Buying own home vs. investing

[Tysonboss1]

Disagree. It's not reasonable to make such a generalisation.
By 35 I'd fully paid off own home and investment property. Most of my friends had done likewise.


No, but with luck you may be able to live in it until you fall off the perch.


Disagree, but understand that some people will not form a personal attachment to a home where you can do absolutely as you wish.



True enough.

I aggree with julia.

 

[RandR]

Me and my partner, 23 and 22, are buying our PPOR first.

We are saving a substantial deposit, 30% + and will be shopping within our means. But at the same time we will be buying something that matches all of our 'lifestyle needs' and hopefully fulfilling the majority of our 'wants'.

You need to completely disregard looking at buying your own home with any sort of wealth creation ideas imo.. and like Julia has alluded to, concentrate on the property and subsequent lifestyle that makes you happy.

Were not there yet, but the idea of simply outright owning a property is something that for me is an inspiring thought ... investing comes later.

But in regards to this question by the OP, everyone will give you different answers, feelings that are dependant upon their situation and circumstances in regards to buying a PPOR or investing.

I think you just need to understand your own, and the answer for you will be easy.

 

[Smurf1976]

You need to completely disregard looking at buying your own home with any sort of wealth creation ideas imo.. and like Julia has alluded to, concentrate on the property and subsequent lifestyle that makes you happy.

Agreed. It's a lifestyle choice, not a financial one.

It's like buying a car. If your aim was wealth then you'd just catch the bus instead. You don't buy it to make money, you buy it because you want it. It's much the same with owning versus renting - the main benefits of owning are non-fiancial.

 

[tech/a]

Agreed. It's a lifestyle choice, not a financial one.

It's like buying a car. If your aim was wealth then you'd just catch the bus instead. You don't buy it to make money, you buy it because you want it. It's much the same with owning versus renting - the main benefits of owning are non-fiancial.

Yes I also agree.
BUT
I soon changed to a financial decision when I realized I could keep my PPR at no cost to myself--- it had increased 50 % from the time I had bought it---- I could use the equity as deposit for my next place of financial investment---- rinse and repeat.
Then I could sell off a few as time went buy ---- guarantee a passive income with no concern about interest rates.

My point is that the thought process should shift at some point to include BOTH --- lifestyle AND financial gain/ security.

 

[Tysonboss1]

Has anyone pointed out that it is cheaper to buy a home than rent.

Yes the amount of interest you pay each week starts out higher than rent, each month the interst bill is lower as you pay off the loan, till the point where you have completely paid it off.

But your rent increases each year with inflation.

After just seven years your rent is higher than the interest and other costs,

Exponetial growth of rents vs exponetial decay of ownership costs.

 

[cynic]

Has anyone pointed out that it is cheaper to buy a home than rent.

Yes the amount of interest you pay each week starts out higher than rent, each month the interst bill is lower as you pay off the loan, till the point where you have completely paid it off.

But your rent increases each year with inflation.

After just seven years your rent is higher than the interest and other costs,

Exponetial growth of rents vs exponetial decay of ownership costs.

Interesting point, but don't forget to factor in the exponential increase in savings during the earlier years for the tenant and also don't overlook the exponential increase in council rates for the owner.

In light of these two factors, is it still cheaper to own (versus lease) at today's prices?

 

[ginar]

Interesting point, but don't forget to factor in the exponential increase in savings during the earlier years for the tenant and also don't overlook the exponential increase in council rates for the owner.

In light of these two factors, is it still cheaper to own (versus lease) at today's prices?

not hard to do some sums on this . 500k house gets approx $500 week rent these days . there is the renters outgoing for accomodation . to buy same house we will get interest at variable costs of approx 40k a year , we can add house insurance , mortgage insurance and council rates to this , with a little maitainance thrown in our annual outgoings are going to be close to 45k . seems to me the renter is going to be 20k a year better of initially , naturally property price rises are going to be difficult to guage from here but it seems the breakeven time is going to be quite a few years at least as the renter is 4% of property value better of from the getgo , i havent even added the costs involved of buying a property which likely puts the renter 10% of property value better of in first year . there are quite a few variables here . i know for a long period in my life i was absolutely buckets in front of friends who bought houses . i was lucky enough to buy when property became positively geared in late 90's and i certainly was no worse of than many who bought a decade earlier , in fact i lived a better standard of living than many of my property owning peers and i actually put down a substansial deposit when i finally did buy . all i know is that patience paid in my case ...........

