the Rent or Buy thread

[gopher]

if you want to pay off someone elses house and have all the other bullshit that goes with it like house inspections,possibility of eviction and having to move more frequently then rent
if you want more security and to eventually own a house then buy

 

[HamaTime™]

I'd suggest seeing a Financial Planner. Most banks have have one. Good luck!

Do NOT. See a financial planner at a bank...

 

[ari666]

2% increase in value? Even butt #### idahoes are raising around 7% on average. You also forget to mention the capital gains issues on shares.

to be honest i totally guessed the average property value increase i knew its no more than ten, thought it was less than 5 but meh, 7 sounds good. also capitol gains tax on investments would be offset by property rates/taxes and maintenance/upkeep.

the property i rent was valued at 450,000. we pay $1450PCM in rent, so $17,400PA so thats a 3.8%PA return... which is crap. if you add 7% on 'value increase' then subtract interest from your loan, taxes, rates and maintenance and you have a substantial loss over investing your money into a 'safe' portfolio.


just sayin'

 

[nathanVY]

the average return on the stock exchange for a low risk portfolio is 12% PA. if you are not making a 12%PA return by owning your own home (minus rent, but add things you need to pay like council taxes and land taxes, water rates etc) then renting is a better option.

so you have a house you bought for 100k, it increases in value by around 2% per year. you have a 6% interest rate on your loan, so the 2% increase actually becomes a -4% increase (i.e. a loss) so its costing you $4,000PA not including taxes and loan fees etc. if you invested that 100k in the stock exchange you would be up $12,000PA, but would have to pay rent. so if rent costs you $16,000PA or less ($307 dollars per week for a house thats worth 100k? not likely) then its better to rent and invest, until you can afford the house outright.

all figures are vague guesses but you get the idea.

Yes I'm looking into that, and thats along the lines of what I was thinking. At the very least I think this is a better option of investing my money in the short-medium term maybe I'll buy a house with that money? We'll see.

Note in bold. What a load of crock. Plenty of people have gone belly up losing on property. One guy I know lost almost 3 million in commercial property with the GFC. Sure it MIGHT be regained but growth is rather slow at the moment on the commercial front at the rate of return it will take 20+ years in which case he will be dead.



2% increase in value? Even butt #### idahoes are raising around 7% on average. You also forget to mention the capital gains issues on shares.

Somebody please explain this 'capital gains' tax that seems to push people over the fence on either side. Whats the deal with it, how does it affect a property? how does it affect a rental, shares, etc etc

if you want to pay off someone elses house and have all the other bullshit that goes with it like house inspections,possibility of eviction and having to move more frequently then rent
if you want more security and to eventually own a house then buy

I keep hearing all the horror stories about how awful it is to rent, but in actual fact renting is fine. Sure there's a few things I wouldn't mind doing to the house like laying a slab in the backyard and a better gate so I can work on cars but hey I'm willing to live with that, maybe the next house I rent with my wife will have some of those things in it.

I'll make one point here, that my marriage will be the single most important thing in my life, 2nd when they come will be my kids. Now having seen my parents, and my friends parents, most of them are late 40s early 50s - nobody owns there home, most aren't even close.

I'd rather have the money / time to have living life - paticularly when I have kids than be stressing about meeting mortgage repayments, debt tears apart marriages - not saying that happens in every one but it's definitely something I'll think twice about.

Quick question - When was the last time any of you were DEBT FREE ?

Do NOT. See a financial planner at a bank...

Yeah, you'd end up walking out with a home loan! haha

 

[minux]

to be honest i totally guessed the average property value increase i knew its no more than ten, thought it was less than 5 but meh, 7 sounds good. also capitol gains tax on investments would be offset by property rates/taxes and maintenance/upkeep.

the property i rent was valued at 450,000. we pay $1450PCM in rent, so $17,400PA so thats a 3.8%PA return... which is crap. if you add 7% on 'value increase' then subtract interest from your loan, taxes, rates and maintenance and you have a substantial loss over investing your money into a 'safe' portfolio.


just sayin'

As i said earlier, with negative gearing, running at a loss is not a problem while you have other people paying for your property. It also benefits your income.

Yes I'm looking into that, and thats along the lines of what I was thinking. At the very least I think this is a better option of investing my money in the short-medium term maybe I'll buy a house with that money? We'll see.

