Buying vs Renting??

[chook77]

Hi, just wanted some people's opinion....
We have two investment properties and are currently renting a place ourselves. We would like to buy a house to live in as we hate renting!! We have a 80000 deposit. Do you think spending the 80000 on an owner occupied house is the wisest thing for us?
We are going through a few options....
1. Should we sell both houses and buy a house outright to live in and start out again, buying investment properties, or
2. Keep renting and use the 80000 on other investment properties, or
3. keep both properties and buy our own to live in??

Any advice or ideas would be much appreciated, thanks

 

[Propertunity]

1. Should we sell both houses and buy a house outright to live in and start out again, buying investment properties, or

Definitely NOT!

2. Keep renting and use the 80000 on other investment properties, or

Yes, this is the absolute best way to get ahead

3. keep both properties and buy our own to live in??

2nd best option - but one you may end up doing if you hate renting

At the end of the day, the way to get ahead is to live as cheaply as you can and invest to the max. It will always be cheaper to rent for yourself. BUT life is more than just investing and money - and life is a journey not a destination as the saying goes. You have to live a little on the way - so buy a PPOR - like 2. if you hate renting. BUT for goodness sake don't cash in your investments to consume it all on yourselves at this point in the game as point 1. above.

 

[RumpledElf]

It will always be cheaper to rent for yourself.

I beg to differ. Where I live it costs me $43pw to own and for an equivalent house I'd have to travel a bit and pay $250+ a week or just pretend one as good exists to rent locally, in which case it would be $100pw.

 

[Y33]

Depending on how many in the family what about an elevated house with a built in self contained 2 BR unit underneath. This allows you to rent out upstairs and live down stairs very cheaply. Not a bad situation if you can work it out the right way. I do this with one of my properties and have set it up so that the entrance to the unit is separate from the house and also has its own patio and garden. The block is large and I also made a separate parking area to store my cars when I'm not there which is most of the time.

 

[GoAnna!]

I would either

1) Sell both and buy a PPOR outright(assuming you can after cgt) and get straight back into ips. Do the numbers on a spreadsheet but I think that this would create the best cashflow assuming that you are recieving tax benefits. PPOR can be such a milstone and although this might feel like two steps backwards it might be the fastest way forward.

2) Keep both ips and buy a ppor and churn your expenses via borrowings to convert non tax deductible PPOR borrowings into tax deductible.

Make the best use of the PPOR status and either buy at the lowest end you can stand, pay off debt as fast as you can and then move upwards (avoiding cgt upon sale or use 100% offset account and redraw cash to buy next PPOR and retain first ppor as ip). You may also want to get a property that can be improved to recreate the eqity lost through resale of ips.

In amny ways this is a good market to buy in and you coudl take full advantage of this but this may also prove a challenge when selling..

Sometimes life is not about the best financial option but rather trying to satify your emotional and other needs in the financailly wiest way. Working against your emotional goals is not going to work for you long term.

Do you mind if I ask how old you are, whether you have kids etc?

 

[Propertunity]

I beg to differ. Where I live it costs me $43pw to own and for an equivalent house I'd have to travel a bit and pay $250+ a week or just pretend one as good exists to rent locally, in which case it would be $100pw.

Hi RE,
Yes I was waiting for this - I should have qualified the statement with - "except if you live in the desert"

But you know what I'm getting at. If you can buy for say $300K somewhere near civilization then the repayments would probably cost you $350 pw (at 6%) + rates, insurances etc but to rent the same place would be around $290 pw (assuming a 5% rental yield) or $346 pw with a 6% yield ............ actually that was an interesting execise for me to just do.

That $300K house used to cost $520 pw when IR's were closer to 9%. Methinks that we'll soon be seeing adverts with the line "Why rent when you can buy for the same money"....and so the cycle begins again.

 

[sparky23]

Or you could build a duplex and have the best of both worlds, rent one side out and live in the other - all depends on your lending capabilities and exisiting equity of course.

 

[sparky23]

Oops sorry I just checked out Tully and now that I see the prices and can see 3 bed houses from $215,000 wondering why you can't do both banks permitting!

Also I see lots of big blocks so you could buy one of the homes circa $215,000 on a big block to rent out and then build yourself a shiny new home on the same block. Such as:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

or:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

I would kill for floors like these plus I reckon you could put in a downstairs flat to rent out it looks quite large underneath:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Bloody hell I think I should be investing here the opportunities are endless look at this one:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

This could be the one it has 5 self contained flats so you could live in one the asking price is only $399,000 and current rental income $700 per week:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Sorry I got a bit carried away there, I got excited especially when I noticed there are only 9 rental properties available, it looks very pretty there too.

