Buying vs. Renting

[MrBurns]

I may be about to move out of my house for it to be painted and kitchen refurbished to make it ready for sale.

Just looking at rental properties around my area, I can get a good place for 1/3rd of the interest I'll receive in interest on the cash from the sale.

So why buy again ?............unless the market starts to rise but at present it's going backwards.

 

[Miss Hale]

We are renting at the moment for the same reason. Just makes better financial sense from where we stand with housing prices where they are right now. We've been renting for about 18 months and the only blip was we had to move six months ago when our landlord decided to sell but as we found a better place for less rent so it wasn't so bad afterall!

 

[MrBurns]

The way I see it you just have to watch the market in case it starts to boom, but I don't think there's much chance of that at ptresent.

 

[Knobby22]

i sold my house 2 months ago (had paid it off) and am now renting a place with a pool, more land and hydronic heating. The family and I love it. We plan to stay 2 years before buying another house and I am trying to invest the money for best returns.

 

[Julia]

i sold my house 2 months ago (had paid it off) and am now renting a place with a pool, more land and hydronic heating. The family and I love it. We plan to stay 2 years before buying another house and I am trying to invest the money for best returns.

Knobby, are you able to say what your net advantage is in this arrangement when you deduct rent payments from what you're earning on the invested capital?

What is hydronic heating?
Who is responsible for looking after the pool? e.g. does the owner pay for a regular pool service (which would obviously diminish his return)?

 

[Knobby22]

Hi Julia

The owner, another family, built their dream house 18 months ago but has had to move to Shanghai due to work. (Multinational company).

My net advantage is neutral (excluding the great lifestyle). If I invest only in fixed interest so I am planning to invest half in shares with hopefully some growth and decent dividends to raise the return.

They are supplying a pool cleaner and a gardener as part of the deal.

Hydronic heating is valued greatly down in Melbourne as the winter can be cold for a few months.
Basically you heat water and pump it around the house. The 'heaters' work by radiating a soft heat and gently heating the air rather than the inefficent and not very healthy drying of the air with central heating. Air is basically an insulator so even if it is warm it can feel cold as the wall will still be cold.

This also gives me the opportunity to look for a house I could knock down and build a new one. I live 6 k's from the City and don't want to move out too far. my eldest goes to secondary next year.

 

[white_goodman]

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

 

[prawn_86]

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Thats a great link WG

 

[MrBurns]

The theory is it's better to rent and use your capital to make more money than you could just waiting for house prices to increase.

Thats fine BUT most people have no idea how to invest to achieve that SO buying a house is, in the end. a better option, it forces them to pay a mortgage which eventually gets paid off and they have asset .......house.

It gives a degree of certainty that investing the cash doesn't.

 

[sptrawler]

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

That is a great calculator.
One proviso, if we have a recession and there is no house price rise for 6 years and no rent increase for 6 years.
That is not an abnormal situation, during a recession. Lets compare apples with apples, no increase in either.
If then you put average numbers in the calculator it changes the outcome somewhat.
For example if you put in $450,000 house price and $400 per week rent. Then put in 0% house price rise and 0% rent increase. That gives the result the economy is aiming at.LOL
It is a great link though.

 

[Julia]

Hi Julia

The owner, another family, built their dream house 18 months ago but has had to move to Shanghai due to work. (Multinational company).

My net advantage is neutral (excluding the great lifestyle). If I invest only in fixed interest so I am planning to invest half in shares with hopefully some growth and decent dividends to raise the return.

They are supplying a pool cleaner and a gardener as part of the deal.

Hydronic heating is valued greatly down in Melbourne as the winter can be cold for a few months.
Basically you heat water and pump it around the house. The 'heaters' work by radiating a soft heat and gently heating the air rather than the inefficent and not very healthy drying of the air with central heating. Air is basically an insulator so even if it is warm it can feel cold as the wall will still be cold.

This also gives me the opportunity to look for a house I could knock down and build a new one. I live 6 k's from the City and don't want to move out too far. my eldest goes to secondary next year.

Thanks Knobby. I really like the idea of the hydronic heating which would seem to overcome the dry air aspect of most other forms of heating.
What you're doing makes much sense, certainly as a interim measure.
I'd be curious as to the owner's yield on renting the property out, especially after he has paid for pool service andgardener, but I don't expect you would know that.

 

[johenmo]

I'd be curious as to the owner's yield on renting the property out, especially after he has paid for pool service and gardener, but I don't expect you would know that.

The company may subsidise - I've had that.

 

[Russtafaerian]

Hi,

I just thought I would outline my stance on this issue and invite opinion from other members.

I am Aussie, but lived in Shanghai for the past 7 years. I originally planned to buy an apartment in Shanghai, which is horribly expensive (approx. USD250K for a pretty basic place outside the city center) compared to the rental prices which are about USD500 per month for a similar place.

I've saved for the deposit of 30% for the past 2 years, but now I am living in Kenya and my mind has changed.

I'm thinking that places like Australia and China (esp. Shanghai) are already well over-priced and likely to face a correction in the next year. Basically I feel I've missed the boat in both these markets.

