To buy or rent (forever)???

@Taku Ekanayake Another good option is buying in a place that you would like to live in the future and rent it in the mean time. Then when that future time comes you can renovate and move in, but having paid the price of many years earlier. That's what I did.

 

We have done this many times by now and now have debt free PPOR

 

Yep, good call @Leo2413.
Did the home you did this for attract a good rental yield and not affect your cash-flow too much?
Personally, I wouldn't have the funds currently to buy a place I wanted in the future; even if I rented it out, it would affect my cash-flow too much right now.

 

It was NG when we bought it and rented it but if I recall only by $150 after being rented. If we were to buy the same place today...we would be paying an extra 400-500k.

 

I have a friend who I have helped get to 11 properties since 2009.

He rents in Sydney...he could not achieve what he as done if he did not rent.

 

Hey I'm your friend too....

 

Come on Leo...you don't need any help...you have heaps for properties....

 

ohhhhhhright then... thanks for nothing you

 

I've purchased 2 PPOR's over the years, reno'd while living in then moved into a rental and turned both into IP's.

 

I bought an IP and rented but I'm currently looking to purchase a PPOR now instead of another IP. Long term I think that's the better decision.
Kiyosaki is correct in the way he describes a PPOR as not really being an asset because it doesn't generate income. However, he also overlooks the opportunity cost of not getting a PPOR. Long term if you continue renting the rent is always going to increase. With a PPOR besides interest rate rises the price of the house will get lower over time and you'll eventually own the asset. Than you also have the emotional benefits of it as well.

 

Personally I think Kiyosaki's definition of assets and liabilities is complete and total nonsense.

He says:

Asset – As defined by Kiyosaki, an asset is anything that you acquire that puts money into your pocket. Assets are what the rich use to generate wealth over time.

Liability – Any acquisition which takes money out of your pocket. Rich Dad, Poor Dad examines how many people consider owning a house as an asset, while Kiyosaki views a house as a liability. Home owners don't always take into account the cost of maintenance for the house, the fact that the mortgage may not be paid off by the time they want to move again, and the fact that houses can depreciate in value.

He says "assets are what the rich use to generate wealth over time". According to his definition of assets then the rich are using positive cash flow to become wealthy over time. That's total BS, the rich use growth of equity to become wealthy. I believe he is just touting what sells for the US property market and in turn more sales for him via books, seminars etc.

If I did what he ascribes to, I would probably have 1/10th of what I have today and I think many here would also have a substantially lower net worth.

 

Rentimg v buying the same property will nearly always come in cheaper to rent. Thats why negative gearing works in Australia but rents rise and after about 12 years it would become cheaper to have ownwd tje same property.

So why not get the best of both worlds by getting a main rraidence and then renting it out. Claim all deductions. Save tax and pay lower rent and then after a few years move back in.

 

I don't know about that 'double annual income'. I don't know many people who's mortgage was less than double their annual income. I think that's an unrealistic target. Or extraordinary circumstances, for the majority.

 

I'll be happy renting for the foreseeable future.

Greater flexibility, lower cost (therefore better cashflow and more capital I can leverage and multiply).

 

For our situation, I have a different view - mainly due to circumstance and opportunity. We currently have a few IPs but our next step is to sell an IP that I still have PPOR status on until the end of this year. Then do a subdivide/build of 2 new homes - one becoming a new PPOR with minimal debt. We plan to own this outright by 2017/2018. We will be 37 with a 3 year old.

For us, to own a home outright, we see this as a huge advantage.

I understand the advantage of renting IF it will be 10+ years before you own your home.

 

I don't agree with this bit completely..

It is true that if you invest the difference between what your rent is, and what a mortgage on the same property would be you would be better off - the key word is IF.

Most folks don't do that; they spend it.

So, for most folks the better path is to get into a property as soon as they can. It is a forced savings plan if you like and stops them wasting money on stuff.

This is their best longer term investment (other than possibly superann).

And, if they then adopt a good habit of increased loan repayments and debt reduction on their PPoR loan, and then leverage into their increasing equity when available and use it for further IP purchases, then - for most people - this is a very good longer term investment strategy.

 

Personally, I'm happy to rent. I rented a place for about 6 months before my circumstances changed and I had no issue with it. But once I finish uni, if I end up getting married, having a family, I'd probably want something that is my own that I can work on, add a homey feel to it, without feeling as though I may have to leave the property and redo it all over again in another one.

Why did they kick you out? it wasn't that 10 year tenancy thing, was it?

 

Even if they don't invest the difference, there's a still few hunge of serviceability tied up there that they could be using for investing.

 

Are you saying for him to wait until he has saved the cash to buy the PPoR outright?

 

Rather buy the PPOR rather than rent, yes financially it is cheaper to rent however the long term picture I feel is better to buy rather then rent.

Reasons; I am the best tenant anyone could ask for (and that is me being modest), so why would I want my family and I to move into another LL property when I can move into mine.

Like @Terry_w wrote after a number of years the value starts to sway towards owning.

I can manufacture growth a lot easier, right now we are renovating the laundry (will be completed this weekend) however we have already started to take off the tiles. Doing this with a tenant in the property would be stupid and if we took 2 weeks to do it without a tenant in it between leases that is two less rent + it is harder to get a tenant through when you are doing it up so it would likely be another 2 weeks before you got another tenant back in (4 weeks loss rent).

Finally you get to choose the house and style you want the family home we will one day own isn't going to be your typical rental property. I would like something similar to parents which is a 5 acre property and about 20km from Melbourne with the big house. This is not something you can find in the rental market everyday and if you do find one the house might not be suitable and you cannot change the house.

Not everything is about $$$ you do need to enjoy/reward yourself along the way and I would rather splash out on a nicer house then a 20ft boat which will depreciate.