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Why you should still rent

Many of my clients come to me with an ingrained belief that renting is dead money and that you must buy something.

Only one part of that statement is true and it is NOT that rent is dead money… Indeed you must buy something but it doesn’t need to be for you to live in.

Today I hope to broaden your horizons a little and share with you a few strategies about why you can still rent.

1. First Home Buyers
As a first homebuyer you’re at the pointy end of the stick.
Everyone is telling you to buy rather than rent, so you start looking, you get your deposit together arrange a pre-approval and start looking.

If you buy a home today and take out a Mortgage of 25-30 years this will most likely take you into your mid 50’s before the debt is paid off.
You get no assistance from the taxman, you have no rental income and you are entirely responsible for the repayments.

One strategy that my clients have used is buy a new property in an area that represents good value for money and is a good investment level property, live in the property for 6-12 months becoming eligible for the Grant and Stamp Duty concessions then move out, rent out the property and start claiming your tax benefits.

Why? In most cases you will not be able to afford your dream home as your first property.
Why not accumulate investment properties over time and when the time is right sell one or two of the investments and buy that dream home.

2. Current Home Owner
Do you own property or have a mortgage at the moment?
Well you probably fell into the trap above being told you have to buy something to live in.

You still have options today, best case scenario is do what I did with my wife.
We sold our property in Pyrmont and made the conscious decision to rent wherever we want to live and buy Investment properties in the locations that provide us the best returns.

While not a strategy for everyone it does help highlight the benefits of renting. If I need to move interstate for work or need to up-size or down-size property at any point it is quite easy.

Just before retirement the plan is to buy a nice new home then.
It will need no repairs at a time when our employment income has stopped and we have something nice to live in.

Summary:
Why is it that Renting is so good? Renting alone is not great however if you are buying investment properties whilst renting, it makes good sense.

We can typically afford to rent where we want to live but often is the case we couldn’t afford to buy there.

Renting allows you the flexibility of lifestyle and when coupled with buying property for investment, it also allows you to start claiming back some of your hard earned tax dollars.

This strategy is not for everyone and it took me 2 years to convince my wife that this was the right way forward but we are now on track to a very healthy property portfolio and all of our debt is tax deductible.

Only a small fraction of Australia is wealthy, about 5% - so why is it we feel the need to follow the financial trend of the other 95%?

Is it comfort in numbers? I’m not sure but I know that if I want the success and wealth of the 5% I need to stop managing my finances the same way as the 95% non-wealthy group.
Published on 20th of October 2014 by Marty Stanowich
Marty Stanowich
Marty Stanowich

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