Buying v’s Renting – Should I buy or rent a home?
The reality is there are pro’s and con’s for both and as you would expect, it depends on your personal circumstances and your strategy for wealth creation. The reality is more often than not it’s cheaper to rent where you want to live and invest elsewhere, so let’s take a closer look.
Gone are the days when the Australian dream to own your own home, toil to reduce your debt and strive to pay off the mortgage in record time is a desire of the masses. With communities becoming more internationally focused than ever before and with the influence of technology to bring the world into the palm of your hand, consumers have never been more spoilt with objective consideration.
So what is driving your decision? Long term growth, emotional attitude, locational or convenience? These are ultimately the driving factors for your very personal outcome so let’s frame it from a wealth creation perspective for the purposes of the discussion.
Potential advantages for buying;
- emotional stability
- personalising your space to suit your lifestyle needs and preferences
- capital growth on your investment
- long term savings by paying off your mortgage early
- available grants to off-set deposit stress
Possible Disadvantages of buying;
- Being an owner/occupier may mean a lack of flexibility as it is not so easy to ‘pack up and leave’ (e.g. to move closer to a better school) if you are heavily invested in a particular property
- overcapitalising on your home with “aesthetic” changes may make for a more comfortable home but can sometimes not be returned should you need to sell
Possible advantages of renting;
- flexibility to up and go or alternatively upgrade/downgrade depending on your changing circumstances
- have you ever heard it be said that it can be cheaper to rent where you want to live than own? Often this is true for inner CBD locations
- The fact that renting is cheaper could also lead to more disposable income being available
- rates, maintenance and where applicable owners corporation fee’s are not the concern of renters
Possible disadvantages of renting;
- whilst renting can give the tenant the flexibility to move conversely they can find themselves being asked to move when it doesn’t suit them
- the intrusion of inspections, valuations and the sense of being beholden to someone else’s needs can leave tenants feeling unsettled
- changes are not permitted without approval ie cable installations, picture hooks, improvements
To Buy or not to Buy, that is the question….
To buy positions you with a forced savings that ultimately provides you with a growth on your investment over an extended period of time unlike renting which can be less money spent but no return on your spending over the same course of time.
So on this basis it makes sense to buy. However, what about the idea of Renting AND Buying.
As suggested earlier more and more today we see people renting where they want to live which is generally inner city locations and buying in outer suburban areas. This flexibility gives investors the ability to enjoy the lifestyle they want to live whilst not burning their cash on rent. With money invested in sometimes multiple investment properties in the middle to outer ring suburbs, renters are able to have the best of both worlds.
Long term this can give investors the leg up to consolidate their investments down the track and purchase a single residence in the area that they have been renting in.
Remember there are more expenses to owning your own home as opposed to renting so if you can free up some disposable income to invest for less it will ultimately put you where you want to be which is owning your own home in a more desirable location than you could previously afford.
The cost to own is;
- Interest on mortgage repayment
- Ongoing Maintenance
- Regular one -off capital expenditure
The cost to rent is;
So ultimately like all investment decisions it comes down to your personal circumstances and preferences. Buying is always a good option, renting has it’s own flexibilities but if your starting from behind the post a little, a combination of the two can let you start living the lifestyle you want for yourself sooner rather than later.
As always the most important thing is to make sure you do your homework and make the best decision for your own life.