Steve rents but is it better to buy?

Hi Dan260,

I have often struggled with this question – and I think in general terms the answer is – it depends on your particuliar cercumstances.

Up until now I have always lived with my parents – so it’s not been such an issue – however I have recently been forced to move out, and was presented with the option of renting or buying. For me, the choice was to buy. The biggest reason for this was because of the market I am in. Being in Tasmania meant that I could actually buy a reasonable property with a weekly repayment considerably less than what I could actually rent that same property for.

For example:

Currently loan repayment is $86.00 a week.
Rental of the same property is $130 a week.

On top of that payment i have been able to put two other people in to the property (being a 3 bedroom) charging them $65 per week. Which means this money goes towards my loan and as a result will be paid off in 5 years instead of 25. Everyone wins.

The other thing I liked about this option was that I could then borrow against the equity in the property to do “other” things with. It looks good on the balance sheet when I go as guarantor for our property investing company when obtaining finance. Additional income etc.

So basically – it would depend on where you live and the current market. If you can buy a property (which meets the 11 sec solution) in your market for less than the current weekly rent, then financially that might be the best way to go. And having said that I strongly believe that this can be done in any market in Autralia – if you really try hard enough and get creative.

A simplistic view but it might help!

Regards,

Tim Wilson.

“Poverty is not an option”

Hi,

The reason why I rent is because in order to get to my goal by the chosen date I need to have my capital working in my investing deals rather than tied up in a home.

E.g.

If I bout a home for $300k on a 80% LVR, then $60k + closing costs is tied up at a 0% Cash on Cash Return (although I may get cap. gains).

However, by using wraps and other strategies I can get >50% returns. Then when I reinvest my profits (as Dave and I do… I live on <$500 per month from my wife!) in order to compound my returns.

Sure, I could retire now and comfortably never work again… but I am not yet at my money goal.

So in the meantime I am trying to work a little less each month while also accelerating my earnings.

Hope this has helped.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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