To Rent, Own or Invest: that is the question
Buying your own home is still the number one Great Australian Dream, but is it really worth it in today’s property market? Each person’s situation is different, but as a general rule, buying a house must be viewed as a long-term investment. It would not be worth buying a house if you intended to sell within four to five years, as you would probably lose money due to the associated sales costs and loan interest. Many banks and credit unions have rent vs. buy calculators on their sites, making it relatively easy to get a quick snapshot based on your own figures. There are some things to consider before you decide whether renting or becoming a homeowner or investor is the way for you.
- Flexibility – renting is the best option if you intend to travel frequently or move around regularly for work.
- No maintenance, no worries – a tenant must pay the rent and ensure basic upkeep of a rental property, but unless otherwise stated in the lease, that is tenant responsibility ends. Renting means renovation-free weekends and no outlay for expensive maintenance items like plumbing or electrical repairs.
- Lack of stability – on the downside, a tenant cannot control the term of their stay. They can be asked to move out at the end of their lease for a myriad of reasons. This can cause upheavals and stress, especially for families.
- Lack of control – a tenant cannot change their home environment to suit their tastes, or improve their quality of life unless the landlord agrees.
Buying: the pros and cons
- Stability – owning your home means you can engage with the community in which you live, and make decisions about your future with more certainty
- Choice – a homeowner can renovate or rebuild if they have the funds and the desire to do so
- Interest repayments – the interest accrued over a twenty-five-year loan will be far greater than the original amount borrowed, and in the current property market, has the potential to lower the amount of equity available to you
- Lack of flexibility – if you lose your job, and experience bill shock due to a major event in your life, your mortgage repayments will still have to be met. If you do not have insurance and cannot meet the repayments, your home could be repossessed to cover your lender’s costs
Consider the Investment Option
If neither renting nor buying appeals to you, perhaps you are the perfect candidate to be a renting investor. Here are some reasons why buying an investment property while continuing to live in a rental property may be for you:
- Home ownership is out of reach in the suburb you wish to live in. In this case, many people choose to buy an investment property they can afford and continue to live in the suburb of their choice
- You frequently travel for work or leisure and you do not want the hassle of looking after a home, but you do want to get into the property market
- You are living with your parents and paying nominal or no rent, and you can afford to buy a property
- You want to own property, but you do not want the burden of a non-tax-deductible mortgage
More and more people are questioning home ownership, but a debate focused on facts and figures does not take other factors into account. Buying a house is based on more than financial viability. For many, it is the culmination of a life-long dream and a safe haven from the world. It is a place to raise your family and collect memories. For many, it is home and that will always be more important than tax incentives or columns of figures.