Greetings again everyone,
I had an interesting conversation with a fellow business associate on the plane home from Sydney last night about various types of investments, not least of course property. One thing she said intrigued me. She mentioned something about the so-called First Rule of Property Investing – “Always buy your own house first, then start buying investments.” Despite what I explained to her about how it’s more than likely that weekly mortgage repayments would be higher than weekly rent, thereby giving you access to more funds (in the short term at least…) to invest with should you rent, she remained unconvinced. So then, what would be some more reasons to initially rent rather than buy that aren’t necessarily so obvious? Incidentally, my conversation partner did mention something about potential tax advantages should one choose to buy rather than rent…
As always I look forward to your valued feedback
Gerrit GoerresI reckon its more of a case of going against the Australian dogma of home ownership. I don’t bother even trying to explain anymore why we rent when people ask us who also know we have a property portfolio. It’s a bit like trying to teach a pig how to sing, your wasting your time and you only annoy the pig.
Regards
Tony
PS the only tax break on your own home is the CGT expemption on saleHi Gerrit,
The First Home Owners Grant (and reduction in stamp duty in some states) is a compelling reason to purchase yourself a house first, even if you only live in it just long enough to qualify and then turn it into an IP.
Apart from this, it probably makes more financial sense to purchase IP’s and rent. Although purchasing a PPOR has less inherent risk and also has lifestyle benefits.
Regards
Alistair PerryHi,
Through pressure going about things the ‘normal’ way my husband and i bought our first home 2 years ago and after speaking with some experienced investors realised that we might be better off renting so we sold up our brand spanking new house (it was painful [blush2]) and opted to rent.
Advantage is our rent is partially tax deductible because we have a home office whereas the mortgage repayments on your own home aren’t.
It was a sacrifice but we figured a sacrifice worth making because we’ve been able to borrow alot more money than what we could have if we had our own personal mortgage.
Hope this helps.
Kim
Kim Anand
[email protected]“Money Can’t Buy you Happiness but it Does Bring you a More Pleasant Form of Misery”
HI Guys
i agree with those who say its better to rent. As long as you start to build a property portfolio. I’m very boring and believe in delayed gratification. Build your own wealth first then out of that add the nice things of life like your own home. Nice cars, big homes etc can wait till you have real wealth. We did it hard for many years, while we owned our home (Mortgaged) we always had cheap cars. a few years ago my car was a 1983 Commodore and my wife a 86 Ford. I planned to become a millionaire before i upgraded, sadly the car died a few months early. Yet it amazes me how many young people (i’m not that old 41) would be driving around in new cars (bought with debt).
So if you can rent till you’ve created wealth. By renting you will actually have more money to invest. This is especially true while the market is flat.
regards westan
Over 100 deals done in the USA in 2005
Buy in the USA email me at [email protected]I chose to rent a place. Where I live the ppty yields are very low, and there is high strata fees. Growth has also been low. When I started rented the place about 7 years ago, I considered buying there, but instead bought a similar priced proeprty in a different area. This has since tripled in value, while the place i am renting has only increased slightly.
I am probably saving about $20,000+ per year in renting, plus can claim additional tax deductions on hte investment property, plus I can claim one property as my main residence for CGT purposes at the same time.
Terryw
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If you want to live in a place that has low yields it makes sense to rent. Then (as Terry said) buy in a place that has higher yield and/or CG.
Steven. That can be very advantageous (depending how big your mortgage is).
You can move out and claim the interest, rates, insurance etc while renting it. My daughter did this for a while as she had a 2 bedroom unit and was finding the mortgage hard to handle. She rented it out and moved into a 1 bedroom for a while and was $100pw better off.
My wife and I live in the inner city and have a mortgage on this property. Our current home is getting too small and we are thinking of renting out our home and finding a bigger place in the same area to rent for us to live. Does this make financial sense? i also have a small cleaning business that i run from home. Please help!!
APerry wrote:Hi Gerrit, The First Home Owners Grant (and reduction in stamp duty in some states) is a compelling reason to purchase yourself a house first, even if you only live in it just long enough to qualify and then turn it into an IP. Apart from this, it probably makes more financial sense to purchase IP's and rent. Although purchasing a PPOR has less inherent risk and also has lifestyle benefits. Regards Alistair PerryWhat a lot of people don't realise is that you might still be eligible for the FHOG at a later date even if you start an investment property portfolio first. So you can wait and buy your PPOR when you are ready instead of doing it just for the initial cash outlay.
Cheers
Tom
I'm increasingly seeing people opt to rent and invest rather than buy a home to live in. The dollars just stack up better. However, I have noticed a trend to towards people purchasing a brand new home to live in as their first house and getting both the FHOG and new Home Benefits about $20k in NSW. Then they move out after the compulsory 6 months and rent whilst using the extra funds to pay down the mortgage more quickly. This enables them to get into their second investment property more quickly.
The traditional mindset get thrown out the window pretty quickly when people realise they will have more money in their pocket!
Hey Tom (or PLC), can you really buy an investment property first and then your PPOR later and still claim the grants?
I have just never heard of this and it will be very helpful to my situation if it is true.
Regards,
Matt.
If I was starting from scratch today I would rent and buy investment properties because you can normally live in a better suburb that you could afford to buy in and also buy investment properties of higher value because the banks will take the 80% of the rent into the calculation on how much you can borrow.
Hopefully if you buy in a good inner city location you will especially today get great capital growth.
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I am 99% sure you can do this …also if not legally married you can buy 1 in each persons name so that you get the FHOG whenever you buy a place, then when ready to buy the next the title goes in your partners name and she/he gets FHOG again. This is what we were able to do after I purchased with then wife… then divorced purchase in now partners name, received FHOG as hadn't purchased before!
Hi Matt,
The eligibility requirements for FHOG state that you cannot have purchased any property pre-GST (1st July 2000), nor purchased any property after that date in which you have resided in for at least 6 months (which basically are your investment properties).
If you meet the above criteria, plus the other eligibility requirements for your state, age, values, etc, then you are eligible for FHOG when you purchase your first PPOR in which you will live.
Cheers
Tom
This is NOT legal if you are in a defacto relationship.
If you are in a defacto relationship and one partner has had the grant (or purchased a PPOR previously) you are not eligible.
I wish we did not own our on PPOR now. Because of the large mortgage, we are really limited in how we can move forward with our investing. Unfortunately, I heard the 'renting is better than owning when you want to invest' too late. Although we could still sell, we are too settled with my mother living with us to do that now.
As other have said, if I was starting out today, I would rent while I built up my IP portfolio.
Cheers, Michael
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