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Should You Buy a Home or Rent?

Updated: Jul 3

buy a home or rent

Should you rent or buy a property? Well, until we find out more about your situation and aspirations, there is no clear-cut answer to this. There is no one-size-fits-all solution no matter what the property market is doing. However, there are some salient questions you can ask yourself that should provide good insights and nudge you in one direction or the other. Let’s explore these here.

Are you planning to move or stay put?

Curveballs aside, what’s your living plan for the next five years at least? Are you keen to lay down roots and stay put, or is life too sporadic, reactive or uncertain for the next few years? Buying - and then selling - property is not a quick process, nor does it come without plenty of costs and fees such as Stamp Duty, Capital Gains Tax, real estate agent commission, mandatory legal costs, etc. Assuming you don’t have generous capital available, these costs quickly eat into any profit from the sale.

Australian housing prices are continuing to surge. Indeed, for the first time in Australian history, the median house value across the country is now more than $1-million. However, just like the share market, property values go up and down. So, you need to be confident about managing any volatility.

Do you regard a home as a financial asset or a lifestyle asset?

Although the home you live in might provide equity or value, it doesn’t provide income. Granted, it might one day deliver you a lump sum upon selling, but it’s not contributing to money in the bank right now. As such, it is not typically regarded as a financial asset per se.

Do you want a flexible approach to wealth-building?

Renting does not mean you can’t grow wealth. OK, so you may not have a physical asset to show for your efforts, but there are many other ways to build wealth for any stage of life. For example, if you decide homeownership is not for you, but you’re still willing to get a loan, you could consider investing the money in other potential revenue-generating opportunities such as the share market (this in itself can be a round-about opportunity to invest in real estate). Doing so enables you to diversify your investments rather than putting all eggs into one basket.

What are your lifestyle objectives versus wealth-building plans?

What is more valuable to you right now and into the foreseeable future? Building wealth or creating comfort and enjoying life pleasures sooner rather than later? It’s important to be clear on this answer as it really helps to lay the framework for any financial planning we propose.

How far can you stretch financially?

The average first home buyer takes out a loan of $431,525, which would require an approximate deposit of just over $100,000 upfront. That’s a very chunky amount of capital that needs to be raised. Have you got that money in the bank right now, or can you acquire it easily enough? And if so, can you afford to invest 100% of it into property? Or will doing so force you to compromise other areas of life, for example, what school the kids go to, where and for how long you holiday each year, etc. What’s more important?

Let us help you make the decision of whether to buy or rent

There can be a lot of emotion in this decision, which is not always a good thing. As your financial advisors, we’re here to lay out the facts and look at one of the most significant life decisions you may make. We’re here for a no-cost, no-obligation catch-up to talk about your situation, your goals, and how to get there. Let’s find out together if renting or buying is the best way to build your wealth.

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