Renting vs Buying

[Guest guest30085]

Inspired by another thread ....

 

 

Ive seen a few comments about renting (they referred to Oz in particular but Im talking more in general) and to be honest I can't wait to no longer have the responsibility for a while. Im planning on renting for quite a while when I move over, of course there are some problem agents/landlords and I know you have to ring up to gain permission to have a pee with some of them .

 

But I've had a mortgage since my early 20s and the thought of just being able to commit for 6-12 months in any one place suits me just fine for the foreseeable future. I've had enough of renovating houses, struggling to pay for boiler repairs etc and then day-trippers when you try to sell your property. Oh! also when I look at my annual mortgage statement and realise just how much Ive paid in interest compared to capital payments.

 

I know some think renting is just 'paying somebody else's mortgage but I think it does offer a lot more freedom than buying. Obviously factors such as a young family may impact on your choices (in you can afford a mortgage that is, dependent on where you live). But, does owning a property make you feel much more settled? For me, it just feels like an additional stress, but that may be the stage I'm at in life and the fact my only child is grown up now.

 

Just curious as to how others see it?

[Guest Andy]

I think it depends on the circumstances. When we went into rented in preparation to move to Australia 4 years ago we had sold a house we had renovated paid off a huge mortgage and had a good lump sum in the bank and renting for a year seemed like heaven as there was no pressure and i didn't have to do anything to the property. However i think if you are renting after selling and have no capital then i feel the pressure would be on to get back on the ladder before it moves on and you cannot afford to,also having a mortgage can sometimes feel like a ball and chain and the relief when you pay it off is massive, so in a nut shell it depends on your circumstances. Great question by the way.

[wakeboard1980]

For us we are glad to finally own our own place. Yes we are spending a lot on the interist part of the loan but you can't get away from that. I like the fact that everything we do around the house will benefit us and not te landlord. Our last rental I fixed up all the gardens as they were a disgrace when we moved in. I got material from work to do it but I will never get the time back, now every bit of time and effort I put into our place makes me feel like its worth it.

 

looking at it from your point of view I understand your idea of not being tied down and that way you can try a few places/areas before you decide where to settle down.

[caramac]

We own a property in Kent which we let out, so we do have a foot on the ladder, so to speak. However, when we knew we were coming up here for a few years (prob max 5) we decided to rent. The size of house we need would mean a stamp duty rate of at least 3%, possibly 4% and we didn't want to give the govt any more money! Also, buying a house in 2011in an uncertain market could have meant we lost more when we came to sell, so renting made sense for us.

The benefits include being able to live in a beautiful house we couldn't afford to buy, on a huge estate we can walk over, having all the upkeep and servicing of appliances paid for by the landlord - we get our water from a spring and last year there was a problem with it which meant putting in a £5k filtration system which was (eventually) done for us. That alone has meant we're better off financially than we would have been if we'd bought it, only to sell in another couple of years. Any problems the landlady has to sort out. She's often not happy to do it, but tough, she knows it's her responsibility. She's ok with us now, but can be horrible to some of the farm workers who live in other properties she owns. She never bothers us, we can do what we like to the house on terms of holes in the walls, decorating etc and we never have any inspections.

We have all the benefits, but no hassle of upkeep. There's a lot to be said for it!

When we eventually decide where to settle we will buy somewhere, but I'm very tempted to buy something very new and shiny rather than the usual 300 year old houses we go for..

[Rupert]

I still rent and I look for the positives in it, although ultimately I will prefer to buy. The positives in renting are the flexibility and not having to worry about repairs and maintenance. I don't look at it as dead money, I look at it as a cost of living like any other cost of living.

[Bobj]

Well now, Jo and I rented 2 houses over 5 years and both were taken back by the landlords as they wanted the properties for themselves. So we bought an old house, lived in it and 16 years later sold it for 3 times our original purchase price. Went to the bank and asked for a 20 year mortgage to build our retirement home and paid it off in 4 years.

 

If you can, BUY.

 

Here endeth the lesson.:wink:

 

Cheers, Bobj.

[jac2011]

Id owned my own home since I was 20 and loved the security of it being mine, however after buying an old Victorian terrace which constantly needed work (2 boilers in 2 years) I was so relieved to rent when I moved out. Its lovely knowing at any time I can up and leave and relocate, we are in a lovely village in a lovely house but would love to be closer to school so, in February we are moving out to be closer to school.

 

Despite all this, and the freedom and financial rest renting has given us at this time I am now desperate to own my long term family house in Australia. I think renting is good but possibly not forever.

