Mega Thread The Random Thoughts Thread Part 1

[PAFC04]

I've stayed on the sidelines with this debate so far but can't help myself here.

You wouldn't save 400K because you would own an asset that after 25 years would be worth more than the 450K you paid for it. By renting, you would have nothing to show for your 320K after 25 years.

In fact, your house would only need to increase in value by ~100K in those 25 years to break even with your renting example once you factor in the value of the asset. As house prices generally follow CPI over the long term (money loses value over time thanks to inflation), this is likely to occur.

And that's not even getting into paying off your mortgage quicker to lower the interest paid or dealing with landlords and inspections every 3 months.

I would have 400k in an account to show for it that didn't go into paying just the repayments.... where as you would have to sell your asset because its in bricks and morter... dont forget, owning a home has a lot more overheads than renting over that 25years and your at the mercy of the banks to increase your interest rate by a couple of percent or even go back to the interest rate of the 80's of 14-18%.

 

[Forzaport]

I would have 400k in an account to show for it that didn't go into paying just the repayments.... where as you would have to sell your asset because its in bricks and morter... dont forget, owning a home has a lot more overheads than renting over that 25years and your at the mercy of the banks to increase your interest rate by a couple of percent or even go back to the interest rate of the 80's of 14-18%.

Fair enough. Keep renting then.

 

[raman]

It's a fairly unique to Australia thing though isn't it?

The dream...

 

[PAFC04]

I'd say for a decent place you'd be looking at $350+ per week (which would be $455k over that time period) and rental prices will likely continue to rise over the course of that loan. I'd also say that there wouldn't be too many people these days who actually complete a 25 year loan in 25 years, saving the interest repayments significantly over that time. I think your interest repayments is a bit out on that calculation as well. It would be around $620k if you paid it off in 25 years. A big portion of people would be able to cut out $100k in interest repayments.

So in reality the difference between the two isn't all that big ($50-100k maybe) and the difference is one person has rented for 25 years, the other owns a property and probably is halfway through a second as well.

Thanks for the correction.... I still think its best to save up for a home rather than jump into loan market... yeah..... thats how the Germans did it... BUT who can save... yeah...

 

[El_Scorcho]

Its not dumb at all..."ÿou don't have to buy a house"

If you weigh up what you end up paying in mortgage repayments vs rent over a 25year loan period, you might find that your better off renting a home because it would financially cheaper in the long run.

As an example, regardless of the income, over 25 years you could save 400K.

happy for someone to correct me...
View attachment 244063

Forgeting all the other issues with this post, you understand that when you choose a mortgage over renting you are allowed to keep the house at the end of it, right?

 

[Macca19]

I would have 400k in an account to show for it that didn't go into paying just the repayments.... where as you would have to sell your asset because its in bricks and morter... dont forget, owning a home has a lot more overheads than renting over that 25years and your at the mercy of the banks to increase your interest rate by a couple of percent or even go back to the interest rate of the 80's of 14-18%.

You are assuming a locked rental rate of $250 a week for 25 years which is fundamentally flawed

 

[raman]

Forgeting all the other issues with this post, you understand that when you choose a mortgage over renting you are allowed to keep the house at the end of it, right?

This otherwise interminable debate has been entirely justified by this post.

 

[Macca19]

I think the housing market should remain affordable for people, I think a major issue is that a lot of young people aren't prepared to start small and build up. I've seen it with people my age over the last 10 years. If they can't get a house 200 metres from the beach in the Western suburbs then they aren't interested in buying.

 

[Papa G]

If i was a first/second homebuyer with a budget up to $500,000 I'd be concentrating on buying in the V between Torrens Road and ANZAC Highway. Basically the western suburbs. You won't lose and you can still get character/land. You are between the city and the beach, you are close to pretty much everything, good public transport by Adelaide standards and it is reasonably cosmopolitan.

