When it comes to the rent vs buy debate, like many of our clients you may be weighing up the pros and cons.
You might be thinking that you’d love to buy a house but it all seems out of reach right now. You might be asking yourself if it’s still a good idea to invest in property at all?
You’re not alone. In today’s housing market, many people are considering the pros and cons of buying a home and whether renting could be a better option.
If you rent can you still get ahead?
Put simply, yes. But buying property is not just a financial decision; it can be a lifestyle decision too. You might prefer to rent in a suburb you really want to live in, yet still invest in buying a property in a suburb that’s more affordable.
It’s a matter of considering everything: your own situation, your goals, the property market, the costs and the risks you’re willing and able to take.
When it comes to the financial side of property, it’s important to understand the difference between just renting and renting plus investing.
Purely renting a home, without investing, means your money is unlikely to grow and you can end up paying off someone else’s loan. In this scenario, you may not get ahead.
If you start a conversation with us about renting combined with investing, we can show how you can get ahead without putting a foot in the property market at this stage.
It may turn out that renting is a better choice for you right now. Instead of paying home loan interest charges and the ongoing costs of owning a property, we may be able to set things up so you have some money left over to invest and build wealth in more readily accessible options like super, managed funds or shares for example.
The value of buying
As hard as it can be to get started in the property market, if you decide to put money into a home loan there can be long-term benefits.
A home loan can help you force yourself to save and build wealth, however it all depends on your situation. Generally, as you pay off your home loan you’ll lower the interest charges (providing you have a principal and interest loan, not an interest-only loan) by repaying some of the capital you initially borrowed.
Your house may also increase in value at the same time and eventually be worth more than the amount you owe.
Owning your own home can also give you security and freedom. You could potentially rent out a room to help through the early days of your home loan and paint the walls as you please.
The long and short of it
When it comes to any financial decision, it pays to consider the needs you have right now and your long-term goals.
Could renting short term and buying later on be a good strategy for you? Say you plan ahead and rent for a certain period of time. We may be able to create opportunities for you to put extra money in shares with the aim of boosting your deposit for a home loan down the track. Your deposit may build more rapidly than in a savings account and you could be on your way to a deposit quicker than predicted or perhaps borrow less with a bigger deposit.
What’s the best option for me?
The thought of buying a home can be as daunting as it is exciting. Because the upfront costs can be so high, it may be better for you to rent for the short term or even longer.
Contact us today if you’re debating the pros and cons, together we can explore the ins and outs of renting and buying and work out how and when property may fit in with your plans.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