[Xenon4017]

For timescales longer than 5 years, you save money by buying.

 

A lot of it comes down do whether you can find the right house for rent. There are some good houses and landlords, but also some real shockers. As a recent arrival, you have a certain amount of time pressure so you inevitably end up with a sub-optimal rental. As you stay longer you get more of an idea of what's out there.

 

But I disagree that rent money is dead money. Any more than renting a camper van for 2 weeks is dead money. You pay to use something for a temporary period of time.

 

We used to rent (not in Oz) all the time. 7 years with one landlord, 11 years with another. No hassles with inspections or decorating. The place felt like ours. The only difference was that we didn't accumulate any equity in the house over that time.

 

We bought here primarily because we couldn't find anywhere similar to rent at the time. The cost of the mortgage interest, plus water, repairs etc is a bit less than what we'd pay in rent if we could find somewhere equivalent.

 

You're right that renting give you flexibility. Especially if you decide to buy later. Not having to sell one house to buy another is a real bonus; don't waste that if you ever decide to buy!

[surfndirt]

Rent where you wanna live and buy where you wanna invest.

 

Example, my last place in Texas - USD$60,000; rents for USD$1200 a month. 5x of em and the world is your oyster; don't really have to work any more :-)

 

Example, rent on our current two bed working class terrace in Albert Park, Melbourne = AUD$550 a week. Buy it = AUD$1200 a week. I honestly think people in Melbourne are actually mentally retarded.

[Chortlepuss]

Got a house in UK so happy to rent here. Now live in a house 6k from city with pool - Sure beats living in anything we could afford to buy. Early days yet, but we seem to have a decent landlord and managing agent which really helps. It has taken a long time to find a decent rental - I'm shocked by the quality of most rentals I've viewed in Qld and how many tenants get treated like some sort of underclass. I'm also puzzled, given house prices particularly in Sydney how people can afford to buy to let, even with negative gearing...

[Xenon4017]

 

Example, my last place in Texas - USD$60,000; rents for USD$1200 a month. 5x of em and the world is your oyster; don't really have to work any more :-)

 

Example, rent on our current two bed working class terrace in Albert Park, Melbourne = AUD$550 a week. Buy it = AUD$1200 a week. I honestly think people in Melbourne are actually mentally retarded.

 

Long term, there is a corelation between rent price and buy price. They can temporarily deviate for short periods, but ultimately the two things are inextricably linked. You've quoted two extreme examples. In Texas, the house price is sure to rocket, assuming you didn't just hit the last two mug renters in the state. A 25% yield is sure to attract investors.

The example in Melbourne should lead to rent increases. The issue there is that while there is no ceiling on how much someone will pay to buy a house, those who rent do have a ceiling above which they won't pay. In other words, purchase price is governed by people's willingness to borrow; rental is governed by people's ability to pay. I'm surprised by the disparity in your examples though. Who would rent in Texas, and who would buy in Melbourne?

[Guest littlesarah]

If it were purely about investment strategy, I know we'd be better off renting and investing the difference between rent and a mortgage. However, for us it came down to the fact that it is very hard to find decent rental properties for an affordable amount in our neck of the woods, and also that we are both pretty particular about what we like/dislike in a home, and buying gives us the freedom to create a home we enjoy living in. Hopefully we're adding value with the renovations we're doing, but honestly I doubt that we would get back what we've spent on materials etc because we haven't necessarily gone for the cheapest, and if you factor in mortgage interest we probably could have made more by investing in the share market.

 

I'm not 'mentally retarded' (though I'm not sure what you mean by that phrase, it's a bit ambiguous, to say the least) - I think that for a lot of people finding a home is about more than just money. I am under no illusions about the financial reality of our decision to buy our house, but I'm comfortable with our decision because we are getting exactly what we wanted from our home.

[Xenon4017]

I'm not 'mentally retarded' (though I'm not sure what you mean by that phrase, it's a bit ambiguous, to say the least) - I think that for a lot of people finding a home is about more than just money. I am under no illusions about the financial reality of our decision to buy our house, but I'm comfortable with our decision because we are getting exactly what we wanted from our home.

 

I think the post was comparing investing in Texas compared to Melbourne. Texas gives 25% gross yield, whereas Melbourne gives a negative yield.

 

When it comes to the house you live in, there are many other factors to consider. Not least of all is that most people spend an awful lot of time at home! One couple I know practically live in theirs

[Peach]

In other words, purchase price is governed by people's willingness to borrow;

 

I would phrase that 'purchase price is governed by the bank's willingness to lend (and whatever government incentive is offered)'.

