Monday, October 17, 2016


A lot of the articles you read in financial papers/websites talk about the pros and cons of renting versus buying in purely economic terms, focusing on the rate of return on investment, usually assuming that a renter is investing the money they are saving by renting.

As a long term renter I like to read these articles, as they often put the renter out in front. However, I have not been a good saver and investor, only recently getting my act together and still only having a small amount invested. And my partner and I do want to buy property and have been saving a deposit for quite a while now. However, due to crazy Melbourne house prices we have resigned ourselves to buying an investment property rather than a home to live in. We figure that at least we will have a property of some sort paid off by the time we retire, allowing us to live rent-free in retirement.

But I thought I would put together a list of all the good things about renting, not only to make myself feel better, but to make others feel good about their renting situation too:
  • Rent is usually well below what you would be paying for a mortgage for the same property, even with interest rates this low. For example, I live in a house that would probably sell for a bit over $1million (even though it's old and run down, it's in inner Melbourne's Northcote which is prime real estate at the moment!) but we only pay $2064 a month in rent. An $800K mortgage would set you back around $3800 a month at the moment with 4% interest rates.
  • If you are fortunate enough to find a long-term rental (which we have), rent increases are generally minimal, especially in comparison to market increases. Eg. I estimate our house would rent now for around $2400 a month, probably more given our improvements - see below.
  • When things go wrong, you don't have to pay! ie. plumbing issues, hot water service breaking. Not your problem.
  • You can move much more easily and cheaply if your situation changes. Around my area it's all about high school zones. When it comes time to choose a high school for my children, we could potentially move houses and even suburbs, to get into the desired school zone, without having to pay the premium house price and all the other associated costs of buying and selling a home.
 And a few other thoughts about long-term renting:
  • If you have a nice landlord/agent who is happy for you to make improvements to the property, and you feel confident that you will be there for a while, consider investing a bit of money to improve the property. 
  • For example, our house was very run-down and a bit depressing and cold when we moved in. Improvements we have made over the years to the house include: 
    • Painting the interior of the main rooms (with the landlord's permission; she agreed to avoid rent inrease for a year, as we did it ourselves and were given the paint from friends);
    • Installing gas ducted heating (the landlord agreed to go halves; about $1100 each);
    • Changing blinds and lampshades (got on sale at Spotlight so very inexpensive but looks great!);
    • Buying and installing a dishwasher (we paid for it ourselves, plus the plumbing, but it was the best $1100 I've ever spent!);
    • Painting the interior of the rest of the house (I got the paint cheap from a paint store - mistinted paints but all versions of off-white - enough for 4 rooms for $120!)
    • Fake grass for the concrete back garden. I got a large piece for about $600 and have filled the gaps over the last year by picking up off-cuts from hard rubbish and friends. It doesn't look perfect but it means my kids have a soft ground to play on. And I don't have to stare out the back window at concrete!
    • A raised veggie box/planter. This can be taken with us if we move, but it makes the back yard look much nicer.
  • So even though over the years we have spent a bit of money to spruce the place up, I estimate that what we save in rent has made it well worth it, and renting a cheaper house and fixing it up is a strategy I'll use again when we inevitably have to move. 
  • For example, a freshly painted house with heating and a dishwasher in our suburb would be perhaps $130 a week more than what we currently pay, which is $500-600 month more or $6000 a year more! And we have been here for 7 years, so that's about a $42000 'saving' over this period! We will never move if we don't have to - but am sure that day will come. Fingers crossed it's not too soon. And I'd better actually start investing those savings!

No comments:

Post a Comment