As with every financial decision in life, there are pros and cons to consider when deciding whether to rent or buy.
It’s one of the great dilemmas faced by young Australians, and there’s no right or wrong answer as we all have our own personal needs and financial circumstances.
While some in the finance industry will leave it up to you to make the big decision, at My Expert® we see it as our responsibility to give clients the information and knowledge to help them decide which scenario best suits their lifestyle expectations and financial aspirations. Our aim is to put an end to the emotional drain around property transactions, especially when you’re facing the rent or buy conundrum.
Many renters want to buy but don’t know where to start
“People often look at it purely from a ‘dead money’ vs ‘active money’ perspective, but it’s more than that,” says My Expert® Founder and CEO, Brett Wadelton. “It’s also about the lifestyle you want and the wealth you hope to accumulate throughout your life.
“Some that are renting might do so for the flexibility it offers, and that’s fine. But there are those who have the dream of buying a home who are still renting because they don’t think they earn enough, are struggling to save a deposit, or simply don’t know where to start.
“Once we sit down with them, review their situation and work out a saving plan, it’s incredible how many of these people we’ve been able to help start their home loan journey and ultimately end up purchasing a home.”
Advantages of Renting
The most obvious advantage to renting is flexibility. As a tenant you can more freely relocate from home to home and area to area once your lease expires, if that’s what you prefer to do.
Some renters may associate buying a home as a risk they don’t want to take on (although there are personal insurances to protect your home and income that can be put in place to negate this risk). And renters don’t have maintenance costs, repair bills or Council rates to pay.
Renting can also be a cheaper alternative to buying, particularly for young professionals that may prefer the lifestyle that inner-suburban and city locations can provide. Many in this situation can’t afford to buy in these areas, but can afford to rent there (albeit in a unit or apartment, rather than a house).
In recent years, there’s also been a growing trend where children are staying home to save for and buy an investment property, put in a renter, then save a further deposit and use the equity in the investment to buy and move out into their own home.
Advantages of Buying
One of the main benefits of having a mortgage is that it encourages you to save.
“When you’re renting, saving is optional, and if you’re not saving and spending your money on other things like holidays and cars, especially early on in your adult life, the chances are you’re not going achieve the discipline around saving that you might otherwise have as a home owner,” says Brett.
“I fully encourage our clients to live and enjoy their life, but with a bit of structure and future planning around what you’re doing with your money – like saving a deposit and buying your first home, then a bit further down the track using the equity in your home to buy an investment property – you’re going to end up in a far stronger financial position than a renter over your lifetime.”
Home ownership also brings intangible but important benefits, like a sense of stability, settling down and belonging to a community, the pride that comes with ownership and the equity you can build for future investments.
“All of our home loan advisors get a huge kick out of helping people who come to us on the renting treadmill to buy their first home,” says Brett. “And even more so when these people go on to purchase one or even several investment properties.”
Disclaimer: The information provided in this blog is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this blog you should consider the appropriateness of the information having regard to your objectives, financial situation and needs, and it is important for you to consider these matters and to seek appropriate legal, tax and financial advice.
Pinnacle Advisory Pty Ltd. Trading as My Expert® Wealth ABN 36 638 505 950 is a corporate Authorised Rep of MG Wealth Advisors Pty Ltd AFSL n. 496089 ABN 20 617 338 137.