 It’s your fifteenth round of rental inspections. A dozen young couples and small families heave their way through the door of a unit forty minutes from the city. The property manager spouts on about the first-class amenities, walking past a carpet stained by years of tenants. There’s a metallic smell in the air. A cockroach crawls sluggishly over your foot. This is the current state of the rental market in Australia, especially in our capital cities. Many people may be considering if buying is a cheaper, easier option. “Rent money is DEAD MONEY!” The myth that renting is the equivalent of throwing your money into a pile and dropping the match fails to consider the other costs of home ownership. When you’re saving for a house, you are often looking to buy it within the short to medium term (5 to 10 years). This limits your capacity to invest your money while you’re in the process of saving for your deposit, meaning you're missing out on potential returns. Along with the deposit comes stamp duty, rates, maintenance, and other repairs. “Why pay someone else’s mortgage?” In some cases, small households and individuals may benefit from renting a relatively cheap place and investing the money they would have spent on stamp duty, deposit, or other costs. These returns can create opportunities for goals later, such as buying a house with a larger (or full) deposit or retiring early to travel. “Is it worth it if I can buy cheap?” Most properties in Australia that are around the $250k mark are units. Though this seems attractive, it’s important to note that units come with their own costs such as body corporate fees and generally do not increase in value at the same rate as houses. “I’m sick of changing places every year.” While some people stay at the same property long term, it’s not realistic for everyone. Rental increases, landlords, or neighbours may push you to leave a place that you’d otherwise be happy with. Renting is inherently unstable as leases are generally only signed for a twelve-month period. For some people the potential costs of buying are worth the feeling of security. It depends on your personal situation and preference. “So, I can pay $1100 a week for my studio apartment, AND make money?” What works for one person may not work for another. Smaller households will benefit more from renting as their costs will generally be lower, leading to better cash flow.
This is especially true in rural and regional areas where cost of living is slightly lower. However, if your rent is substantially higher than what you would have paid for a mortgage, it might not be your best option. Ultimately, renting is not the devil everyone makes him out to be. Owning a home can bring security but isn’t the only option. If you’d like to find out more about the benefits of buying versus renting, you can check out our podcast episode on the topic or get in touch with us to discuss your options. Comments are closed.
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