As the old saying goes, “rent money is dead money”, or is it? The fact is that we all need a place to live, and this will always cost us money, whether it takes the form of rent or mortgage repayments. And while it is true that monthly rent payments don’t help you build equity, they do have several other benefits. Like any financial decision, there are costs and benefits associated with both buying or renting.
Renting
Pros
- Flexibility
The main pro of renting is the flexibility that it offers. For young Australian and families who need (or want) to move from place to place, renting is a much easier and convenient option. - Invest Elsewhere
Putting your money towards rent rather than tying it to a mortgage means you can free up your savings and put them to work elsewhere. For example, a balanced portfolio of shares and bonds might see you earning a higher return than would be possible if you had purchased a property. - Fewer Out-of-Pocket Costs
When you rent a property, you generally know how much you’ll be spending on housing each money. Accidents and disasters might occur, but it’s unlikely you would have to pay for the repairs, although you might be temporarily inconvenienced.
Cons
- Lack of Stability
If your landlord decides to sell the property, increase your rent, or renovate the property, there is not much you can do. This means you might have to move suddenly and at an extra cost, at a time that is not convenient or economical for you. - Rental Costs
If you live in a capital city like Sydney or Melbourne, you’ll know that rental prices have increased the past year and are set to continue their steady growth. Of course, because you are renting, you can shop around for the right property for you, but this will come at a sacrifice of either time, money or location.
Owning
- Stability
Homeownership brings a whole host of benefits, but one of the main features is its sense of stability. When you own a home, you gain belonging to a community and the pride that comes with ownership. As such, owning a property is ideal for those who are ready to put down roots and want a tangible asset to their name. - Property Appreciation
Anyone living in Sydney has borne witness so that skyrocketing house prices. Against all predictions, housing prices remained steady through the coronavirus and are set to include steadily over the next decade. What’s more, there are notable tax benefits over the long run as you don’t need to pay capital gains on your primary residence. And later on, any appreciation will see its returns once you either decide to rent or sell it. - Leverage
Buying and owning a property gives you a tangible asset to leverage. Should you decide to purchase more properties in the future, conduct renovations, or encounter unforeseen expenses, you will be able to leverage the value of the property.
Cons
- Ownership costs
Purchasing and maintaining a property is expensive. According to the RBA, the costs involved in buying a house (including stamp duty, conveyancing and other services) can be around 4.3% on average. Add to this the ongoing costs of running a property (such as council rates, water, insurance) and any unforeseen repairs or disasters, and the amount starts to add up.
The fact is that the decision to buy or rent isn’t simple. There are many factors to consider, including your lifestyle, investment goals, financial resources, family needs and more. Here at Wills Property, we boast a range of property management services dedicated to helping you achieve the result you want. Call us today or browse our range of current properties.