Stock market is a mugs game, to me it is like the pokies and I know very few people who have done well out of it. The only gamble I have taken is when I bought gold back in 2000. Paid off well. Again though, each to their own, I prefer to see my money going into something physical.

Somebody please explain this 'capital gains' tax that seems to push people over the fence on either side. Whats the deal with it, how does it affect a property? how does it affect a rental, shares, etc etc

Check ATO's website. It will explain t all best. Effectively it is a tax on making a profit.

I'll make one point here, that my marriage will be the single most important thing in my life, 2nd when they come will be my kids. Now having seen my parents, and my friends parents, most of them are late 40s early 50s - nobody owns there home, most aren't even close.

Considering the market when they could have bought I would say they have made bad calls on finances. Most I know in their 40's have paid off their homes, they were lucky enough to buy in the 80's and saw out the recession. Their mortgages are minute in comparison to todays market.

I'd rather have the money / time to have living life - paticularly when I have kids than be stressing about meeting mortgage repayments, debt tears apart marriages - not saying that happens in every one but it's definitely something I'll think twice about.

Why can you not have both? I had a hard four years while studying and working full time. It has all paid off now to the point we are comfortable. Not once did we stress about repayments, instead we went without luxuries that we do not need. I do not know anyone where debt has torn apart a marriage. I do know a few where bad budgeting skills were the cause. Blaming debt is silly, as the debt is not the root of the problem, it is only a symptom.

Quick question - When was the last time any of you were DEBT FREE ?

Never. As soon as I turned 18 i bought a property in Geelong while serving in the army. I do not see debt as an issue. I see it as a stepping stone to being debt free in 10 years and where I can provide everything for any children we have including top rate education. For me, I want to make my childrens life everything and work hard to setup their lives so they do not have to work as hard to setup their childrens. Worse case scenario is we sell off owned property that has zero debt and we are home free. Everyone has their own way of doing things, hard work now means easy life later.

 

[nathanVY]

It depends on your circumstances. If you plan on settling in the one place i'd buy, but if you plan to move around a lot go for renting. You will never loose money on property. I'm 43 and own my 40+ square house that we live in and have a portfolio of 18 investment properties. Both my kids go to private schools and week holiday overseas once a year. Now all of this has come from working hard and sound advice. Nothing we have has come from "family money" as a lot of people seem to think. Now where our investment portfolio will come into play is when we decide to retire. Just think about what's beat for you and don't over extend yourself.

Congrats are in order I think lol. So how did you get your portfolio started?

 

[nathanVY]

Considering the market when they could have bought I would say they have made bad calls on finances. Most I know in their 40's have paid off their homes, they were lucky enough to buy in the 80's and saw out the recession. Their mortgages are minute in comparison to todays market.

Yeah you're not wrong about that, hence why I'm asking.

Why can you not have both? I had a hard four years while studying and working full time. It has all paid off now to the point we are comfortable. Not once did we stress about repayments, instead we went without luxuries that we do not need. I do not know anyone where debt has torn apart a marriage. I do know a few where bad budgeting skills were the cause. Blaming debt is silly, as the debt is not the root of the problem, it is only a symptom.

So you paid off a house in 4 years? Right again, debt is a symptom of living beyond your means. I was talking more about homeloan repayments than general debt, all I'm saying is it is a big responsibility and can be a huge strain on any relationship.

Never. As soon as I turned 18 i bought a property in Geelong while serving in the army. I do not see debt as an issue. I see it as a stepping stone to being debt free in 10 years and where I can provide everything for any children we have including top rate education. For me, I want to make my childrens life everything and work hard to setup their lives so they do not have to work as hard to setup their childrens. Worse case scenario is we sell off owned property that has zero debt and we are home free. Everyone has their own way of doing things, hard work now means easy life later.

Yeah it's not necessarily and issue, but I was just curious



I'll do some more research and possibly attend this Sir Richard Branson, Tim Ferriss, 21st Century Financial Education Summit
I've got 5 months or so until I'll be seriously looking at exactly what to do. Will just be saving in the mean time, when I get 2-3k in the bank maybe I'll start investing then instead of saving and see where that gets me.

