Renting can be a great way to get yourself in to the market. It has typically been the way that young ones moving out of home have been able to afford getting in to the real estate market, and also an option for elderly people who are looking at decreasing their equity in property. There are pros and cons to renting over buying, so we wanted to compile the main things to think about.
Renting can offer some positives for both families and young people wanting a change
- When you decide to rent, your upfront costs are generally pretty low. You are able to get in to a rental property with four weeks rent for the bond paid upfront and a bank statement to show you are able to cover the payments.
- Because the commitment is lower it is much easier to walk away if it doesn’t work out. By not having all of your equity involved in a property, you are able to either give notice that you want to vacate the property if the lease is not in your name, or find an alternative when the lease finishes if you don’t want to stay on.
- You have no stamp duty fees that would be associated with buying a property. Buying a property incurs stamp duty which can cost around $15,000 on a $500,000 property.
- Maintenance is not your responsibility. When renting, the responsibility to ensure that the communal areas are clean, the lift works and all lights in the building are functional is not your concern. If there are any issues you can easily call your body corporate manager.
- You can save money for a further investment. Sometimes investing where you live is not always the best bet as you may be able to get more capital growth elsewhere in your investment property. You may want to live in the inner-city but the best growth may be in the developing suburbs further out. By renting elsewhere you may be able to assist your rent costs by renting your place out to another tenant.
- Sometimes you can find that you are paying as much as you would be if you had a mortgage. This can mean that you are paying someone else’s mortgage without owning an asset at the end of the repayments.
- You can’t receive capital appreciation. With the property market having trended upwards consistently, if you don’t own a property you can’t be eligible for the capital growth that may come from the increased desired to live in Australia.
- You are subject to rent rises at the end of your agreement. If the landlord feels that they can make more money from the rent, they may up it with little notice. This can mean you need to pay the extra or be back looking at houses over your weekends.
- You are limited in what you can edit in your rental property. Whilst you may be able to add some artwork, you will be restricted in your ability to make structural changes such as knocking walls through. This can be frustrating as you may not get to utilise the full potential of the property and you can feel restricted by your lease agreement.
- Your lifestyle may be restricted as the landlord may not allow pets or certain lifestyle choices such as smoking. This can mean you are bound to behave in the manner they would like.
We have started a local discussion and we’d love to hear your thoughts on what you think here.