Does Anyone Still Rent?

[Sunfish]

Pitt St said;

$215 pw on a month-to-month lease.

Compares well to a weekly payment of over $500 on a $350k loan, P&I @ 6.4% for 30 years in an uncertain Sydney market.

Damian said;

We rent as well. Probably purely because we couldn't afford to live where we want to but we can afford to rent there.

No way do I wish to infer that these two gents could not "afford" a home. So If I change "afford" to "it is no longer economically viable" the argument still holds true methinks. If prices are unviable to some then the secret will get out and increasing numbers will will drop out of the market and a new equilibrium will be found around long term multiples of wages etc.

Not much more than a passing thought really.

Thommo

 

[Aceyducey]

If prices are unviable to some then the secret will get out and increasing numbers will will drop out of the market and a new equilibrium will be found around long term multiples of wages etc.

Thommo,

When you meet the person who sets this equilibrium 'rule' let me know - I've got a thousand questions I'm dying to ask them!

Or maybe people will just use the Rule of 11 (see the Coffee Lounge) or another similar rule to create a pattern where none exists

Cheers,

Aceyducey

 

[LisaS]

Wow, maybe I should have started a poll?

The advice has been great!

The main reason for my question is that we have moved out of Sydney, renting out our previous PPOR for $250 per week. We are now living in a house worth around $450,000 paying a rent of $215 per week.

The more I think about it, the more I like this situation. I also have about $170k of equity in my Sydney house that I would live to use to invest, but if we decided to buy a property here to live in our equity would vanish!

Acey - I would love to learn more about your method of renting the house you live in.

Lisa

 

[Peter_Tersteeg]

Lisa,

You buy your home in a trust structure. You then rent the home from the trust. The trust is required to keep the transaction at arms length.

The disadvantage is that you probably won't get the PPOR capital gains tax exemption if you sell your house, but the tax benifits of renting can offset this. It can come down to your long term objectives for the property.

There's actually quite a few posts on this topic. Check the accounting and tax forum.

 

[LisaS]

Thanks PT. I will have a look.

 

[Mr. Fabulous]

At this point in time, I rent while investing. Although I have no IP's (yet), if I was in the position to put money into a deposit on a PPOR or IP, I would put it in an IP. My plan is to get a few IP's under my belt, then look for a PPOR. I currently rent for $80 a week (my share) and live five minutes walk from cafes, restaturants, beaches and transport. Why buy if I have such a sweet deal? I've been here nearly two years and the subject of rental increase have never even been an issue, although this may have something to do with the intention of being a long term tenant, so maybe this is my 'reward' from the landlord?

 

[Mr Ed]

We rent as well. $360 p/week is value for money. 4 br 3 bath large upstairs office, A/c & heating close to hwy to snow. And besides our money is in our IP’s.

Rach would like a PPOR though.

Home office is a great expense and cuts out CGT in a PPOR.

 

[Sunfish]

Why buy if I have such a sweet deal? I've been here nearly two years and the subject of rental increase have never even been an issue, although this may have something to do with the intention of being a long term tenant, so maybe this is my 'reward' from the landlord?

I know your type! My tenent is the same. Just because he has been there 4yrs reckons he's a good tenant. Just where do they get these ideas of equality?

ps. My smilies are't working.

 

[geoffw]

I was a renter for many years, and did not see any reason to buy.

I was 35 (and a newlywed) before I decided to buy a place. That place did not do anything much for us. (That was 15 years ago).

Five years later, we bought the PPOR we are still living in.

When I discovered property investing, it was the growth in PPOR which provided me with my springboard. Without the growth which the PPOR had achieved, I would not have been able to get anywhere.

If I'd woken up to IPs back then, I may have been able to get to a similar situation- however, IP loans were more expensive and more restrictive than they are now, so it would have been a bigger battle.

 

[Hulkster]

We continue to rent and invest although we have another reason apart from those mentioned. We live in Sydney, but are originally from Tasmania, and at this stage of our lives we are unsure where we will end up living.

Our rent is about one third of repayments on buying the house we live in so we have purchased a few IP's over the last few years. When we decide on a place to settle we may very well buy using the gains from investing.

 

[DanielB]

Hi Lisa,
Are you aware that if you sell your ex-PPOR less than six years after you first rented it out that you do not have to pay CGT on it? Do a search in the Accounting section for more details.

