Is renting a good idea?
In finance circles, renting is often talked about as being wasted money. The money you pay each week goes towards building equity and wealth for someone else.
But there are several countries in Europe where renting is the norm for much of the population, and they rent for long periods of time. With Australian house prices continuing to soar, renting may be the only option for many Aussies for some time as they struggle to save up a deposit.
So what are the advantages of renting over buying?
- Freedom: you’re not tied down to a 25-year mortgage, making it a lot easier to pack up and move on if you choose to.
- Location: for most people, renting makes it possible to live in a better area than if you were to buy.
- Reduced responsibility: if the boiler breaks, you just pick up the phone and ask the landlord to fix it (it becomes someone else’s problem).
- Ease: there’s no saving up for a deposit, no stamp duty or insurance to worry about.
That doesn’t mean to say owning a property is a bad idea. It’s not. But there’s a case, particularly among first-time buyers, to buy an investment property over a home and rent for a bit longer. You build up equity, get help from tenants with mortgage repayments and can use the property to your advantage come tax time.