Do Most Investors Rent?

Discussion in 'Investment Strategy' started by magma, 12th Apr, 2016.

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  1. citystar

    citystar Well-Known Member

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    Never wanted to buy a PPOR, happy to pay rent and continue investing however the misses wanted a PPOR so we came to an agreement. We would buy a PPOR, renovate it and use the equity to purchase two investment properties. She couldn't argue with that. Win-win.
     
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  2. dabbler

    dabbler Well-Known Member

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    That is a good compromise.....
     
  3. Corey Batt

    Corey Batt Well-Known Member

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    I'd say circa two thirds of clients who I see own a PPOR - with the renter component heavily being dominated by younger investors.

    There's merit in both, I would suggest that if it's possible to buy a PPOR there's a lot of value in it, in that you can always run a debt recycling strategy on the property to the point that you eventually have a nil cost PPOR and another property to leverage from.

    Then there's the whole personal space/owning the four walls around you etc.

    The strategy works best where you rent where you want to live because owning would be prohibitively expensive. Those nice 2-3% yielding inner suburb rentals. :)
     
  4. DaveM

    DaveM Well-Known Member

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    Ive rented while investing after sale of last PPOR (greatly assists with servicing), then got another PPOR which is now an IP, and am now renting again. I live how it suits me.
     
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  5. House

    House Well-Known Member

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  6. Azazel

    Azazel Well-Known Member

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    That's the ticket.
    How much do they charge for photocopies? ;)
     
  7. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    My wife and I decided from the outset that we were going to rent and purchase investment properties as a strategy as the numbers just didn't stack up purchasing a PPoR in the suburb we want to live in (Sydney). It's enabled us to build a double digit property portfolio across Australia and overseas and also to start a business in property and property management which, crucially I believe, enables me to see things from both the tenants' and investors' perspective given I'm both!

    In regards to the security/moving debate - we simply ensure the places we rent are owned by long term investors (asking questions as part of our decision making) and we only just recently moved to a new place after 8.5 years in the one property as a result of our own need to upsize due to a growing family. The place we're in now is owned by a Buyer's Agent who is also in it for the long haul and has no problem with us making certain changes to the property either.

    There's also a certain "liquidity" in renting as things can change. I also work as an airline pilot and given my job is intrinsically linked to my medical, if anything happens to me that would cause me to lose my licence (and thus my job) we can also make fast decisions.

    Overall, although it would be nice to own a PPoR the numbers are far better as "rentvestor" in most cases and provided one can overcome the emotional aspect (and of course everyone is different) it's quite a satisfying lifestyle.

    - Andrew
     
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  8. radson

    radson Well-Known Member

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    Rentvestor as well.
     
  9. raj_27

    raj_27 Well-Known Member

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    You can just fill in your detail and download the article.

    If you would like a copy of this article, just fill in the form below and we’ll send it to you right away.
     
  10. Azazel

    Azazel Well-Known Member

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    Good stuff!
    Cheers @raj_27
     
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  11. bob shovel

    bob shovel Well-Known Member

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    Scan it for free at my library! ;)
     
  12. Azazel

    Azazel Well-Known Member

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    Apparently I can scan it for free at my home library.
     
  13. Ash

    Ash Well-Known Member

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    I have done a bit of homework on this as I was in process of buying PPOR vs IP. I have signed up for PPOR and yes mostly because of family reasons but NUMBERS always DON'T stack up. Who ever is doing numbers can easily twist the numbers. The saying rent where you want to live and invest in best places can go wrong if your IP does not grow in initial 2-3 years.

    1. In case of buying few IP's and then buying PPOR -- Risk is you may not be able to buy PPOR if your IP's dont have enough equity in say 5 years and NO ONE can accurately tell you about equity gains.

    2. Rent will be cheaper than paying mortgage -- you can twist these numbers as you like and anyone can win ( rent vs PPOR)

    In my mase I wioork in North Sydney so prefer to rent close by .. rent 700-800 PW but to live if i buy an apartment where i am living now which i like in Homebush .. I will pay same amount of mortgage and no hassle of shifting , rent increase .. moreover no CGT when I will seell my PPOR anytime ..

    so Number may or may not stack up .. all depends on where you are renting & where u are buying ..

    hope this helps
     
  14. Azazel

    Azazel Well-Known Member

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    That's the thing, if that's your strategy, you could choose to rent anywhere, probably where you want to live and maybe near your work.
    But your IP could be anywhere. Not necessarily where you choose to rent and maybe not where you think it should be. Don't need to twist that. It's not a matter of your IP is in the wrong place, but you have chosen the wrong place.
     
  15. Ash

    Ash Well-Known Member

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    Again someone might have chosen the right place but if thing don't work as expected PPOR will again be delayed. I am assuming person is willing to buy PPOR after few IP's in say 5 years time rather than life long renter.

    IP could be anywhere but if we believe in blanket statement : Renting is always better in number terms than PPOR " I think it's not correct but highly dependent on 2 factors .. where to rent vs IP and numbers can favour any of these
     
  16. bob shovel

    bob shovel Well-Known Member

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    Mr Fancy Pants with your scanner and magazines! :p
     
  17. Azazel

    Azazel Well-Known Member

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    My fancy scanner only scans at the moment :(
    Printers are pretty much disposable these days.
     
  18. bob shovel

    bob shovel Well-Known Member

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    Dispose it this way buddy ;) the kids at the library pick on me
     
  19. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    When people say the the numbers are better, they are generally calculated and referred to on buying the place you want to live in vs. renting that exact same place using normal buy costs and at a given point in time. For example, in my case the property I have just moved into rents for $850 a week but to purchase that exact same property assuming a 20% deposit and all associated costs would cost me approximately $1500-1600 a week - a huge difference. I have the exact same lifestyle as if I'd owned in and can then inject that weekly $650-750 a week into multiple other investments (or personal expenses) by either funding cash flow or paying down investment debt (if that's your thing) which even if they grow at lower than average growth rates will give me a much better return over a 20 year period, including CGT liability, on absolute values alone. Of course, that is not even the case as anyone who has geared a portfolio to negative $650-750 a week is really taking on some risk! One's risk profile must be considered as not everyone is willing to go out and buy 5-10 investment properties.

    As another example, The first place we rented back in 2007 was worth approximately $450,000 and is now worth approximately $750,000. By renting that place and purchasing investment properties we have been able to grow our overall equity to a far, far greater position than if we have bought that place (even had we paid it off)...and that's in Sydney where the capital growth has been stellar, meaning that if the numbers aren't in favour of buying a PPoR in that example then they'll be very hard to find.

    Remember, your point in comment 1. is somewhat moot if you're planning on using equity from IPs to purchase a PPoR in coming years anyway as there is no deductions available from equity used from an income producing asset to fund a non-income producing asset. To do what you're suggesting you would have to liquidate one or more properties, pay the CGT and then use what was left to buy a PPoR which somewhat negates benefits given the entry and exit costs in such a relative short investment time horizon.
     
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  20. Ash

    Ash Well-Known Member

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    Good Points .. I was not even aware of "no deductions available from equity used from an income producing asset to fund a non-income producing asset."