Apart from the emotional side of having a patch that is YOURS, it seems to me that the main financial benefits are the CGT exemption on a PPOR and - once you have it paid off - a lower cost of living. Do you really want to be paying ever increasing rents for the rest of your life?
I agree that the % of people renting will probably continue to increase over time. Just look at some of the more 'mature' property markets in Europe (to use John Edwards' from Residex' expression). I used to live in Switzerland and only 30% own their own PPOR.
Look forward to your spreadsheet to quantify some of this discussion Steve!

cheers,
Daniel

 

[Garry K]

. Do you really want to be paying ever increasing rents for the rest of your life?
Daniel

Another side to that story is that we have rented for 6 years, direct to the owner ie no agent, only had one rent rise in that time (3 years ago).
He is happy just to have a reliable tennant who doesn't bother him with trivial matters ie I do a bit of home handy man stuff, as he is very busy himself.
Personally I think it's a poor move on his part, but my advantage.

So, if you can find the right property/landlord, it can work in your favour.


GarryK

 

[Jamie]

Do you really want to be paying ever increasing rents for the rest of your life?
cheers,
Daniel

The other point to make here is that, while you may pay increasing rents on the property you are renting, in the meantime youve used the difference between your rent and a mortgage to buy a number of investment properties... all of which you'll have increased the rents on in the interim

Jamie.

 

[alpina]

Hi Lisa,
Are you aware that if you sell your ex-PPOR less than six years after you first rented it out that you do not have to pay CGT on it?

Do many peole use this rule to their advantage? Sounds like a good one for people who feel renting is the way to go. for eg:

Scenario
Buy house for $400k.
Borrow 80% and drop as much as possible into linked offset account.
Live in it for 6 months and then move out and rent for the next 6 years.
Pull out all money from offset and make the loan 100% tax deductible and get full benefits of depreciation along the way.
6 years down the track, sell the place CGT FREE!

Seem like the best of both worlds to me! Unless I'm missing something?

Julie

 

[robwil]

Hi all.

Yes I rent, but Im walking the same path as acey,

top landlord.

Regards Rob.

 

[Sunfish]

My tenant is one of you lot. Could easily buy a home but is comfortable in mine. And of course he takes advantage of me. Hasn't offered a CPI increase in 4yrs and I'm too polite to ask. What a bummer! We're both in a comfort zone.

Thommo.

 

[Jamie]

My tenant is one of you lot. Could easily buy a home but is comfortable in mine. And of course he takes advantage of me. Hasn't offered a CPI increase in 4yrs and I'm too polite to ask. What a bummer! We're both in a comfort zone.

Thommo.

"One of you lot?"...

I think youre missing the point. Your tenant could buy a place, but chooses not to. The people in this thread who rent have all said they do so because it enables them to buy property. By renting this year instead of buying the place I live in, I'll be able to buy another 3-4 properties I couldnt have afforded if all I was doing was paying off a mortgage....

How is this anything like your tenant who is comfortable to be a renter and nothing more?

Jamie.

 

[geoffw]

I's suspect that a property investor, who has IPs but no PPoR, should investigate having a PPoR at some stage- especially if it's a property which may be sold at a good profit.

The CGT exemption on the sale of the property would make it well worth while the higher payments for 12 months while living in that property.

I can say that- in Canberra, rental yields are better, so renting is not completely attractive.

 

[Jamie]

I's suspect that a property investor, who has IPs but no PPoR, should investigate having a PPoR at some stage- especially if it's a property which may be sold at a good profit.

The CGT exemption on the sale of the property would make it well worth while the higher payments for 12 months while living in that property.

I can say that- in Canberra, rental yields are better, so renting is not completely attractive.

Hi Geoff,

I agree. If yields were better in the suburb I was living, I would definitely look at buying. With yields around 4%, I prefer to rent here in the inner city and invest in other places with a minimum of 7-8% yield.

If, at some stage in the future, yields returned to around 8% here and I still wanted to live in this area, I would probably buy.

Jamie

 

[Sunfish]

Jamie you should not take me so literally.

You say you are different because "The people in this thread who rent have all said they do so because it enables them to buy property." If my tenant is doing so to enable him to invest in his wife's biz isn't there a paralell? I have no idea what other investments he has but by definition he has some because he needs savings to be able to purchase a property and savings need to be invested.

I will just have to remember to use more smileys and LOLs. LOL

T