Does anyone rent by choice?

DH and I are moving back to the burbs soon to be closer to my mum now that we have a bub. We will be renting out our PPR in the Eastern Suburbs (with no intention of moving back in) and moving into one of our IPs out west for 4-6 months to fix it up a bit and then put it back on the rental market at a higher rent.

We are undecided whether to rent or buy a PPR. Does anyone here rent on a long term basis so they can buy more IPs or just to increase their cashflow? Does it end up cheaper in the long term to rent than to buy? We will probably move to Quakers Hill/Stanhope Gardens area or another new estate out that way.
 
Yep. I'm a long term renter.
Allows me to maintain all my debt as tax deductable, gives me huge tax advantages over ownership, flexibility to move around if I want to try living in different places (eg. ocean view one year, inner city the next).
I also plan to travel a lot in a years time, so renting suits my lifestyle and enhances my ability to grow my portfolio.
 
I have a number of properties and I rent.
It allows me to live in areas that I currently cannot afford to live in.
My current plans are a bit up in the air as to how long I am staying in
this area so renting works for me.

It doesn't prevent me from still buying thou.
 
We did for many years. I reckon it would be fun to rent a property thru the same PM that manages your IP :D

Cheers,

The Y-man
 
It certainly helps you understand what a tenant looks for in a rental.
I personally hate renting. But am looking at doing it later this year myself. As Rob says you can turn all your debt into good debt (tax deductable)!!!

Matt
 
I’m a long term renter, frequent investor and I wouldn’t have it any other way. There was a small period there while rates were so low that the cash flow argument for renting wasn’t as strong but the tables are turning around again.

How strong the rental argument is depends very much on the yields of the sort of place your looking to live in provides. Our landlord is getting about 4% gross based on current value. If you assume buying as a PPOR then factor 6% interest plus strata, plus rates, plus water, plus repairs. We’ve consciously elected to invest the spare cash for yields of 6%+ and have used years of renting to build up a very solid portfolio worth many times what a PPOR would be worth.

The other argument, and this is purely financial and does not consider the warm and fuzzies, is that living in a PPOR tends to prompt the resident to spend all sorts of money they wouldn’t normally do. Kitchen too old? Replace it. Don’t like the paint? Repaint it. Carpet a bit shaggy? Polished floor boards. Watching friends go down the traditional home ownership route, there seems to be a lot of expenses I don’t incur as a tenant and I’d be more ruthless about as a landlord.

Incidentally, I think the argument for renting increases dramatically with the value of the property. I see a lot of lower end stuff yielding 5% plus but as the dollars go up the comparable rent often drops. Case in point; I looked at this one the other day for $3.35M then found it for rent at $1.5k/w which is a 2.3% yield. Factor on paying three times that before you even get to the principal component if you buy as a PPOR and there are plenty of similar examples. For the record, our strategy of renting and investing is one of the key reasons we’re able to look at this type of property :)
 
Please pardon my ignorance but how do you claim your rent as a tax deduction?

I am in similar circumstance, my IP on the market now looking for a tennant and we plan to rent a unit close to my work at $300 a week. This will help us pay our IP off within 3 years max.

Cheers

Dan
 
Does it end up cheaper in the long term to rent than to buy?
This part of the equation would be different from person to person.

If you are on a good income and have a mortgage over a ppor and loans over IP's, you could concentrate on the ppor loan, pay it off asap, then keep on the investing path with more funds than you would have had if still renting.

Perhaps sit down and do some sums assuming paying off a ppor loan over 5,10,15 years etc and work out what suits your personal needs/wants.

Personally, I wouldn't like the potential uncertainty of renting, but that's just me and I respect the opinions of those that choose to rent over buying.

Regards
Marty
 
Please pardon my ignorance but how do you claim your rent as a tax deduction?

You don't. However the interest on IPs is deductible, whereas the interest on a PPOR mortgage isn't. Ditto for depreciation.

So by renting + owning an IP you get more tax deductions than if you lived in the house you're paying off.

There are swings and roundabouts, and capital gains tax is payable for IPs but not your own home.
 
There are swings and roundabouts, and capital gains tax is payable for IPs but not your own home.

But, if you live in it first, you can make it your PPOR and not have CGT payable for up to six years. Of course, that presumes that you have no other PPOR.
 
I'm a renter by choice.

Two reasons have been articulated by previous posts, namely it's often cheaper and I want the flexibility, particularly with a recession going on around here.

A third reason is that it gives you the opportunity to short the property market. I think prices are still high, and, given the economic outlook, there's a reasonable chance they'll fall. So it's a gamble, and probably a risky one. I'm not sure that many round here will agree with it.
 
Yes, I choose to rent.

$20 p/week.

In a place I love very much.

It turns out it has been helpful in accumulating a property portfolio.

I will shift and buy my own home one day, just haven't decided where I would like to settle down yet. Too many wonderful choices.:)
 
I rent as well. The difference in cashflow has been helpful for me and I'll keep doing so for the time being.

That said, I also see a lot of value to having a fully paid-off ppor. Even moreso when one gets to retirement.
 
You don't. Private rent is a personal expense. Same as you can't claim interest paid on PPOR loan if living there.
Marg

Renting can offer tax advantages over owning a PPOR.
When you own, you claim a % of expenses for home office. This then has CGT implications when you sell the PPOR.
However, you could rent a home office, making that portion of the rent fully deductable, with a smaller portion of the weekly rent being allocated to the domestic part of the residence. If structured correctly, it allows nice deduction for rent that would otherwise have been seen as a personal expense.
 
Beachgurl

Given that you are moving to Quakers Hill/ Acadia it maybe more prudent to buy there. In the older parts of Quakers Hill you can still buy a house for under 330k. It will need work....but not a bad area to get into.
 
I have always rented/boarded except for my first house where I claimed the FHOG. At the moment I am living in employer paid housing for a nominal rent of $70 per week including electricity and water so very happy with that.

As others have said, renting allows you to live in an area you may not be able to buy into, move around to take advantage of different areas and if you have bogan neighbours who have loud parties every night you can up and move once the lease expires. Of course the disadvantages are that you may not be able to easily rent if you have pets.
 
Thanks for all your responses. Am thinking I might pursue the renting path. I have a part time business I run from home and as some of our properties are in a company then I'm sure we'd be able to use some of the rent as a tax deduction.

Sash, good food for thought to buying an older property, but we're more interested in a McMansion type home that we don't need to touch for a while. With a baby and undergoing fertility treatment for another I'm not interested in going down the reno path and our money's tied up with IVF instead of home deposits . We're going through a mid-30s life crisis where we're chucking in the fast pace life and taking a few years out to chill a bit. We'd have to sell our current PPR if we buy out there and I reckon the growth on a unit in the East is likely to be better than a McMansion in the North West.

Thanks again, much appreciated.
 
However, you could rent a home office, making that portion of the rent fully deductable, with a smaller portion of the weekly rent being allocated to the domestic part of the residence. If structured correctly, it allows nice deduction for rent that would otherwise have been seen as a personal expense.

I have a part time business I run from home and as some of our properties are in a company then I'm sure we'd be able to use some of the rent as a tax deduction.



Hi, just be careful with claiming rent as a deduction. The tax office do have guidelines that they are looking for and it's a little more involved than simply doing some work at home.

See here, here, and, here.
 
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