Buy vs Rent?

W

WebBoard

Guest
From: James C


Hi all,

I really enjoy reading the posts on the forum and find them very useful, thank you.

My wife & I currently have 2 IP's in Sydney both apartments fetching just over 6% gross return and solid capital growth. We have paid off some of the principal of one of the IP's (contrary to most popular advice) and now have total euity of approx. $270K.

My question to the forum is what are your opinions on the fact that we currently do not own a home (we rent). I feel like I'm at the crossroads. Do I use our existing equity & income to service additional loans for another 1 or 2 investment properties OR purchase a property to live in? We have no problems in renting as we both work long hours & don't have time to spend maintaining gardens etc. So the context of my question is from a financial point of view as oppossed to an emoitional one. Thank you.

regards
James
 
Last edited by a moderator:
Reply: 1
From: Les .



G'day James,

Check the Property Investor Archive, click on Bottom, and read the very first entry (right at the bottom of the list).

It was one of my earliest posts, but I still feel pretty much the same way today.

From your comments, it doesn't sound like you're too stressed by renting - so make hay while the sun shines .....

There are SO MANY benefits in buying rentals, and renting yourself, that I would still say "Keep renting" And, since you said you were looking for financial answers, not emotional ones, the archived post might go some way to answering your questions.

It sounds like you have a very healthy LVR there - certainly worth considering putting some of your equity to work, IMHO.

And, (forgive me for a bit of nostalgia here ;^) remember, "We pay a huge premium for wanting to own our own home" ....

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
Last edited by a moderator:
Reply: 2
From: Nigel W


James

I think you've really answered your own question. If emotion is not part of the equation I'd be surprised if the numbers add up to make buying your home the better option.

Like you, it suits me much better to rent in the area I want to live (for work/lifestyle reasons) but invest in the types of properties and areas that I think have the best combo of growth plus rental yield. Not surprisingly, the two don't coincide in my case. There's no way I'd buy the type of property that I demand to rent (way overpriced, rental yield too low and modern [so very limited opportunity to value add for accelerated cap growth!]).

The trick with home ownership is that there's nobody else helping pay those property expenses like rates, body corp and loan interest etc and there's no tax breaks to help ease the burden even further. If you're both working long hours you may be in a high income bracket to take best advantage of the tax benefits investment properties can offer [now don't everyone sledge me for advocating wild -ve gearing!!! I'm not! Just pointing out that tax benefits are there and should factor into the overall picture!].

Unless your P&I loan repayments are significantly lower than your rent and your home is in a very good capital growth area I'd keep renting.

I think there's some calculators for rent vs buy on a number of mortgage broker and bank websites.

Good luck
N.
 
Last edited by a moderator:
Reply: 2.1
From: Les .



G'day Nigel et al,

You said "I think there's some calculators for rent vs buy on a number of mortgage broker and bank websites."

Can you point me to some? I only ever stumbled over one of these, and WOW - was it ever skewed toward home ownership (read as "take up a mortgage with us").

I put some OUTLANDISH figures in it (Rent at half the norm, and mortgage Interest Rates double - around 12%). And the winner was - Home Ownership.

After giving this result some thought, I wanted to go back to it to test some other ideas .... and it was gone !!!

I guess it comes back to Caveat Emptor - don't just "buy" what these calculators tell you without checking they are telling the WHOLE truth.

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.1.1
From: Donna Larcos


You don't mention what your other
circumstances are i.e. married, children,
retiring etc. I think renting is fine if there is
just one or two of you and you can get a
dream run and rent a property for years.
On the other hand you could, like some
friends of ours in the 1970s find yourself
moving five times in three years. (I know
because I helped them move their **!#
wardrobe and a large collection of 1960s
cravats each time.) Then you have to
consider whether you want to uproot
children from friends and neighbours in
the street etc etc. You can still use equity
in your home for more properties and if
you are worried about the whole tax
deductibility thing talk to Steve Navra.

Just my two pesos worth.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.1.1.1
From: James C


Thank you all for your comments,

I guess your right I have answered my own question and will be better off to keep renting until other factors such as starting a family change our situation.

I must say that renting in an area that we cant afford to buy in really does seem to satisfy a lot of needs if you can just get over the fact that "It's not your home" & at the moment "I can live with that" (pun intended ).