[Guest]

Brits are somewhat obsessed with home ownership. Or lack of it. I found it very odd after living on the continent for many years and being used to renting being the normal thing for many till they were much older. And even then many still rented. Usually when they did then buy a place of their own that was it and they would rarely move on or try to upsize or anything. I only had one friend who owned his apartment and then it was more like s studio. Everyone else rented and we were all in our 20's and early to mid 30's.

 

I found renting gave me a great deal of freedom in my 20's and allowed me to move round Europe and experience living in a few countries. Sure sometimes leases were cut short or something but for the most part (at least living on the continent) rentals were long term and often people were in them for years and made improvements or changes to the apartment or house and so on.

 

UK renting is a very different kettle of fish and I am not overly keen on it but having said that, we did fine while we were in that market. The key thing for us was we looked for a landlord who didn't ever need to live in the property and had bought it purely as an investment property. That way were knew we were more likely to be ok for a longer timeframe had we needed it. As it was, moving to Aus was our plan and renting filled a gap for us at that point and gave us the freedom to move when we wanted to, not have to sit and wait for a house to sell or worry about renting it out if selling didn't happen etc. It was a big freedom and relief not to have that worry.

 

I'd be happy to rent here in Aus for a while but I would like to buy a house sooner rather than later. I find the rentals either crappy and/or expensive, at least in the areas we are looking at buying. And I also don't like the feeling of having to keep going through finding a new place to live if the landlord decides not to renew or sells or something. If we are staying in the longer term, buying seems to make more sense here. Plus I don't really like the rental market here in terms of viewings and all that. And some of them are hideous in terms of decor and kitchens/bathrooms. Dated and from a decade before even I was born :laugh: If I am going to be in a rental for 6 months, fine, I'll live with it, but longer term, having a kitchen with units from the 60's or a bathroom suite from the 70's doesn't appeal. At least not at my point in life. I'd rather have more modern fixtures and fittings and have a kitchen laid out how I want it and all that. Same for decor. We didn't move here with a view to being in rentals for the long term and we actually want to be stuck as it were with a mortgage and all that at this point in our lives. Our son is young and its important to us he have a home that is his home, our home, not someone elses iykwim. A room of his own we can decorate how he wants, make changes to and everything else without worrying about reading the small print or seeking permission or worrying about putting things back how they were when we leave. Same for the rest of the house. Sure some landlords are easy going but its still their house, not our own.

 

I wish there wasn't such pressure on younger people to get on the 'property ladder' as often it can take a few years to build a career or find a job in an area and so many other things. I think having freedom and renting for a good 10 years or so or through your 20's and even into your 30's isn't a bad thing but so many people seem to want to be home owners.

[Xenon4017]

I would phrase that 'purchase price is governed by the bank's willingness to lend (and whatever government incentive is offered)'.

 

Well, yes, there's more than one way to describe it:

 

Banks willingness to lend.

 

Buyer capacity to borrow (at current interest rates)

 

Australians preparedness to borrow more than they can repay.

 

The essential point is, all of the above have an element of speculation built in.

 

But when you rent, you pay x dollars for using the house for 1 week. You don't expect to get any money back; all of the utility and enjoyment is used up in that week. Like renting a car, or booking a hotel. People here tend to believe that buying a house will give them not just a roof over their head, but also furnish them with a copper bottomed savings plan to boot. And that this investment will outstrip all other forms of investment. Forever. It's like anyone who buys a house has just bought a winning lottery ticket. All they have to do is put it in the cupboard and wait for the opportune moment to cash it in.

[flag of convenience]

Not forgetting that debt is what binds folk to unpleasant work places. We are paying a very high cost here in Australia for the changes that have been imposed on us in recent years.

Renting is fine as it goes but again the pressure is there to get one's own. Australia has some of the worst protection for renters in the developed world, as such is not an entirely favourable experience.

But everything is so over valued to buy on the other hand. How many years of servitude to pay of a loan? Laid back country? Yeah right.

[VERYSTORMY]

It is only now we are buying / building that I have finally started to feel settled in Oz.

 

The issues with renting are numerous. Firstly, in Oz a tenant can be thrown out fairly easily - so you might settle in a house only to find you can not stay there.

 

The planning for long term future is important. I don't want to have a mortgage or rent when I retire.

 

We have always hated the inspections. Our place is inspected by the agents every three months and it feels like a serious invasion of privacy.

