Friday, June 11, 2010

Renting vs. Buying

The great rent vs. Own debate has been around forever and will be around forever. It is not something where you can be told exactly what to do. In every situation what is best is different. In some areas it is cheaper to rent then own and in other areas the mortgage repayments are less than the rent, so it would make more sense to buy.

I have desperately been wanting to buy my own home here, but lately I have been thinking that might not be the best option. I do love it where I live, but it is hideously expensive and I am not 100% sure I want to live here. Mortgages are A LOT more than rent, but the rent is hideously high too.

I have come to think that buying investment properties instead of my own home might be a better option. I have a house, so am already in the property market. It is not located in an area I would ever live in again, (because there are too many people in the area I am related to) but it is a foot in the door. It is on the market at them moment, but I am not sure I really want to sell it.

I think buying my own home here would be more an emotional choice rather than a smart investment choice. I can understand why people want their own home and I totally do, but I think I can set myself up better financially by holding off on that decision and buying an investment property somewhere I would like to live.

I also think the Aussie real estate market is so overpriced it’s no longer a joke! All the houses I have looked at here are at least $100,000 MORE than other areas for the same damn thing. That’s outrageous. Especially since there is nothing really here. There’s no beach, no rainforest, awesome bushwalks or anything. You can drive to some close by, we are only like 1 – 2 hrs to the snow fields, 1 – 2 hours to the beach, 3 hours to Sydney, so you can drive to lots of things, but here there is only public servants who are overpaid and are paying too much for real estate making it hard for everyone else.

So I think right now, the best option for me is to continue renting, whilst looking for property elsewhere.

What are you doing? Renting or paying off the mortgage? DO you wish you had done it differently?

I now wish I had not bought where we did and bought where I wanted to, because we would have had a smaller mortgage, been able to pay off more of it quicker AND be able to charge higher rent than we can for the place we have. Ahhh, hindsight is a wonderful thing!

I also wonder how long this real estate bubble can continue. I mean, we have some of the highest rents and mortgages in the world, which have sky rocketed to the point you pretty much need 2 people working to afford the repayments. Surely this is not sustainable and will have to crash at some point. It has before. Real estate has NOT always gone up. It does come down. Just look overseas at the moment and you can see what I mean.

For an interesting read check this out. It talks about why you should rent vs. buy. On the other hand Money Magazine said this month that properties in capital cities in 2020 will all be over 1mil, which would make it impossible to buy and smarter to buy now. What do you think?

As for me, I change my mind every week it seems as to buying here or not, so we'll see what I end up doing! lol. Though right now, it's continuing to rent.

9 comments :

  1. I've been thinking about this A LOT lately!

    I'm 20 and am starting to think about moving out, and the renting vs. buying debate is a big deal. Do I move out right this second and rent? Or do I stay at home and save?

    I've always seen rent as dead money, so ideally I would love to buy. But in this day and age, property prices are beyond ridiculous and I will probably be stuck at home until 2050. Tough choice indeed, but different options will work better for different people, I guess. x

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  2. I worry about this too. We are paying off our home (out of a capital city) but prices are still insane. I worry very much how my kids will ever be able to afford to buy their own home.

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  3. Definitely buy because then you have a bit of control over your future. Renting is a short term thing and you always have the uncertainty that you could be forced to move on regardless of your situation.
    Amazingly, we all go through this discussion and most of us realise that we can't be paying rent when we are retired. Good luck.

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  4. I enjoyed reading your post...Yes this is a hard decision...I do worry about my kids because I think time is getting tougher. I personally am not for renting as I see it money down the drain, but then everyone has his own opinion...I also know that these days if you have a property and you can hold on to it...the advise is not to sell of course that is if you are copying with payments & use it as a stepping stone for your next venture..

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  5. Thansk for your comments eveyone. I love to hear others views. :)

    Jane 1, if you can I'd stay at home and keep saving. Would buying an investment property somewhere be an option? Then you could pay a lot down, but have your foot in the door, and it means you're not renting. If that makes sense.

    Jane 2 - It's crazy. I worry about my kids too. Ideally I'd like to be able to help them by buying properties now and either selling one later to help my kids get a house or let them live in it, as in early inheritance...

    Hampers - I do prefer buy, rent is my option atm, coz I have a property, but it is so true, you do not want to be renting when retired.

    Mathese - I see rent as money down the drain too. It's sort of like once you start renting, it is so much harder to save and buy I think. I have been leaning towards taking our property off the market and just sitting on it for longer, which is why I;d still be renting. But I figure since I charge double what I am paying, it's an ok situation for now.

    Oh, and I just discovered somewhere not too far that has some reasonable priced properties. It'd be a longer commute by this cities standards, but still short by Sydney or Melbourne standards. I'm going to check it out next week.

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  6. Hi there - I found you over at Blog This and am your newest follower :o)

    I bought my first home (by myself) at the age of 24. It's the best thing I ever did and in hindsight I wish I'd done it even younger.

    I bought the place for $80k and sold it 10 years later (after renovating it) for $350k. I learned so much from this process and it has set me on a solid financial path.

    Buying was the right decision for me, but everybody's circumstances are different and you need to do what's right for you!

    www.kellyansapansa.blogspot.com

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  7. I was reading marie claire and i came across this interesting paragraph
    "Rent money might be dead money but so is paying $300,000 in interest over 25 years... On average, young mortgage holders pay up to 60% more a week - or $139 - than renters. that said, renters seldom invest what they save. if you are going to rent, put the difference in a high-interest earning bank account and you'll have compound interest working for, rather than against, you."
    Now I know everyone has different circumstances and needs and renting is not best for everyone I'm not saying it is...
    but this paragraph did make me think twice about how I'm saving to buy a home and how to maximise my renting experience... wouldn't have looked twice at it if it wasn't for you're blog post.

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  8. We are renting at the moment, we do have two investment properties, and the next step for us will be whether to buy our own place to live in or to buy another investment and keep renting, it'll depend on which we can afford. We came from NZ last year, and sold our home there, and also left an investment property there, we spent alot of money moving over, and decided to put our leftover money into a small investment property here, but have no deposit now to buy another, we maybe able to use some equity. I would love to live in our own home, but it maybe more viable to buy an investment instead, if we can find something where the numbers add up.

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  9. I've enjoyed reading your blogs. Renting vrs Buying is interesting debate as it is so dependent on individual circumstances. One option could be to rent where you want to live and buy for investment purposes. I have purchased a number of investment properties using a company called We Find Houses www.wefindhouses.com.au and they were great. They also have a great website with property investor information and blogs about things related to investing at www.educatingpropertyinvestors.com

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