costs: they reduce property’s net performance versus a financial portfolio.

Using the simulator to design your diversification strategy

1. Test multiple investment rate scenarios

For serious portfolio diversification, you should test at least three scenarios in the buy-or-rent.net / acheter-ou-louer.com simulator:

• Conservative: investment rate 2 %.
• Base case: investment rate 4 %.
• Dynamic: investment rate 6 %.

Then compare:

• Net wealth after 20–25 years if you buy now.
• Net wealth if you stay a tenant and invest the difference plus your savings.
• Variants with higher or lower down payment, or postponed purchase.

2. Accept that there is no single right answer

There is no universal answer to the buy or rent question. Everything depends on:

• Your time horizon (5, 10, 25 years).
• Your risk tolerance (how you handle market volatility).
• Your family and job situation (mobility, stability).
• Your tax situation and goals (retirement, inheritance, flexibility).

The simulator gives you quantitative orders of magnitude, but it is not personalised financial advice. The outputs should be treated as decision support, not as a recommendation.

Conclusion: property plus investments as a potential winning combo

Effective portfolio diversification means balancing:

• Real estate: stability, mortgage leverage, partial hedge against inflation, but significant entry costs (notary fees, agency fees), ongoing property tax, maintenance, and low liquidity.
• Financial investments: liquidity, global diversification, potentially higher investment rate than the mortgage rate, but with volatility and uncertainty.

Instead of looking for a definitive yes/no to “should I buy or rent?”, a more useful question is: what mix of property and financial assets, with what investment rate assumptions, best fits my situation and time horizon?

This article is for educational purposes only and does not constitute personalised financial advice. To explore your own diversification scenarios, including different investment rates and buy or rent strategies, use the simulator and compare numbers for yourself.

Simulate your situation on buy-or-rent.net