 

[ginar]

not hard to do some sums on this . 500k house gets approx $500 week rent these days . there is the renters outgoing for accomodation . to buy same house we will get interest at variable costs of approx 40k a year , we can add house insurance , mortgage insurance and council rates to this , with a little maitainance thrown in our annual outgoings are going to be close to 45k . seems to me the renter is going to be 20k a year better of initially , naturally property price rises are going to be difficult to guage from here but it seems the breakeven time is going to be quite a few years at least as the renter is 4% of property value better of from the getgo , i havent even added the costs involved of buying a property which likely puts the renter 10% of property value better of in first year . there are quite a few variables here . i know for a long period in my life i was absolutely buckets in front of friends who bought houses . i was lucky enough to buy when property became positively geared in late 90's and i certainly was no worse of than many who bought a decade earlier , in fact i lived a better standard of living than many of my property owning peers and i actually put down a substansial deposit when i finally did buy . all i know is that patience paid in my case ...........

the renter can also have advantages in the ability to affordably live close to places of employment and ease of relocating when employment changes . the time and economic cost of travelling to and from work is often left out of these property debates . so many variables that muddy the overall picture . living near quality schools for your kids or near the city for entertainemt value . its never as cut and dried as just a pure dollar value ..................

 

[Tysonboss1]

1, don't forget to factor in the exponential increase in savings during the earlier years for the tenant

2, and also don't overlook the exponential increase in council rates for the owner.

3,In light of these two factors, is it still cheaper to own (versus lease) at today's prices?

1, Ahhh yes, Renters always lock away the difference between ownership costs and renting in some high growth investment. Not likely for most, Paying off a home is a great forced saving that keeps alot of people out of the bread lines latter in life. (studies have shown retirees who own their home live better in retirement)

2, Compared to the annual rent, the annual rates are very small. And as with any input cost an industry faces it is passed on to the renters with rental increases over time.

3, Well their is different opinions on whether property is over valued. But I myself would rather have my housing costs start with a higher base and decay down to a nominal amount, rather that start at a low price and endless grow higher over my life.

 

[Tysonboss1]

the renter can also have advantages in the ability to affordably live close to places of employment and ease of relocating when employment changes . the time and economic cost of travelling to and from work is often left out of these property debates . so many variables that muddy the overall picture . living near quality schools for your kids or near the city for entertainemt value . its never as cut and dried as just a pure dollar value ..................

Yes but I think that statement muddies the water.

You say a benifit is that the renter can rent a property that is better than he could other wise buy.

This suggests that he is living above his means, and that rather than using the savings from renting to build wealth and improve his life style over the longer term he is using the savings to upgrade into a more expensive property and hence no longer generates savings but instead just becomes acustomed to a higher life style.

To each his own,

 

[ginar]

Yes but I think that statement muddies the water.

You say a benifit is that the renter can rent a property that is better than he could other wise buy.

This suggests that he is living above his means, and that rather than using the savings from renting to build wealth and improve his life style over the longer term he is using the savings to upgrade into a more expensive property and hence no longer generates savings but instead just becomes acustomed to a higher life style.

To each his own,

You sure can live beyond your means in certain times , i remember in the late 80's . i had homeowning friends who couldnt afford to go out for dinner and drinks , i remember shouting them out for dinner many times all whilst living in rented executive homes . these homes had pools , saunas and city/beachside positions . i did this for nearly 10 years living the high life in houses i thought i could never own . well the worm turns and now i own a similar house where when i bought a mortgage became cheaper than rent . i do work hard but i cant see the point in becoming a slave to a block of dirt and or the bank . life is for living and the right time comes around at some time , recognizing that is key . i now have friends who rent that are in similar position to where i was 20 years ago . living a higher standard than those out there now with no disposable income who are funding banks and these people are now highly stressed watching RBA decisions with furrowed brows . those renting and saving actually look forward to rate rises ....... crazy hey

to each her own ......... too true

 

[ginar]

I certainly got a giggle out of this article . its a lighthearted look at home ownership but definately has all the pertinent points being discussed in this thread :


http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/


http://www.jamesaltucher.com/2011/05/why-i-would-rather-shoot-myself-in-the-head-than-own-a-home/

 

[ENP]

Once you have purchased a home, does it make sense to pay off the mortgage ASAP?

Or try to build up an investment base in rental property or shares whilst paying down your home mortgage?

 

[tech/a]

If your only property is your PPR and you can't make more than 10 % on your excess capital---- then yes.
If it's an IP and you gain a deduction for interest and or can make more than 10% on your spare capital--- then no.

All my IPS that have a mortgage component are interest only.
My PPS is owned.
FWIW I didn't pay down the mortgage with earnings capital.
I cleared it with profits from IP'S
I have used trading Priofits to clear IP'S.
Some Freeholded IP'S are now in my SMSF these are industrial properties which my company rents of my SMSF.
Nice round robin structure.

