# Rent From Parents or Buy Own House?



## Spanning Tree (3 September 2008)

Hi, I have just finished uni and will be starting a $45,000 per year job next year. I will be working in the Melbourne CBD. I currently live with my parents at Scoresby, which is far away from the CBD, so I have to drive to a station and catch public transport. I pay rent/board of $150 a month.

I told my friend Frank that I was paying $150 a month and he told me that "rent is dead money" and "you should buy a house and get equity, mate."

Spending only $150 per month on rent, I save up quite a bit while I work part-time at the moment, so with the spare money I make I buy shares once I have about $5000 cash or more. I'm a Warren Buffet-style investor, choosing to buy and hold, although I buy a lot of shares in big companies like BHP Billiton.

Which is cheaper? Should I pay off my parents $150 per month and live with them while continually saving up and buying shares or should I buy a house and live by myself? What do you think I should do?


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## gav (3 September 2008)

Just to put things in to perspective, I earn less than you, and I am renting in a pretty cheap area at the moment.  I live with 2 of my brothers, and my monthly share of the rent is $450.  Gas bill is around $70, electricity is at least $180, water bill around $180 also, and they come every 3 months.  Phone line rental is $20 per month, internet is $80 per month.  Then of course, food....

$150 per month is NOTHING.  If that $150 includes your meals too, and you dont mind catching the train to work, then I'd say never move out, ever!


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## robots (3 September 2008)

gav said:


> Just to put things in to perspective, I earn less than you, and I am renting in a pretty cheap area at the moment.  I live with 2 of my brothers, and my monthly share of the rent is $450.  Gas bill is around $70, electricity is at least $180, water bill around $180 also, and they come every 3 months.  Phone line rental is $20 per month, internet is $80 per month.  Then of course, food....
> 
> $150 per month is NOTHING.  If that $150 includes your meals too, and you dont mind catching the train to work, then I'd say never move out, ever!




hello,

great words Gav, keep putting it away Spanning Tree

go hard and tight fisted all the way, and in no time things will be cool

thankyou
robots


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## prawn_86 (3 September 2008)

It depends on how you value your independence.

To me it is priceless and my old man would have to pay me to live there for a period of more than 6 months. Plus living out of home (for me) is heaps more fun and a lot more responsibility.


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## white_goodman (3 September 2008)

get a granny flat at your house, independence to a degree and cheap  i love it


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## nunthewiser (3 September 2008)

Nah m8 , give up them easy living ways and opt for the rock nroll lifestyle, get a cheap house , fill it up with mates , get your folks to guarentor your personal loan to fund ecessive lifestyle , get heaps of chicks , throw heaps of partys , keep going till you run out of cash then move back home and veg in your room with a big cheesy grin playing the playstation for 4 years .

that my friend is my advice for you


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## skyQuake (3 September 2008)

nunthewiser said:


> Nah m8 , give up them easy living ways and opt for the rock nroll lifestyle, get a cheap house , fill it up with mates , get your folks to guarentor your personal loan to fund ecessive lifestyle , get heaps of chicks , throw heaps of partys , keep going till you run out of cash then move back home and veg in your room with a big cheesy grin playing the playstation for 4 years .
> 
> that my friend is my advice for you




And dont forget to invite us along


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## theasxgorilla (3 September 2008)

Spanning Tree said:


> I told my friend Frank that I was paying $150 a month and he told me that "rent is dead money" and "you should buy a house and get equity, mate."




Lets face it, there is a certain dignity to not living with your parents...however, and this is a great big however, in general terms their generation has been the greatest beneficiaries of the economic conditions that have made getting on the property ladder considerably more difficult for 1st home buyers.  If they can do something to help you get a leg up on to the first rungs of the property ladder then I should think that is only fair.

You've heard the whole 25 is the new 18, 32 is the new 25?  I guess that is just something to keep in mind in case you start getting heat from other oldies about, "and so-and-so's son is still living at home, can you believe it???".  Nothing to be ashamed of IMO.  

The "rent is dead money" is parrot talk.  Frank buys a house and rents money to "control" it.  The RBA raises or lowers his rent.  If he can't pay down the principal fast enough, or the market doesn't hand him capital gains then he has stagnant or evaporating equity and an extra base to cover: the reponsibility for the outgoings on the asset he has signed-up for control of.

Interest is dead money too, and at almost 10% thats a lot of charity for the RBA.


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## gfresh (3 September 2008)

Rent money is not dead money if you are investing the difference in something else worthwhile, which is what you seem to be doing. 

Personally, I think $45k owning a home these days is stretching it (~$700/wk clear) at the moment. Do you have a partner, or somebody else to split the repayments with?

Mortgage repayments are likely to be too high on an entry level $300k property ..assuming $280k loan, that's approx $540/wk repayments @ 9%... I don't think there is any way the bank would give you a loan for that much, with clear income of $700. 

You also need to work out carefully (speak to a home owner, or even renter), about the extra costs you are up for. Rates, water, phone, mobile, internet, electricity, home insurance, contents insurance. If you add them up, that's probably another $200/wk on top of the mortgage. 

Then assuming you have even a cheap car to get you around when you are not working, you're looking at about $700 rego, then $400 insurance, and then maintenance.

I'll be blunt, there's no way you can afford it.. If you share you may be able to do it, but remember people will come and go, have annoying girlfriends over each night, give you the #@$#, etc, so that is not always ideal. 

You never know with your first job either, maybe you will hate it, or will be relocated. If you save and save for a year you'll probably have a better idea, and see where things are taking you.


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## theasxgorilla (3 September 2008)

What I hear you saying in there somewhere gfresh is live at home and invest the difference in a decent girlfriend so you can afford to move out


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## Julia (3 September 2008)

Spanning Tree, I wonder if you saw the recent programme on (I think) SBS "The Nest".   It was about several varieties of your situation.

All I'd say is that, particularly if food is included, you are well and truly taking advantage of your parents if you're only paying them $150 per month.
Maybe they are happy with that, in order for you to be able to save.
But I guess I'd hope you'd at least be aware of how cheap it is.  Might be nice to take home the odd bunch of flowers for your mum, good bottle of wine for dad every now and again, at least.


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## son of baglimit (3 September 2008)

nunthewiser said:


> Nah m8 , give up them easy living ways and opt for the rock nroll lifestyle, get a cheap house , fill it up with mates , get your folks to guarentor your personal loan to fund ecessive lifestyle , get heaps of chicks , throw heaps of partys , keep going till you run out of cash then move back home and veg in your room with a big cheesy grin playing the playstation for 4 years .
> 
> that my friend is my advice for you





mr nunthewiser - or should i say COREY WORTHINGTON !!!!

you have no mates (now), ya folks have written you off (and rightly), chicks avoid you, and you probably waste your days at fountain lakes.

and buy a new coat will ya.

(back on topic) - $150 A MONTH - stay there as long as humanly possible. end of story.


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## gfresh (3 September 2008)

asxgorilla said:
			
		

> What I hear you saying in there somewhere gfresh is live at home and invest the difference in a decent girlfriend so you can afford to move out




haha, maybe  preferably one that earns more money than you do, and you'll be a happy man


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## dotocom (4 September 2008)

houses are a liability considering all the taxes and interests you're bound to pay. If I had a place to stay for 150(?) a month, id stay there, use the cash to invest in shares/savings, generate secondary earnings from that, and ultimately buy the house in full cash.


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