 

I hate that we can not make changes to the house and when things have gone wrong, they haven't been sorted quickly enough - it took them nearly 2 years to sort out a badly leaking roof that flooded our bedroom repeatedly.

 

By building we are getting a house that suits our needs and wants.

 

My recommendation is to rent initially to see where you like and then look at building or buying. Building here is a good option as you get a house to your design. It can also be a good investment. We are spending just over $500k. But, the agent estimates it will be worth $650k the moment it is completed. Though did get a very good deal on the block of land as the owner only recently bought it for twice what we are paying but then found himself in a position of having to sell.

[Eng32]

Inspired by another thread ....

 

 

Ive seen a few comments about renting (they referred to Oz in particular but Im talking more in general) and to be honest I can't wait to no longer have the responsibility for a while. Im planning on renting for quite a while when I move over, of course there are some problem agents/landlords and I know you have to ring up to gain permission to have a pee with some of them .

 

But I've had a mortgage since my early 20s and the thought of just being able to commit for 6-12 months in any one place suits me just fine for the foreseeable future. I've had enough of renovating houses, struggling to pay for boiler repairs etc and then day-trippers when you try to sell your property. Oh! also when I look at my annual mortgage statement and realise just how much Ive paid in interest compared to capital payments.

 

I know some think renting is just 'paying somebody else's mortgage but I think it does offer a lot more freedom than buying. Obviously factors such as a young family may impact on your choices (in you can afford a mortgage that is, dependent on where you live). But, does owning a property make you feel much more settled? For me, it just feels like an additional stress, but that may be the stage I'm at in life and the fact my only child is grown up now.

 

Just curious as to how others see it?

 

 

I thought the the same at first, fed up of renovating, thought renting would be less of a responsibility for a while. But now after 18 months in a rental....I hate it, can't put our pictures up on the wall, my Daughter can't have her own bedroom the way she would like it to make her feel more at home, inspections every 3 months feels so invasive. Can't wait to find our first house here, and prices have dropped so much in our area since we moved here so it's the right time and the final piece to our jigsaw.

[surfndirt]

If it were purely about investment strategy, I know we'd be better off renting and investing the difference between rent and a mortgage. However, for us it came down to the fact that it is very hard to find decent rental properties for an affordable amount in our neck of the woods, and also that we are both pretty particular about what we like/dislike in a home, and buying gives us the freedom to create a home we enjoy living in. Hopefully we're adding value with the renovations we're doing, but honestly I doubt that we would get back what we've spent on materials etc because we haven't necessarily gone for the cheapest, and if you factor in mortgage interest we probably could have made more by investing in the share market.

 

I'm not 'mentally retarded' (though I'm not sure what you mean by that phrase, it's a bit ambiguous, to say the least) - I think that for a lot of people finding a home is about more than just money. I am under no illusions about the financial reality of our decision to buy our house, but I'm comfortable with our decision because we are getting exactly what we wanted from our home.

 

Sincere apologies I was not pointing that mentally retarded brush at you at all. In fact, a very extreme turn of phrase so I retract it in it's entirety. What I mean is I think a section of the public in Melbourne / Aussie are just basically daft.

[gpo1971]

I think renting is a good option while people determine whether Australia is for them or not. I cringe whenever I hear a story about somebody buying a place before they have even lived here or have lived here 2 minutes; recipe for disaster if you ask me. We rented for over 2 years and that seemed about the right length of time.

We have found that our preferred house styles and layouts, favourite locations, needs, wants and priorities etc. have changed time and again whilst we’ve been here, and are nothing like what they were when we first arrived 5 years ago. We had a mind to transplant our UK house over here but it doesn’t really work like that.

Getting lumbered with a mortgaged property that you no longer want can be an expensive lesson. But then I wouldn’t want to rent for the rest of my life, for me it does leave a nagging unsettling feeling.

[Skippy1]

I thought the the same at first, fed up of renovating, thought renting would be less of a responsibility for a while. But now after 18 months in a rental....I hate it, can't put our pictures up on the wall, my Daughter can't have her own bedroom the way she would like it to make her feel more at home, inspections every 3 months feels so invasive. Can't wait to find our first house here, and prices have dropped so much in our area since we moved here so it's the right time and the final piece to our jigsaw.

 

 

Curious to know what part of QLD as we are moving over in March.................thought property was rising everywhere

[Rupert]

I thought the the same at first, fed up of renovating, thought renting would be less of a responsibility for a while. But now after 18 months in a rental....I hate it, can't put our pictures up on the wall, my Daughter can't have her own bedroom the way she would like it to make her feel more at home, inspections every 3 months feels so invasive. Can't wait to find our first house here, and prices have dropped so much in our area since we moved here so it's the right time and the final piece to our jigsaw.

