Is it possible to buy cheaper than renting?

I've been looking for somewhere that would end up cheaper than renting, but finding it difficult even if I rent out spare rooms etc, is anyone living in a cheaper than renting situation? Any advice/ info? It seems more common/ plausible in other countries e.g the U.S

 

Depends on the location of course, but even in lower cost higher rent locations it also depends on your deposit and loan scenario. Plus whether you factor in insurance and rates/strata.

EG I just picked up a client investment property in a major coastal regional area of NSW at $286k and they just signed a tenant at $400pw. The investor used a cash deposit as this was his first property and hence this will be cash +tve for him (yes even with strata I believe it will be slightly +ve) - so is it cheaper to buy than rent? The gross yield is 7.2% the net yield is around 6% so is it better to be an owner or a tenant in that scenario? Its close I guess.

 

so there is 2 ways of counting whats cheaper. renting or buying

1. one is based on purchase priced vs current yield

other is

2. the current market value of property vs current yield.

in sydney at the moment,

scenario one your always almost cheaper to buy as long as you bought 4 or more years ago.

2nd scenario your always gonna be cheaper renting.

 

Thanks, the only way I can see it being cheaper at the moment is as mentioned if you bought 5+ years ago etc, I have seen some people doing it though e g renting 6brm houses living in one and renting out the rest individually etc. Or maybe people with granny flats etc? Whereas in the US it's not uncommon to basically be able to live for free by renting out a spare room etc.

 

At current interest rates, plenty of properties in Perth are cheaper to buy than rent.

 

It really depends on your personal situation - how much you are wanting to spend, size of your deposit, taxable salary. Yes, it’s definitely possible but just like there is no such thing as a positive or negatively geared property, it all comes down to your personal situation.

- Andrew

 

It is also possible or close to possible in Canberra - I'm assuming no deposit.

 

My place was. But not how you might think. Our repayments plus on costs are about $90 more than renting.

But we bought close to everything so we could get rid of 1 car ($100 P/wk approx) and spend much less on the car that's left.

With a PPOR the numbers aren't always evident.

Lots of ways to skin a cat!

 

Thats a good point, but wouldn't it have still been cheaper to rent a place close to everything?

 

You havent experienced a boom have you?

Most nice areas are more expensive to buy than rent. This doesnt stop them from becoming even more expensive.

 

That's an excellent point! The answer to that is a solid "Maybe". We have a dog (more expensive rent) and the yields here are quite high.

A photo finish!

 

I would say it's rare in Sydney.

 

Our first home in 1980 was the same price per week to buy than to rent but only for the mortgage. We then had to pay rates, water and insurance. These days, those three costs add to nearly another $100 per week on top of a mortgage.

 

Rent or Buy? - Aussie Firebug
Rent or Buy? We do the sums
https://www.smh.com.au/opinion/rent-or-buy-the-evidence-is-in-20170107-gtnj2a.html

In some regional cities buying can be cheaper than renting because many don't want to commit to buying hence property sale price is low but good rents.

 

Out here in South West Victoria I've never seen the rental market so tight . There is virtually nothing available to rent in most of the towns within cooee . An influx of workers for wind farm construction is part of it . Rents 20% higher than 12 months ago .

Lots of people seem able to afford to buy rather than rent but don't qualify for a loan

 

Too many variables to factor in but at the absolute basic of rent vs mortgage, it is.

There's 2br units on the NSW Northern Beaches where it's $100/wk+ cheaper to buy than rent if you go IO, 10% deposit so that's one way to do it. Add in rates and you're pretty much break even so still pretty good for a decent unit 5mins walk from the beach 20km from the CBD.

 

No shortage in the outer suburbs in Perth with 3x1, and a few 4x1 houses on 600++sqm blocks , going for around 250k or less with easy access to train stations up for grabs.
Beats paying double to triple that in Sydney with many jobs that may only pay up to 10% more.
Or even worse and paying strata fees at around $1000 per quarter.

 

In all growing areas with tight rental supply this factor alone is going to see rents grow WELL above average in coming years (assuming lending doesn't instantly get easier)

 

Depends what timeframe you are referring to.

If you rent over 20 years you get rent increases. If you buy over 20 years you should get growth (equity) since the value rises but the loan doesnt.

Over 1 year its madness to buy any property due to the costs of legals, duty etc etc....But renting for that year and missing a purchase if prices rebound could cost you over the next 19.

Many people consider others ways to help finance the deal today so the lease v buy option is levelled. eg flatmates, house share, Airbnb etc Its all about cashflow and equity.

 

Matt Knight nailed it above.

This question is all about location really: capital city metro areas are almost always cheaper to rent, and more expensive to buy. Regional areas are more expensive to rent, and less expensive to buy.

But it brings us to the concept of "rentvesting", and I am more lukewarm than most on this. The super fast "readers digest" version of my view is:

- rentvesting good for short periods of time, bad for long periods of time

- we buy real estate because we want to take advantage of time, compounding and inflation. Over long periods of time, if you are not earning compound returns, you are paying it. So don't rentvest for long periods of time.

- rentvesting works if you run a business from home, so you can claim tax deductions on your rent. That doesn't work quite as well on a PPOR because you lose your CGT discount.

Cheers,
John