 

[Darren_L]

I keep hearing all the horror stories about how awful it is to rent, but in actual fact renting is fine.

maybe you've heard the horror stories because it happens all the time. Maybe you've just had a good run, I know maybe one person who has, the rest have similar stories to mine.

If the landlord manages the property themselves and you strike up good relations with them, they will probably tend to leave you alone.
but most times you get stuck with a real estate, and they couldn't give a **** about the tenant. I did a lot of repairs myself rather than bother the real estate, kept all the places I rented in good order, including yard etc. Yet they'd drop the notice to enter notices every 3 months in my letterbox overnight and show up the next day when I was at work. I had no knowledge they were there until I found the notice of entry in my letter box the next day. I had a landlord decide to put one property I lived in for sale. Every couple of days I had strangers walking through my home, opening cupboard doors etc. This went on for a couple of months. I approached the real estate about it, and their response was that's the way it is..... I ended up moving out after a couple of months of that crap.

Next place I moved into, I asked the real estate if the landlord had any plans of selling within the next few years, he indicated that they didn't have any such plans. Just after a 12 months of moving in, the place was sold and I was moved out.

Another place I had a toilet that had come loose from the floor. Water was leaking out of the rear pipe. I had approached the real estate several times to fix it. They eventually sent some handyman guy out who simply put new screws in the base, which barely lasted a day before they pulled out (the inserts in the concrete needed replacing). I told the real estate and they never got back to me. So I eventually paid a plumber myself to fix it. I submitted the invoice to the real estate requesting re-inbursment, and never heard back.....

Real Estates know that they have a long line of tenants waiting for properties, so their attitude is if you don't like it, move out. And this sort of scenario is not unheard of, in fact it's very common

 

[showbags]

Congrats are in order I think lol. So how did you get your portfolio started?

I bought my first property when I was 18, worked my butt off and poured all of my money into paying it off. And from then I gradually bought more properties ( as my bank manager and adviser would let me ) and it sort of snow ball from there. As I said in a previous post that you'll never loose money on property, I was talking residential property not commercial portfolio's. I stick to buying properties in areas that I know are going to have high occupancy. Close to schools and universities are my favorite. But its ip to you wether your buying just for a place to live or to build personal wealth, justice sure you get plenty of advice before you commit to anything. And I don't mean forum advice either.

 

[Reaper]

So we started this discussion (I'm sure it's not he first one ) In my thread, (link if you want to read).

Posting this thread because I'd like to know peoples opinions and maybe get some new ideas.

a) Save money, Buy a house, Be in thousands of $ of debt for most of your life..

b) Save & invest money, rent the house you want to live in, buy an investment property when you have a substantial amount of money or even outright..

Be interested to know ways of short to long term investments. Open to pro's/con's of each one. Renting is something I can't avoid, I'm not in a position to buy a house -but I could probably get in one reasonably quickly if I wanted to.

Discuss.

Information presented here is of general nature and you should consult a registered investment advisor before making any decisions.

From a purely financial point of view, rental returns are generally lower than the interest paid out to a bank as part of a mortgage thus renting is the cheapest way of living in a particular house. To take full advantage of that, one should take the difference between the rental payment and what the mortgage payment would have been and further invest that money on a weekly/monthly basis. Of course most don't do that and thus any advantage is lost.

"Ownership" is pretty much an inefficient forced savings plan. Banks charge for this service by means of interest in your mortgage. That said, many people seem to lack the discipline to save in any other way so its better than blowing all the money away.

Your point "b" is the cheapest way out although there is the down side of renting being unable to make changes to the house/garden etc in most cases and of course the insecurity of being kicked out at the end of a lease period.

Weather you invest in other property, shares, bonds, fixed interest or other asset classes is really a matter of personal preference. You can find any number of examples that show *any* of the classes are "best" for a given time. I personally like to put my money over a number of classes. Of late I have would back on some of the emerging equities markets and very recently cashed in some of the huge gains I have made in gold and moved into some of the listed property trusts and resource stocks that have been oversold (I hope) recently. Both of these sectors are quite undervalued (IMO) and have excellent prospects for outperforming the market in the next few years.

Further to that I have some money in a few hedge funds (makes money weather equities go up or down - volatility is great for these types of funds) and other derivative type investments.

Reaper