 

[_VXV]

Like anything you need to work the advantages. We got in with fa deposit with homestart's graduate loan, bought cheap(just shy of 200k) and payed as much as we could for about 5 years. Then moved to a non trad lender which offered rates banks can't match. Keep paying the overs. Now 13+ yrs later we're in a good place $ wise. Looking now to buy another property, something to see us out & keep this house. All workable.
You're hopefully alive a long time, even ten years of stocking up on your 20/30s will be a distant memory when you start getting older.
Buy something small, you don't need to be there forever.

 

[Lagooner]

I think the housing market should remain affordable for people, I think a major issue is that a lot of young people aren't prepared to start small and build up. I've seen it with people my age over the last 10 years. If they can't get a house 200 metres from the beach in the Western suburbs then they aren't interested in buying.

Yeah I've got a few friends in this boat.

They're also the ones who refuse to sacrifice that $25,000 jaunt to Europe or equally expensive brand new cat so that they can get their deposit together. Like I said before, opportunity cost.

It's tough, especially for singles, but for the majority of full-time workers it's still achievable if they're committed to it.

 

[PAFC04]

Forgeting all the other issues with this post, you understand that when you choose a mortgage over renting you are allowed to keep the house at the end of it, right?

yeah..as apposed to money in the bank.....

 

[Malibu#27]

Forgeting all the other issues with this post, you understand that when you choose a mortgage over renting you are allowed to keep the house at the end of it, right?

And the price you payed for the house when you bought it is locked in, whereas with renting the value of the house you rent continues to rise as does your rent payments.

 

[Peck]

Forgeting all the other issues with this post, you understand that when you choose a mortgage over renting you are allowed to keep the house at the end of it, right?

Buying a house vs renting wasn't actually better financially over the last 30 years even though for whatever reason people are certain it was.

A house is just an investment, there are better and there are worse.

If you are desperate to own a house because emotionally you can't handle living under someone else's roof, or you don't want to or are incapable of finding better investments - both perfectly legitimate reasons - then go ahead and focus your money on that.

If you can find other ways to invest then IMO you can end up with more money while renting a nicer place. Especially given the overwhelming likelihood of a housing crash in the next 5-10 years.

Basically it's not particularly better to buy a house or to rent+invest, it just depends on your particular circumstances.

 

[Doctor Feel]

Buying a house vs renting wasn't actually better financially over the last 30 years even though for whatever reason people are certain it was.

A house is just an investment, there are better and there are worse.

If you are desperate to own a house because emotionally you can't handle living under someone else's roof, or you don't want to or are incapable of finding better investments - both perfectly legitimate reasons - then go ahead and focus your money on that.

If you can find other ways to invest then IMO you can end up with more money while renting a nicer place. Especially given the overwhelming likelihood of a housing crash in the next 5-10 years.

Basically it's not particularly better to buy a house or to rent+invest, it just depends on your particular circumstances.

Or you can just get a mortgage for the same amount of rent per week and invest in other portfolios such as shares and bonds. - killing all birds with one stone.

Renting is stupid if you have the capacity to buy.

 

[Lagooner]

Another option is buy a place you can afford, rent it out, and then rent somewhere else yourself.

This way you can reduce your income tax payable by taking advantage of negative gearing, you can do this for 6 years before you have to start paying capital gains tax. Then just move back in or upgrade to something else.

 

[Papa G]

No CGT on own home too. Im not a property is da best, property will always go up crazy guy. Far from it. In fact I think most of the property spruikers out there are absolute charlatans, but buying your own property within your means, paying down debt, improving the home, getting some capital growth and then upgrading when you can afford to is a tried and true method of increasing your personal wealth and lifestyle.

 

[Jonts]

GTA 5 install update

47%

over 24 hours now

 

[Peck]

Or you can just get a mortgage for the same amount of rent per week and invest in other portfolios such as shares and bonds. - killing all birds with one stone.

Renting is stupid if you have the capacity to buy.

If you are willing to live in a less-nice place then you can use the extra money to invest more anyway.

I'm currently paying 1100 a month in rent. To buy this place for lets guess around $400,000 which is most likely unders at 4% interest over 25 years would cost ~2100 a month in repayments. Which is very nearly twice my rent.

