Should you buy or rent?
At some point in your life, you’ve probably asked yourself: is it better for me to continue renting or to buy a home of my own? The buy vs. Rent question is a notoriously though one for consumer, and it’s not just a financial decision; in fact, it can be a very personal choice. Weighing all the factors, and looking to your own needs – paired with the proper financial analysis – will help you make the market decision for your particular situation and lifestyle. Wise Real Estate Advice has put together a guide to walk you through the myriad thing you ought to consider when confronting the buy vs. rent questions, so you can come to the decision that’s right for you.
Whether buying is a better financial investment than renting depends on many factors, but in particular, it depends on two things:
- How fast prices and rents rise in your area.
- How long you stay in your home.
Location, Location, Location.
Every Buyers Agent will admit this can be very useful saying, remember across Melbourne the answers will change from one neighbourhood to another. For example, in the super high-priced Brighton market it still makes more sense to rent, since it takes close to a decided for a return on your investment of course where as an area like Altona in the west of Melbourne ROI could be realized allot sooner based on capital growth and the current interest rate.
If you don’t plan on holding onto the home you’re buying for, at a minimum, the high cost of buy (stamp duty’s), then you’re probably much safer renting. On the other hand, if you know you’re going to raise a family in a neighbourhood where all the numbers point towards the purchase paying off over a 10 year period, then it should be a no brainer to buy – if, of course, you can afford it.
Can I afford it?
Your analysis should take into account your personal situation along with the potential down payment, mortgage and rental payments, buying and selling costs, stamp duty, rates, insurances costs and maintenance costs.
The costs you incur when you go initially purchase the property, solicitor/conveyancer fees, loan establishment fees, building and pest inspection, a buyers agents / buyers advocates, stamp duty’s etc.
Monthly or yearly expenses, including mortgage payments, insurance, council and water rates, renovations and maintenance costs.
Lost Opportunity Costs
Figures tracked for the initial purchase costs and for the year costs. Essentially, how much you could have made if you had invested the down payment elsewhere instead of buying your home.
The rental (usually first month’s) bond, the cost of relocating on an average of every 2 to 5 years.
The monthly rent and the cost of renters insurance.
Lost Opportunity Costs
Calculated each year for both your initial costs and your yearly costs. How much you could have made if you had invested that money elsewhere.
What’s your lifestyle?
It’s important to remember that purchasing or renting is as much a lifestyle decision as it is a financial one. In addition to your financial situation, things to consider when buying include how mobile you will be, your marital status, your career goals and even your personality.
Home ownership invariable comes with more responsibility than renting a property, and this might not be for everyone. If you can’t keep up a house, and you can’t afford someone else to do it for you, that don’t buy. You’ll have a dilapidated, depreciating home in no time. Ask yourself truthfully, ‘Is the purchase of a house a responsibility I’m responsibility I’m ready to take on?’ At the same time, you may be much happier having that quintessential slice of the Australian dream, a home of your own. It gives you the freedom to customize the home and landscape as you please, and you can add whatever you like: garden, pool, shark tank, you name it. There’s something special about that, and it may be worth living a more frugal life now to be able to afford it.
If you don’t want your money tied up in a home, and prefer to use it on vacations, cars or anything else in the immediate future, than that’s a lifestyle choice that may affect your decision. ON the other hand, buying a home gives you the opportunity to make a lot of money if your equity increases. Equity is the difference between the amount the house is worth and the amount you still owe on the mortgage. You will build equity as you pay off your mortgage, but there’s also the change that you could lose equity if the home’s value declines. This becomes a major concern if you want to sell or need to take equity out of the house to finance your lifestyle.