Good Luck!

 

[Liverpool St]

Hi, just wanted some people's opinion....
We have two investment properties and are currently renting a place ourselves. Any advice or ideas would be much appreciated, thanks

We rent and have 7 IP's. We will continue to rent and eventually we will either shift into one of the IP's........

LS

 

[chook77]

Hi everyone, thanks for the replies, you have all given us something to think about. Thanks Sparky23, for looking at tully for me, but we moved from there three months ago to Townsville, but sounds like there are some good buys there!
I will give more details of our situation and also what I found out today....
We are 31yrs old and have three kids, 3yrs, 2yrs and 3mths! My husband has just left the army after 14yrs and has joined the Police. So we are going from quite a comfortable salary to the bottom of the heap!
We were wanting to purchase in Cairns if it was for living in( as we are getting posted there) or probably Townsville for IP. Rang a mortagage broker today and told her our situation and she said we would only be given a 140000 loan because the starting Police wage is so low. She also said I should look into getting family payments fortnightly instead of at the end of financial year so I have an income too.
We are thinking we may have to keep renting until his wage gets a bit better in a couple of years.... Is there anyway around this, as we are good savers and think we could make the repayments on a house if purchased for about 350000.

 

[sparky23]

Silly me! I meant to say at the end of the post that perhaps you weren't looking at places in Tully, nevertheless if you do go for an ip it could still be a consideration plus its area you know very well!

Maybe Richard will be along shortly with some ideas about the finances!

 

[tubs]

I think buying a PPOR while keeping the IPs would be the best.

Its a personal choice because I'd rather my own place than be at the mercy of a landlord. You can do what you like with it, and its yours forever if you so choose.

It will cost more initially to buy, because the interest and expenses will be more than it would cost to rent but...

...over time, rents continue to increase and increase. However, interest rates are cyclical so there will come a point where your repayments on your PPOR will be less than it would have cost to rent.

 

[fokas]

Oops sorry I just checked out Tully and now that I see the prices and can see 3 bed houses from $215,000 wondering why you can't do both banks permitting!

Also I see lots of big blocks so you could buy one of the homes circa $215,000 on a big block to rent out and then build yourself a shiny new home on the same block. Such as:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

or:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

I would kill for floors like these plus I reckon you could put in a downstairs flat to rent out it looks quite large underneath:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Bloody hell I think I should be investing here the opportunities are endless look at this one:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

This could be the one it has 5 self contained flats so you could live in one the asking price is only $399,000 and current rental income $700 per week:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Sorry I got a bit carried away there, I got excited especially when I noticed there are only 9 rental properties available, it looks very pretty there too.

Good Luck!

Some of those certainly do look enticing!

 

[Property Meister]

Oops sorry I just checked out Tully and now that I see the prices and can see 3 bed houses from $215,000 wondering why you can't do both banks permitting!

Also I see lots of big blocks so you could buy one of the homes circa $215,000 on a big block to rent out and then build yourself a shiny new home on the same block. Such as:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

or:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

I would kill for floors like these plus I reckon you could put in a downstairs flat to rent out it looks quite large underneath:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Bloody hell I think I should be investing here the opportunities are endless look at this one:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

This could be the one it has 5 self contained flats so you could live in one the asking price is only $399,000 and current rental income $700 per week:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=26937362&s=qld&tm=1231128920

Sorry I got a bit carried away there, I got excited especially when I noticed there are only 9 rental properties available, it looks very pretty there too.

Good Luck!

Hi Sparky,

Just a quick Q, the properties you mentioned, all have great yields, are cheap etc. (I know nothing about the suburb) but I'd just like your opinion on why you think this is such a great area. just trying to apply your logic to a few suburbs I am looking at, as I know yours is a regional area (or outskirts, whatever the term you use without being offensive!!!)

 

[sparky23]

Hi property meister

I know nothing about this suburb I just did a quick search to gather some info as this was the suburb in chook77's address and I thought that is where they were looking to buy or invest. However having had a look the numbers they do seem to be quite attractive, I didn't get as far as looking at CG prospects particularly as there was the possibility that a property was required as a PPOR, neither did I do other research into the area but as chook77 has lived there they would no doubt have on the ground knowledge of the area.

Which areas are you considering for yourself?

