the Rent or Buy thread

[calaiss]

I'm not sure why the second option is to rent and buy an investment property. Where would the money for this property come from?

 

[Reaper]

I'm not sure why the second option is to rent and buy an investment property. Where would the money for this property come from?

For people who are financially disciplined, from a strictly economic point of view it is going to produce the best returns over virtually any given period given like for like investment by the buyer. That means investing the same amount into buying a owner/occupier house or spending the same on renting a house + buying an investment property (also including the income from the investment house).

Reaper

 

[Reaper]

If you are building, I'd buy. If you plan on not building, rent.

I personally would not be buying to invest at the moment. Rent is not even close to covering the average mortgage and you will be out of pocket far too much. It is why all these stupid investors are going belly up. Over borrowed on over inflated properties, now the market is slowing they are suffering.

In many cases you are correct however when you take into account depreciation of the building (with a near new dwelling) returns of near cash neutral can be found. Locating a stressed seller will help a lot here. Generally with negative geared investments the first few years are the most difficult on cashflow as rents will generally increase that will move the dwelling from cash negative to neutral and then positive over time. Of course if you buy well the capital growth is the ultimate goal as it is very tax effective in most cases.

Reaper