 

You are probably just in the wrong rental, or you maybe need to assert yourselves a bit more. And of course goes without saying that you need to be a good tenant and build up some credit, landlords like good tenants and will try to hang on to them rather than go into the unknown

 

Can't put pictures up? I have put loads of pictures up, you either use those sticky things which are very strong or you just make good at the end, or you just leave it, everyone needs picture hooks, it doesn't take much. Just ask about the room for daughter?

 

I have been renting my house for 3.5 years and have been inspected twice in all that time, there is no need to put up with three monthly inspections. If you are a good tenant and make your displeasure known I am sure they will back off.

 

I am a fabulous tenant, I do everything expected of a good tenant and they know they are very lucky to have me. I know they are very lucky to have me, no rent increase for 4.5 years (we just signed another year) and I won't put up with any silly nonsense like 3 month inspections and no pictures.

[Gbye grey sky]

You are probably just in the wrong rental, or you maybe need to assert yourselves a bit more. And of course goes without saying that you need to be a good tenant and build up some credit, landlords like good tenants and will try to hang on to them rather than go into the unknown

 

Can't put pictures up? I have put loads of pictures up, you either use those sticky things which are very strong or you just make good at the end, or you just leave it, everyone needs picture hooks, it doesn't take much. Just ask about the room for daughter?

 

I have been renting my house for 3.5 years and have been inspected twice in all that time, there is no need to put up with three monthly inspections. If you are a good tenant and make your displeasure known I am sure they will back off.

 

I am a fabulous tenant, I do everything expected of a good tenant and they know they are very lucky to have me. I know they are very lucky to have me, no rent increase for 4.5 years (we just signed another year) and I won't put up with any silly nonsense like 3 month inspections and no pictures.

 

Not surprised to see this. I am sure that no landlord would want to get on the wrong side of Rupert lol.

[caramac]

You are probably just in the wrong rental, or you maybe need to assert yourselves a bit more. And of course goes without saying that you need to be a good tenant and build up some credit, landlords like good tenants and will try to hang on to them rather than go into the unknown

 

Can't put pictures up? I have put loads of pictures up, you either use those sticky things which are very strong or you just make good at the end, or you just leave it, everyone needs picture hooks, it doesn't take much. Just ask about the room for daughter?

 

I have been renting my house for 3.5 years and have been inspected twice in all that time, there is no need to put up with three monthly inspections. If you are a good tenant and make your displeasure known I am sure they will back off.

 

I am a fabulous tenant, I do everything expected of a good tenant and they know they are very lucky to have me. I know they are very lucky to have me, no rent increase for 4.5 years (we just signed another year) and I won't put up with any silly nonsense like 3 month inspections and no pictures.

 

 

Tbf I think you've been lucky. We've rented five houses in Aus and in all but one we've had to put up with three monthly inspections. In most cases it's in the contract and very much much depends on the landlord or agent you get re how fussy they are. I remember one of ours complaining that there were some toys on the floor when she came round - I had three under 5s at the time. The place was immaculate - I even had to wash the walls before she came round and try to get rid of any marks with jif! It was so stressful living there and I hated it. I wouldn't mind, but all the appliances were outdated and not really safe and my husband almost killed himself when he walked into a glass door which broke into long shards - I had no idea that safety glass wasn't a legal requirement in rental properties. Thank god it wasn't one of our children who walked into it!

The second one we had was completely different - the landlords had moved to Canberra and we could do what we liked within reason. It definitely helped us feel more settled and that the house was 'ours'.

We've got used to agents and landlords trying to rip us off re getting our bond back too. In our house in Sydney I took over 200 photos which I emailed to the agent when we moved in, showing every mark, hole, bit of mould, weed, everything. When they tried to keep $2k of our bond when we moved out I reminded her of the photos and miraculously we got the whole lot back.

 

I remember phoning the tenants association in Sydney about the landlords just turning up at weekends with no notice and they were very clear that when you pay rent you are paying for the right to live in that house in peace as though it's your own. Didn't make one bit of difference and they'd still turn up at 8 am on a Saturday morning! They just pretended they didn't understand us!

 

I agree about the pictures. We used the sticky hooks with no problem -they're really strong, but peel off pretty easily when you want them to. You can also use the metal ones and just fill in the holes when you leave.