"Pay the same amount as rent" is a lie I've heard many times.

 

[JimmyBeerCans]

GTA 5 install update

47%

over 24 hours now

lol

 

[Doctor Feel]

If you are willing to live in a less-nice place then you can use the extra money to invest more anyway.

I'm currently paying 1100 a month in rent. To buy this place for lets guess around $400,000 which is most likely unders at 4% interest over 25 years would cost ~2100 a month in repayments. Which is very nearly twice my rent.

"Pay the same amount as rent" is a lie I've heard many times.

That's one example. You even said that you can live in a less nice area for cheaper. The rentals here fetch 210-250 a week. My mortgage is only 1150 a month, it's hardly a difference. If you can do it, you can. Paying tve same amount in rent is by no means a lie.

Especially if you are paying shitloads of rent and you are getting no return. Why wouldn't you explore paying LESS and owning a property?

Then there are the intangible things like being able to do whatever the **** you want with the house, no inspections, as many pets as you want etc.

 

[RussellEbertHandball]

Its not dumb at all..."ÿou don't have to buy a house"

If you weigh up what you end up paying in mortgage repayments vs rent over a 25year loan period, you might find that your better off renting a home because it would financially cheaper in the long run.

As an example, regardless of the income, over 25 years you could save 400K.

happy for someone to correct me...
View attachment 244063

I agree with what you are saying in principle, but saying rent stays the same for 25 years is wrong. Also how many people rent in the same place for 25 years. You have to factor in all the moving costs.

The key to long term being better off if you decide to rent for part of or all of those 25 years, is to invest a big part of your savings from renting over buying, into assets that grow at a quicker rate than your potential house does, because who wants to be worrying about renting when you are retired. ie You have to factor in capital appreciation of your house v capital appreciation of the assets you invest in. Can't find the 25 year comparison but this article talks about the 40 years 1975 to 2015. You can see the multiple between average wage and average house cost has more than doubled in all markets.

http://www.news.com.au/finance/mone...r/news-story/3a9cc7dbc1ec5394c3dbe8ba9365b064
In 1975, the average full time earnings were $7618. Today, it’s almost 10 times more at $72,000.

In Sydney, the average house cost $28,000 in 1975. Today, it costs $850,194. That’s 30 times as much as it used to be. Your 10-times as much annual earnings isn’t looking too great right now, huh?
....
In Adelaide, it’s 28 times higher from $16,250 to $459,258.
http://www.news.com.au/finance/mone...r/news-story/3a9cc7dbc1ec5394c3dbe8ba9365b064

 

[Eddie Dingle]

Another option is buy a place you can afford, rent it out, and then rent somewhere else yourself.

This way you can reduce your income tax payable by taking advantage of negative gearing, you can do this for 6 years before you have to start paying capital gains tax. Then just move back in or upgrade to something else.

Actually thinking about this at the moment.

We have our house we live in, owe about 700k and two investment properties one in Sydney and one in Adelaide. We want a bigger place where we are but anything 4br 2b 2c with a yard is 3.8mil or over. So seriously considering renting ours out and renting a place nearby.

Doing the sums over the next few days so will be interesting to see how it looks.

 

[RussellEbertHandball]

Another option is buy a place you can afford, rent it out, and then rent somewhere else yourself.

This way you can reduce your income tax payable by taking advantage of negative gearing, you can do this for 6 years before you have to start paying capital gains tax. Then just move back in or upgrade to something else.

Ah yes the 6 year rule, forgot about that. my sister used it to her advantage when she moved overseas. I think there is a ruling that stops it from being used if you are still living in the same city.

 

[Jonts]

I dont know if this is the norm but for where i am in the southern suburbs

my rent + what i can safely afford (still live pretty good i reckon) to save weekly towards the deposit = more than what my mortgage repayments will be (roughly)

my rent by itself = less that what my mortgage repayments will be

I thought this would be normal, then its up to you if you think you're smarter buying a house or investing in another way