Rent V Buy (again)

[maadha]

Has it now swung back to be a better choice (financially - on paper) to buy rather than rent?

http://propertyupdate.com.au/rent-versus-buy-what-makes-more-cents/

Just read the following and interested to see what the SS take on this is?

 

[perthguy]

Buying a PPoR is not always a fantastic investment financially compared to an IP. I house share with a guy who bought his house over 20 years ago for $180k and it's worth around $500k now. Not a great return. However, he paid it off in less than 10 years so the last 10 years have been "rent" free. Not so if he had rented. Then there are the intangibles... no property inspections, being able to make changes to the property, etc.

The thing is that the house is the size he wants in the location he wants. If you are getting into the area now, vs 20 years ago, it is a completely different story.

 

[Paul@PFI]

8.8% net after tax annual growth year on year for 20 years is bad ??

What was his yield on rents ??? No idea ?
Its like self-funded retrees with long held shares. They hold CBA etc shares and dont sell. Why ? It actually makes sense when you know what the shares cost.

Because those shares originally cost $5.40. They pay a dividend of $3.83 (ignoring franking credits). Yield...71%. Higher if they are a self funded retiree accessing refund of tax credits (101% yield).

Now your friend has a prop that cost him $180K. He can borrow against it and his yield remains unchanged.

A renter can NEVER do this.

 

[jrc]

Apart from the psychological factors eg no inspections, hang pictures where you like, I think renting beats buying provided you invest the savings. On the current house we live in, rental estimate is $400 per week. Loan payments approx $400 per week. So on top there is rates, insurance, repairs and the equity that is not earning anything. Value may have gone up 10 per cent in 5 years which would just about cover the buying and selling costs. So I could have invested say $60000 plus $120 a week and could conservatively have doubled my $60k plus whatever the ongoing investment made and if ibad invested the $120 using salary sacrifice I could have invested say $170 pre tax, so about $145 after contribution tax and be even further in front.

 

[jackbak]

Renting was great when I was young and in a shared house but I think there comes a point when you need your own place to do as you please and also the security to know that you're not about to be kicked out.

 

[Corey Batt]

Leaving aside the personal reasons, financially it really depends on the suburb. There are some areas where renting is far better financially due to low rents compared to much higher medians and likewise vice versa.

 

[travelbug]

There is no blanket yes or no answer. as CJay said it depends where you want to live.
If you want to live in an area with a low yield it often makes sense to rent and buy an investment property in an area with higher yield.

You need to do research into your area of choice, ie CG, yield etc.

 

[macca446]

Yes I was thinking of selling my PPOR and rent still in my suburb due to my sons special education needs but figures were better to stay put as weekly mortgage repayments $250PW IO and rent same area as to my standard of living $450 to $500PW.

 

[Dazz]

However, he paid it off in less than 10 years so the last 10 years have been "rent" free.

Maybe rent free, but certainly not cost free.

There are three categories of PPoR tenure, and ALL cost money.

1. Owner - mortgage free

Has to pay for { council rates, water rates, insurances, maintenance, strata fees if applicable }

2. Owner - mortgage owing

Has to pay for { bank interest, council rates, water rates, insurances, maintenance, strata fees if applicable }

3. Tenant

Has to pay for { rent }


------------

Try not paying those bills (i.e. live for free) and you'll very quickly learn who is boss. People in category 1. (like your friend) do get kicked out if they don't pay their bills.

For category 1. it's the local authorities, for category 2. it's the bank and local authorities and for category 3. it's obviously the Landlord.

It's simply perpetuating those old myths like if you own your home it's cost free and rent money is dead money. Both are false.

 

[Spades]

Maintanence only Dazz if you live on French Island.

Anyhow,-https://duckduckgo.com/?q=man+killed+vacuuming+house

Cheers Spades

 

[perthguy]

Maybe rent free, but certainly not cost free.

There are three categories of PPoR tenure, and ALL cost money.

1. Owner - mortgage free

Has to pay for { council rates, water rates, insurances, maintenance, strata fees if applicable }

...

Try not paying those bills (i.e. live for free) and you'll very quickly learn who is boss. People in category 1. (like your friend) do get kicked out if they don't pay their bills.

Exactly. Also, try not maintaining the place and it becomes uninhabitable.

Which is why I said "rent" free and not cost free.