Should I RENT or BUY a property?
Posted on 09/11/2018
Renting a house or buying one has been an eternal question lingering on many people’s mind.
The question is even more prevalent nowadays as the rising house prices continue to make decision more difficult for many young Australians.
Ultimately it comes down to a personal preference and financial situation, however, there are some guidelines and that can help you decide which road to take.
Advantages of renting:
Flexibility - Renting is more suitable for people who spend a lot of time during a year on business/pleasure related trips or who simply don’t prefer to live in one place for an extended period.
Ongoing Costs - Opting to rent means that there won’t be any additional costs associated with owning such as rates, taxes, insurance, and maintenance for which the landlord is responsible.
Initial Costs - When purchasing a house with a mortgage, you're required to have a sizable deposit, ideally 20%, plus other government fees and charges. With renting this is not the case. Many landlords do require a rental deposit equal to the amount of one month's rent, but that is still far less than making a down payment for a house.
Disadvantages of renting:
Future Wealth - Renting doesn’t offer any wealth creation since the property doesn’t belong legally to a tenant.
Security - There are no guarantees that a landlord will renew a lease when it expires.
Ultimate comfort - A tenant generally is not able to redecorate or make any changes to a property to suit his needs better without the consent of the landlord.
With all this in mind, more and more people have chosen to combine the best of both worlds. They continue to rent an accommodation while purchasing at the same time an investment property!
This approach can offer several benefits:
If the monthly rent earned from investment property exceeds that property's monthly mortgage payment (along with other costs associated such as upkeep, insurance and taxes) an investor is supplementing his/her income and increasing wealth while at the same time keeping flexibility associated with renting a place.
For younger people, owning a home in the inner suburbs may be too expensive, so they rent in an area that is convenient, whilst they are acquire an investment property for their future wealth creation.
General Advice Disclosure: This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.