Is it better to rent or buy.

 Renting vs. Buying: Deciphering the Dilemma

Introduction:

The age-old debate of whether it’s better to rent or buy a home is one that stirs the minds of many prospective homeowners. Both options come with their own set of advantages and drawbacks, making the decision a complex and highly personal one. In this article, we will delve into the factors that should influence this choice, helping individuals navigate the intricate decision-making process.

Financial Considerations:

1. Upfront Costs:

   • Renting: Generally involves lower initial costs, requiring a security deposit and sometimes the first month’s rent.
   • Buying: Requires a substantial upfront investment, including a down payment, closing costs, and potential additional expenses.

2. Monthly Expenses:

   • Renting: Stable monthly payments, with the landlord typically responsible for maintenance and repairs.
   • Buying: Mortgage payments may fluctuate, and homeowners are responsible for maintenance, property taxes, and insurance.

3. Building Equity:

   • Renting: Payments contribute to the landlord’s equity, offering no return on investment for the tenant.
   • Buying: Builds equity over time, providing potential financial gains when selling.

Lifestyle and Flexibility:

1. Mobility:

   • Renting: Offers flexibility, allowing for easier relocation without the burden of selling property.
   • Buying: Ties homeowners down to a specific location, potentially limiting career or lifestyle changes.

2. Customization:

   • Renting: Limited ability to customize or renovate the living space, as it remains the landlord’s property.
   • Buying: Provides the freedom to personalize the home, making it uniquely yours.

3. Stability:

   • Renting: Offers a sense of short-term stability with the option to move as needed.
   • Buying: Implies a long-term commitment, offering stability and a sense of belonging.

Investment Perspective:

1. Appreciation:

   • Renting: Misses out on potential property appreciation as any increase benefits the landlord.
   • Buying: Allows homeowners to benefit from property appreciation, potentially yielding financial gains.

2. Real Estate Market:

   • Renting: Shields individuals from market fluctuations, as they are not directly impacted by property value changes.
   • Buying: Involves exposure to market shifts, with potential for both gains and losses.

3. Return on Investment:

   • Yes, sometimes renting while investing is a much better financial arrangement than owning your own home. Don’t rush off and start leasing your house by any means- there are many reasons why you might AND might not use this strategy. Talk to us first!

Emotional Factors:

1. Sense of Ownership:

   • Renting: Lacks the emotional satisfaction of homeownership, as the property is not truly yours.
   • Buying: Offers a sense of pride and ownership, fostering a stronger connection to the property.

2. Responsibility:

   • Renting: Requires less responsibility for maintenance and repairs.
   • Buying: Involves the responsibility of home maintenance, which can be both rewarding and challenging

What are some other factros for Renting v Buying

So, when is it better to rent than to be a homeowner? Well, it can be:

1. When you regularly change work locations

With the enormous costs of selling and relocating, stamp duty, and other expenses associated with selling a home every time you move, renting while investing is usually a great option. It allows you to jump into the property market for the longer term and gives you time to gain capital and rental growth instead of losing money every time you sell.

You can also accumulate several investment properties over a shorter timeframe, adding to your financial stability. When you purchase your home, you will have a few properties to either pay for it or help fund it.

This type of investing requires a particular finance structure, so please avoid going directly to your lender for this approach; speak to us First.

 

2. When you are young and single

With career changes more acceptable for younger Australians, there is no guarantee they will be in the same job, industry, or state or country in their first 10 to 15 years of employment. So why bother with the ins and outs of homeownership?

Please take advantage of those high tax breaks and get an investment property as the one constant in your life. While our career progresses, so does your net worth and potential financial security. You won’t be the one still working when you 70!

3. When you are old and single, you know what I mean.

Life has crept up on you quickly, and you think it’s too late? You would be surprised how little creative thinking and finance structure can get you into the property market and catch up on lost time. It is harder now since the Royal Commission and Responsible Lending have made it challenging to get a mortgage after age 50; however, there are some workarounds.

There are some ways we help our mature clients transition into the property market at a later stage of life.

Many lenders now look at an aging workforce and accommodate these needs with particular investment lending strategies. Lenders will now add specific requirements for shorter loan terms or provisions to review or repay if employment ceases. Be sure to ask us when you call.

4. When you recently separated. 

There is nothing more challenging than starting again. Yet many of our property investors are single parents who work with us to determine the best way forward financially. If your kids are getting older and going to leave home in a few years, it sometimes makes sense to rent that larger family home and purchase an apartment or townhouse now as your future home. One benefit may be that buying the right property will also decrease your taxable income.

5. When you are approaching retirement and want to purchase your future downsized property Now. 

Like old and single, many of our investors are in the 55+ age group when they purchase their first investment property. We can do a lot for you with double the income, inheritance, and super.

6. If you either can’t afford or can’t find your dream home

Delay gratification is not something our young ones are accustomed to or could even contemplate. But for switched-on singles and couples, renting now, investing now, and buying your dream home later back be key to that mansion you dreamed of. Once again, the change of rules and responsible lending has some impact on this, but there can be workarounds.

7. How do we know this? We’ve done this for our clients.

Only a few (because most don’t realize they can), but our now higher net worth clients have created their wealth through renting while young, investing early, then selling some, and keeping some investment properties later. This has allowed them to purchase a dream home valued at double what they could have imagined. Purely a dream for 92% of the population and a reality for a few. Which one do you want to be?

Conclusion: