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How Does The Rent Or Buy Debate Affect Property Investing?

Rick Otton Takes A Look

The question of whether to rent or buy boils down to practicality. Just like in any investment, you want to be able to get the most bang out of your buck.

And indeed, a common feature of Australian property investment environment is the debate held in real estate offices, coffee shops, and lounge rooms about the merits of property ownership compared to renting.

This is especially true when a respected authority such as the RBA comes out and says that renting may make more sense in the current market. The leading authority on interest rates and monetary policy in Australia published a report this month that cautioned against the belief that property prices always go up.

They also argue that over a very long term time frame, once you take into account all costs like stamp duty, maintenance and mortgage payments, the real price growth of property is between 1.7% and 2.4%.

In comparison, renting means no mortgage payments and associated running costs of a home. It also means that there is less stress, as a mortgage payment is the longest term contract that many people ever enter into, and certainly has the highest dollar value attached. And of course, there is the associated flexibility and lifestyle benefits that come from not having to be locked in long term to a single home.

Given that, how should an investor react to differing perspectives?

Personally, I believe in having adaptable, creative real estate investing strategies that can allow you to position yourself and take advantage of market trends. Don’t be locked into just one strategy. That’s a good bet to lose money.

Much of the success in real estate come down to the terms you use when you buy and sell property. Using flexible terms can help you build a portfolio without investing a huge capital upfront– which minimises your risk. And if you are able to minimise what you invest upfront, you’ll generally have more flexibility to find profitable terms whether you are in a market where people prefer to rent or in a market where there are more interested buyers.

Concepts like these are things we discuss regularly in the We Buy Houses Radio Show. Be sure to catch a new episode each week for more info and resources.

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