I guess its time to seek out anther IP.

thanks again for your comments.

kind regards

James
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1
From: James C


Thanks Les,

I have read through the archives & posts that you mentioned. Those comments all make sense. I guess sometimes when your on a path which isn't considered mainstream it just gives you reassurance to have confirmation from others.

kind regards

James
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.1.2
From: James C


Hi Les,

what is IMHO that you mentioned earlier?

regards

James
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.2
From: James C


Hi Nigel,

Thanks for your comments, sounds like we are like minded on this subject.

best of luck

regards

James
 
Last edited by a moderator:
Reply: 2.1.3
From: Nigel W


Les

There's one on the AMP web site. I've seen others but just can't remember where...maybe on some of the mortgage broker websites?

If you do a search engine search eg webwombat, yahoo, google etc for "financial calculators" something should turn up.

You're probably right that they are a bit skewed!

I vaguely recall a quote from the investor club guy (his name escapes me) saying that it was something like 3 times harder to pay off your own home than to pay off investment property loan (altho why you'd want to pay down and investment loan is beyond me)

(ps. no I don't endorse Investor Club! i just wish I'd thought of it first!)

Cheers
N.
 
Last edited by a moderator:
Reply: 2.1.2.1
From: Robert Forward


Hi James.

IMHO stands for "In My Honest Opinion".

Anyway here is a link to a Rent V's Buy calculator at the AMP website.

http://amp.com.au/au/ampweb.nsf/Content/C+Calculators

Actually this link goes to about 20 different types of calculators. I think AMP has the best site for these things.

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.2.1
From: The Wife


IMHO = In My Humble Opinion :eek:)

TW
~Life is a daring adventure, or nothing at all~
 
Last edited by a moderator:
Reply: 2.2.1.1
From: Anony Mouse


The guy that I've met with the largest property portfolio, lived in a motel room all his life.
No,he was not married, so couldn't be bothered with housework drudgery.
He is now retired to the U.K. and yes lives in a hotel room.
Bit of an eccentric genius.

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
Last edited by a moderator:
Reply: 2.2.1.1.1
From: Michael G


Hi,

Anony Mouse, with such an opporunity to meet someone like that, did you ask how they did it?

Michael G.
 
Last edited by a moderator:
Reply: 2.2.1.1.2
From: Yuch .


Living in a hotel room all his life????? Where is the quality of life then???

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
Last edited by a moderator:

Sim

Administrator
Reply: 2.2.1.1.2.1
From: Sim' Hampel


Yuch,

You don't get out enough ;-)

Try spending a couple of days at the Sheraton Towers, Southgate, Melbourne. Make sure you go down for the buffet breakfast too.

In hotels you leave your washing in a bag one morning, and when you get home in the afternoon it is back in your room, cleaned, pressed and hung up in your wardrobe.

mmm... room service.

mmm... never having to clean your bathroom.

I've stayed in many serviced apartments too, where they have a kitchen or kitchenette as well... so you can still cook up a storm for that special someone.

Some hotel rooms/serviced apartments I've stayed in are way larger and better appointed than my 2BR unit. And they are almost always in a better location !

mmm... heated swimming pools.

mmm... concierge service.

Given that I intend to have a family one day, living in a hotel room is not going to work terribly well. But until then, if I could afford to do so, living in a decent sized hotel room with my wife would work quite well for me.

And I am talking from experience. I spend roughly 25% of my time (sometimes more) living out of a hotel room. There are some that would drive me insane. There are others that I would quite happily live in long term.

 
Last edited:
Reply: 2.2.1.1.2.1.1
From: Yuch .


get out from my room to a hotel room? ;)
no housekeeping stuff sounds great as long as it cost me nothin'!!

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
Last edited by a moderator:
Reply: 2.2.1.1.2.1.2
From: Mark Laszczuk


First I'll say that I know that this is not for everyone, but if it works for you, you should consider it. When the lease runs out on the rental my partner and I are in now, we plan to go and live at her mum's. We'll be saving (assuming we continued to pay what we are now) $11,440. That's a lot of dough! Money that can be put towards IPs. So for those that are able to do it, think seriously about doing so 'cause the benefits are there if you can put up with the olds.

Mark
'No hat, some cattle'
 
Last edited by a moderator:

Sim

Administrator
Reply: 2.2.1.1.2.1.1.1
From: Sim' Hampel


Ahh... you see that's the trick Yuch... it costs and costs a lot to have a nice hotel room in a good location that you would actually enjoy living in.

This would be for when you are so wealthy that you can afford to do it. Until then I'm afraid you're stuck doing your own housework.

 
Last edited:
Top