 

[ginar]

Once you have purchased a home, does it make sense to pay off the mortgage ASAP?

Or try to build up an investment base in rental property or shares whilst paying down your home mortgage?

Im sure there will be differing opinions on this but in my case i say pay of mortgage pretty quickly , main reason i have for this is that residential financing costs arent tax deductible . thats not to say put every available dollar into it but id certainly make it a high priority . everyones circumstances are different so what suits some wont suit others . whilst i could be seen as anti home owning i actually own my own home freehold and it was a great feeling to make that last payment ..... purchase to freehold in under 10 years . at todays property to income ratio thats going to be near impossible so unless you want to be tied to a bank via mortgage for half your life id certainly think twice ................

 

[Glen48]

If your House Price is riding more than Gold stay there.
IF not sell the house and buy PM's.
This time it IS different House prices will fail over the next 10+ yrs and gold will keep rising until 2020 at least.

 

[Tysonboss1]

1, i cant see the point in becoming a slave to a block of dirt and or the bank .

2, those renting and saving actually look forward to rate rises ....... crazy hey

to each her own ......... too true

1, I would rather be a slave to a bank for a limited time than a slave to a land lord forever,
people always bring up examples of property owners with no disposible income, stressing over interest rates. But each year their interest bill is less and their wages go up with inflation, meanwhile each year the renters rent goes up.

why not bring up examples of people who have owned their home for 7 or 10 years who's weekly mortgage payment is less than rent, and only half of the payment is for interest the rest reduces their loan and builds wealth.

2, Yeah if only that were true. the rate rises due to inflation which devalues the savers cash and increases the value of the owners home in relation to the outstanding debt.

And most renters are not saving the difference between rent and ownership costs they are blowing it.

 

[Tysonboss1]

If your House Price is riding more than Gold stay there.
IF not sell the house and buy PM's.
This time it IS different House prices will fail over the next 10+ yrs and gold will keep rising until 2020 at least.

Property - 2002 worth $250 - 2011 worth $450
Gold - 200 worth $200 - 2011 worth over $1400

which one is in the speculative bubble.

If they are both in a bubble, then property certainly has less to fall, and atleast you get paid or save rent.

look at the longterm gold price chart,



If you bought in the peak of the last gold boom you would have had a long wait with no income before you got your money back.

 

[ginar]

1, I would rather be a slave to a bank for a limited time than a slave to a land lord forever,
people always bring up examples of property owners with no disposible income, stressing over interest rates. But each year their interest bill is less and their wages go up with inflation, meanwhile each year the renters rent goes up.

why not bring up examples of people who have owned their home for 7 or 10 years who's weekly mortgage payment is less than rent, and only half of the payment is for interest the rest reduces their loan and builds wealth.

2, Yeah if only that were true. the rate rises due to inflation which devalues the savers cash and increases the value of the owners home in relation to the outstanding debt.

And most renters are not saving the difference between rent and ownership costs they are blowing it.

Look this team stuff aint getting us anywhere , i do have the ability to look at things from both points of view , seems you dont . if your saying everyone go buy an overpriced asset when you can rent for half the cost and either live or save/invest the rest thats fine . historically property has never been more expensive , at best slow to no CG for a decade , anyway im going to live my life whilst you count pennies for the bank ..... enjoy your weekend

ps the selective editing of my points is a tad mundane , how about expressing a view on travel time and expenses to work , how about quality time with friends and family , quality education for kids . everyone who rents doesnt save , yeah sure . your facts and mine dont align . such is life . im successful and financially secure and i havent been a slave to the bank for decades and ive lived a great life . so for those that think owning a house right here and now is the number 1 priority please look at all points of view ......... critical thinking will set you free

one day i will advocate all youngsters going and buying a house on hire purchase, its just that the timing isnt exceptionally good atm , only time will prove me wrong , not words on a stock forum and with that im gone never to return to this thread


last ps i never advocated being a slave to a landlord forever , your words not mine , twist it how you like

i did give example of someone in last 10 years whos mortgage was less than rent , ME , now go and read all the content , im saying the chances of that happening in next 10 years is slim , once again time will be the only judge of this.

i can be just as selective , property inflation adjusted in last 4 years is going how well , finally im gone enjoy

 

[Tysonboss1]

last ps i never advocated being a slave to a landlord forever , your words not mine , twist it how you like

You did say that you didn't want to be a slave to a bank or a block of dirt, they were your words.

I was simply making a comparison saying a renter is slave to a land lord, which is leaving the fry pan to enter the fire.