Do I rent or buy?
So, do you buy your own home or rent from someone else? Lots of people will offer you an opinion about which one is better and, realistically, both have benefits. It comes down to your circumstances – the lifestyle you want, your goals and plans for the future and the state of the real estate market. There is no doubt the Australian Real Estate market has seen remarkable growth over the last twelve months; Sydney alone saw an 8.1% increase. Here are some considerations to help you decide if you’ll be a buyer or a renter.
Renting your home – the advantages
Choose your own adventure
If you choose to rent, you can choose exactly what you want, where you want and when you want. Moving to fit your lifestyle is fairly simple, whether you need to upsize, downsize or totally re-locate you simply need to find the suitable property. While there are cost associated with any move, there are considerably less costs for a renter moving than a homeowner.
You can still buy
Being a renter doesn’t mean you can’t invest in the real estate market. Your investment property may be a house you will never choose to live in but suits someone else perfectly. In this way you are gaining the benefits of owning a home (equity, an appreciating asset) without giving up on some of your lifestyle choices (location, size).
You can invest outside of property
A mortgage, you could choose to make other investments – stocks, bonds, ETFs or investment funds
Renting your home – the disadvantages
It may not be your choice to leave
If you own a home, you choose if you stay or go. As a renter, this power belongs to the landlord. If they want the house back for some reason, once the lease is up they can ask you to leave and you have no control over the situation. If this comes at the wrong time for you, it can be extremely inconvenient and yet there is little you can do about it.
How it looks might not be up to you
In terms of aesthetic, so long as everything is working there isn’t much incentive for a landlord to change the property. You just have to put up with fading paint or a colour that’s no longer in vogue. You also may not have much choice about hanging pictures or the internal fittings. While you can dress the property any permanent changes are not your choice.
The eternal rent cycle
If you opt to rent, then you’ll be paying rent for the rest of your life. While the cost of a mortgage decreases over time, rental payments will only get higher. This is a serious consideration as you get older and income becomes a fixed pension.
Owning your home – the advantages
It’s a pride thing
The great Australian Dream. We hear from the time we are kids. It’s almost a rite of passage and there is no doubt that owning a home gives a sense of accomplishment. It’s not a feeling you can get from renting – owning your home gives you a place to settle & you can use it in any way you want.
Value added
If you had bought a property in Sydney in 2010, you could have expected to pay about $575,000. That property now? Over $1,000,000. In the long term, house prices will increase, meaning the purchase of property provides you with a considerable asset. And, as my grandfather was fond of saying, “They’re not making any more land”, so while the stock market will go up and down and the housing market will fluctuate, you can back it in a house will always be sought after in the future, especially if you buy in a quality location.
Equity achieved
If you are a renter, you will know that at times, your rent can occasionally rise. Home ownership, however, can become cheaper in the long term, as you make inroads into the mortgage. And once you have paid off the mortgage, you have a greater disposable income, which can be a boon on later years when you may be on a fixed income such as a pension. As well, a house provides you with considerable equity should you need assistance in funding retirement.
An income source
Once the home is yours, there is the option of renting it out. This could be a long- or short-term rental but it provides you with flexibility should you be required to move for work or if you have the opportunity for extended travel.
Owning your home – the disadvantages
The costs are all yours
We have all heard of the ‘money pit’, and while that is the extreme there is no doubt that owning a home requires you to have some form of fund for emergencies. If the roof develops a leak or the hot water services goes or if a fence is in need of replacement – you have to cover all these costs.
Not as mobile
As a renter, once the lease is up, you can go and find somewhere else to live – re-locating is fairly easy. When you own the home you’re much more locked in. First there is the mortgage and then there’s’ the cost of moving (e.g., stamp duty, sales costs, marketing costs). As explored above, you do have the option of renting your home but this can also come with a range of issues (e.g., agent’s fees, poor tenants, vacancy rates).
No ‘fee-free’ zone
There are many costs associated with buying a home. As general rule, calculate 7% of the price of the property and this will give you a rough estimate of what your fees are likely to be. These fees can include stamp duty, real estate agent fees, insurances, land transfers, mortgage application. Other associated costs may include a building and pest report and legal fees for conveyancing.
Debt load
A mortgage is likely the biggest debt you will ever take on. This can be a real stress, especially through job loss or rising interest rates.
Whether you decide to rent or buy, the team at Amanda Banton Real Estate know the local market. We have a large range of properties for sale or rent and have the expertise to get you into the property of your choice.
