My father always tell me that rent money is dead money.
He laughed and said why should owners get richer and pay off their house when you could be paying your own place off.
Throughout his life, he built a large portfolio of properties and rented them out to people. The inturn they paid off his mortgages and made him and my mother very wealthy.
At the age of 31, I own my own house but am considering moving into my mother’s place whilst I earn money from my house in Melbourne.
I currently earn roughly $1900 a week in rent from my house in South Yarra and $700 a week in my house in Brisbane. So my income is roughly $2600 in rent per week. Not too bad considering my mortgage repayments are roughly $3000 a month. In turn, I put about $8000 a month into my mortgages to pay them off sooner.
So why do I tell people to buy instead of rent?
- Security of owning your own property. When you rent you are always at the mercy of the landlord. Rent could be raised or they can end the lease early.
- It forces you to save. People with mortgages tend to have to think twice before buying takeaway every night.
- It gives you a sense of pride of owning something of your own, you can decorate it the way you want, change fixtures or even dig up the garden.
- Last but not least you can pass it onto the next generation.
But then again some people say you shouldn’t buy a house. So I ask them to explain their reasoning behind this.
A lot of people believe if you buy a house then you are locked in, that you might want to move around or travel. True when you buy a home, suddenly you can’t just pick up your things and leave. You could rent out your house but sometimes that can be a real pain in the arse. Then again you could sell your house. Wait that will cost you money and time.
Their next reason is that house prices and mortgage rates are too expensive. Well yes, they are but you need to buy within your budget.
So why do most people tend to rent?
- Renters are free to jump from one place to another.
- If they don’t like the cost of the rent they can easily move, with a mortgage it is kind of harder to just move or sell.
- If they don’t like the location well they can move.
- If the landlord isn’t fixing an issue they can move.
There seems to be some upside in renting.
It seems to be a growing trend among young people to spend their 20s traveling around the world, studying and trying new experiences. And that’s awesome!
You have full-time money coming in, are young and can do what you want. Why would you want to tie yourself down by buying a house? You are in such a unique position to be able to drop everything and move/explore/discover the world.
The major drawcard is renting is usually cheaper than buying a house.
Remember that when you rent you don’t need to consider the incidentals of owning a house. These incidentals can include:
- Home Insurance
- Waters Fees
- Body Corp Fees
- Emergency Cost of fixing items
I feel that today’s generation needs to start learning to save and invest in their future. At the end of the day the choice will always be yours.