 

[chook77]

Hi Propertymeister and Sparky23,
We lived in Tully for 2yrs as my hubby was posted there with the army. The industries that run the town is sugarcane and bananas. There are a heap of backpackers that stay there for months at a time and I have been told by a local that at any given time, there are 400 backpackers. These are the people that would most likely rent out a boarding house set up. The road works in the area also demand more rentals. Anywho I just thought I'd fill you in if you were interested in the area. Feel free to ask any questions, cheers

 

[troyhunt]

We would like to buy a house to live in as we hate renting!!

May I ask why you hate renting?

 

[RumpledElf]

Renting sucks in general.

You can get turfed out with very little notice, makes it quite stressful if you actually like a place and the end of lease is looming
Something breaks and it takes 6 months to get hold of the PM (where "get hold of" means they promise to send someone out 30 times and never do, but usually just don't return messages) and it never gets fixed and you have to live with it for all that time, which REALLY sucks if its something like a hot water tap that won't turn off properly and you have a 50L HWS and you get $400 electricity bills for a 1br unit you only live in 3 days a week.
You can't do anything even remotely significant to the house, even something as simple as getting custom fitted curtains - why bother? You'll not get to see them for very long.
No appreciation whatsoever from the PM for doing things like making the garden look really nice
Idiot landlords insist on selling their IPs and you spend weeks putting up with crowds of people stomping through the house with no notice and they guilt you into letting them through without any notice even though its not legal because well, they're there right now with 10 people with them
A lot of people treat renters as a second class citizen - where I live it is endemic, not only are renters assumed to be bogans but landlords are considered fools because all renters are bogans

I'm sure the OP could add a few, but I haven't had particularly good experiences renting. Almost entirely related to inept, moronic, non-communicating PMs who still have acne and zero people skills - the good rentals have always been managed direct by the landlord, usually old ethnic men who nip out and do their own property maintainence if something minor goes wrong.

 

[wylie]

..... - the good rentals have always been managed direct by the landlord, usually old ethnic men who nip out and do their own property maintainence if something minor goes wrong.

That is us (except the bit about ethnic - and I am still considering whether we are "old" - I think we are certainly getting close to old )

We do treat our tenants with respect (unless they "do us wrong" when we get very business like, but still with good manners).

To be honest, while many of our tenants have been renting while renovating, or have been young singles, many of our tenants over the past several years have been on way higher income than us, several have had IPs themselves, and we treat them like "people".

 

[troyhunt]

Renting sucks in general.

You can get turfed out with very little notice, makes it quite stressful if you actually like a place and the end of lease is looming
Something breaks and it takes 6 months to get hold of the PM (where "get hold of" means they promise to send someone out 30 times and never do, but usually just don't return messages) and it never gets fixed and you have to live with it for all that time, which REALLY sucks if its something like a hot water tap that won't turn off properly and you have a 50L HWS and you get $400 electricity bills for a 1br unit you only live in 3 days a week.
You can't do anything even remotely significant to the house, even something as simple as getting custom fitted curtains - why bother? You'll not get to see them for very long.
No appreciation whatsoever from the PM for doing things like making the garden look really nice
Idiot landlords insist on selling their IPs and you spend weeks putting up with crowds of people stomping through the house with no notice and they guilt you into letting them through without any notice even though its not legal because well, they're there right now with 10 people with them
A lot of people treat renters as a second class citizen - where I live it is endemic, not only are renters assumed to be bogans but landlords are considered fools because all renters are bogans

I'm sure the OP could add a few, but I haven't had particularly good experiences renting. Almost entirely related to inept, moronic, non-communicating PMs who still have acne and zero people skills - the good rentals have always been managed direct by the landlord, usually old ethnic men who nip out and do their own property maintainence if something minor goes wrong.

Is that all?

I'm sorry to hear you've had such unpleasant experiences. I think the worst I've experienced through 10 years of renting is the inconvenience of one landlord selling the place. It may be different in Outback SA, but I don't see any 2nd class citizen sort of discrimination in the areas I've rented. The years of savings I've made from renting over buying has allowed me to build a serious IP portfolio and live a far less financially constrained lifestyle than if I'd done otherwise. I wouldn't change that in order to gain flexibility over the curtain colour

Having said this, the parameters of where I live, what the rent is, what the cost of buying would be, the taxation benefits I've had and what I've done with the savings will differ by individual and location. All I would suggest is to put a price on the emotional cost (assuming there is one and it's not actually cheaper to buy) and make the call with full cognisance of all the financial facts. Those curtains may not be worth $20k a year...