I'm looking at places like Colombia and Kenya/Ghana and thinking these countries (albeit with their own problems) are looking like fantastic real estate market growth opportunities.

Having lived in Kenya for 4 months now, I think it seems like a great place to buy, and I can pick something up outright for the same amount of money as my Shanghai house deposit.

At the same time, I could keep renting cheaply in Shanghai and enjoy some rental income and some great capital growth opportunities on the Kenya apartment. The rent would fetch about USD500 a month based on the research I have done.

I'm planning to wait until the elections in March 2013, then buy, after setting up my bank account, developer contacts, lawyers and having a pretty good idea in which part of the city I would like to buy.

The elections in 2007 in Kenya were a bit of a fiasco, with inter-tribal violence causing severe havoc across the country and impacting negatively the real estate prices. Hence, I will wait and see how the 2013 elections go, plus I am waiting for the last chunk of capital to come in from bonuses with work, etc.

Would be good to hear from other members on their thoughts about these ideas!

Cheers,

Russta

 

[CanOz]

Hi,

I just thought I would outline my stance on this issue and invite opinion from other members.

I am Aussie, but lived in Shanghai for the past 7 years. I originally planned to buy an apartment in Shanghai, which is horribly expensive (approx. USD250K for a pretty basic place outside the city center) compared to the rental prices which are about USD500 per month for a similar place.

I've saved for the deposit of 30% for the past 2 years, but now I am living in Kenya and my mind has changed.

I'm thinking that places like Australia and China (esp. Shanghai) are already well over-priced and likely to face a correction in the next year. Basically I feel I've missed the boat in both these markets.

I'm looking at places like Colombia and Kenya/Ghana and thinking these countries (albeit with their own problems) are looking like fantastic real estate market growth opportunities.

Having lived in Kenya for 4 months now, I think it seems like a great place to buy, and I can pick something up outright for the same amount of money as my Shanghai house deposit.

At the same time, I could keep renting cheaply in Shanghai and enjoy some rental income and some great capital growth opportunities on the Kenya apartment. The rent would fetch about USD500 a month based on the research I have done.

I'm planning to wait until the elections in March 2013, then buy, after setting up my bank account, developer contacts, lawyers and having a pretty good idea in which part of the city I would like to buy.

The elections in 2007 in Kenya were a bit of a fiasco, with inter-tribal violence causing severe havoc across the country and impacting negatively the real estate prices. Hence, I will wait and see how the 2013 elections go, plus I am waiting for the last chunk of capital to come in from bonuses with work, etc.

Would be good to hear from other members on their thoughts about these ideas!

Cheers,

Russta

Developing markets are always a bit of a risk for geo-political issues/internal strife. I like Thailand for condos personally, but i just can't get the wife to pull the trigger.

CanOz

 

[Smurf1976]

The thing about owning is that I can have what I want, not what some landlord thinks will be a profitable investment. That plus no pesky landlords worrying that the mouse will escape from the cage or taking half a year to fix something that's broken.

If house prices dropped 50% tomorrow then it wouldn't bother me in terms of owning versus renting. It's only an issue if I sell this house and don't buy another one, which isn't what I intend doing since I bought it to live in rather than to speculate upon the price of real estate.

 

[Julia]

The thing about owning is that I can have what I want, not what some landlord thinks will be a profitable investment. That plus no pesky landlords worrying that the mouse will escape from the cage or taking half a year to fix something that's broken.

If house prices dropped 50% tomorrow then it wouldn't bother me in terms of owning versus renting. It's only an issue if I sell this house and don't buy another one, which isn't what I intend doing since I bought it to live in rather than to speculate upon the price of real estate.

Exactly sums up my attitude also.

 

[sptrawler]

If you are going to rent over buy and use investment to grow your wealth.
Then when the opportunity presents buy a house in a down cycle, you have to be very much on your game.
I do know one person that achieved this, he invested in shares most of his working life and lived in a company subsidised house.
He was a bachelor all his life, loved the share market and researched it constanly, even at work.
On the flip side I know a lot more people who have tried to jump in and out of housing and shares, most end up losing.
I personaly payed cash for my first house and have always put home ownership in front of investment.

 

[Tink]

+2 -- agree with Smurfs post.

 

[pilots]

Exactly sums up my attitude also.

Many years ago we bought a run down dump in Browns way Karrinyup, paid $99,100 for it, we get $350 aweek rent for it, block value to day $650K. Second is in Hillarys, paid $146K, block value today $700k, rent $400 a week, third, Fremantle, paid $148K, block value today, $900K, rent $420 aweek, all of them have been paid off by the rents. We have invested in many things, LAND has been our cream.

 

[village idiot]

Many years ago we bought a run down dump in Browns way Karrinyup, paid $99,100 for it, we get $350 aweek rent for it, block value to day $650K. Second is in Hillarys, paid $146K, block value today $700k, rent $400 a week, third, Fremantle, paid $148K, block value today, $900K, rent $420 aweek, all of them have been paid off by the rents. We have invested in many things, LAND has been our cream.

no one is denying property has been a great investment in the past 30 years. It is questionable however that capital gains in excess of inflation will continue into the future indefinitely. Meanwhile your houses are returning about 2.7% before costs on current equity.