Comment on Renting vs Buying by Get FIRE’d asap.
Hi there FS, I’m in position of being both an owner and a renter. I own three houses but rent an apartment to live in. The reason? My houses are all located in Auckland, NZ, which is a market that has seen huge capital gains in property over the last 10 or so years. But, I live in Brisbane, Australia, which has has a stagnant property market for 10 years. In fact, some months growth is actually negative.
So, as inconvenient as it is to own property overseas, the cap gains on these make it worthwhile holding on to for now which I am doing. However, the cost of renting here in Brisbane is about half the cost of buying the equivalent property since we don’t have to pay insurance, maintenance, body corporate (home association) fees or water.
The key benefits, to me, of owning rather than renting is that you have the security of knowing that you can’t be evicted, and that you have the opportunity to add value and personalise the property.
When I look at purchasing a property, whether as a rental or to live in, I always look at how I can add value to it, whether a paint job, landscaping, or some renovation work. This is often the only way you will capitalise on a property, when you sell, especially when owning in a stagnant market.
I have to admit, I never look at a property from an emotional point of view. To me it’s 4 walls and a roof that I can live in (or rent out) that has a current value and I want to know how I can increase that to sell for a profit in the future.
Perhaps a little hard-nosed for some but it has provided me with my financial independence which I am now enjoying the fruits of.
However, done right, property buying/selling can make a significant difference to your retirement portfolio worth.
Get FIRE\’d asap Also Commented
Renting vs Buying
Good question FS and one anybody considering buying a rental property should consider if they don’t want to deal directly with tenants or if they are not local as in my case.
In NZ, rental properties need to have someone managing them so if the owner is not going to do this, they must appoint someone who the tenants can contact. It doesn’t have to be a management company but this is often the easiest option which is what I do.
Management fees range from around 5% up to 7.5% of the rent but can be higher for premium properties. Three monthly inspection fees are on top of that again. Yes, this does impact my return but a) I don’t have a lot of choice, and b) the capital gains still make the properties worth hanging on to.
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