“I’d rather pay off MY morgage then some body else’s morgage”….
Sound familiar? This usually comes up in conversation whenever the topic of ‘Rent vs Buy’ comes up. Renting usually gets a really bad rap, so I’m here to share our experience, perspective, and hope that you take away just a little bit more then if you had skipped past this article.
Ok, so typically, there are two options you have to choose from if you want to live anywhere with a roof:
- Buy a house and pay off a morgage, or
- Rent a house, and pay rent.
Mrs MoneyPlant and I have only just purchased our first home, but before we did, we happily rented for around 5 years. We had more then enough to afford a deposit and buy a house during this time, but renting suited our lifestyle, and there can be a lot of benefits to renting, a lot of which we were taking advantage of. I always got asked… but why are you renting and paying off someone elses morgage, wouldn’t you prefer to pay off your own morgage?
This is a weird question as it really doesn’t matter where your money goes. If you have a morgage then that’s a VERY high chance that you’re paying the bank some serious interest that’s not going towards paying off your morgage. What’s the different of giving money to someone else towards their morgage, and giving money to the bank for their profit margin? *Shrugs*, same same.
When we paid rent, we paid an ‘all in one’ price per week.
We paid a fixed price of $340 a week, every week, and we were renting really close to Brisbane CBD (At Annerley, so around 3.5kms). When you buy a house, depending on alot of factors of course, it can be pricey. There can be unexpected repairs, bills, council rates and a tonne of other ‘stuff’ that can pop up. I’m not saying it’s bad, but it can be tricky to manage if you’re cashflow is tight.
Renting is generally cheaper then buying, but I think the reason that societies general perception is ‘anti-rent’, simply because most people aren’t disciplined enough with their money.
When you are paying off a morgage you’re effectively signing up to a forced 30 year savings plan. When you’re renting… your not signing up to a forced 30 year investment plan, so this is where the perception comes from.
When you buy a house, you’re repayments are at least going towards paying off the capital of your property. After 30 years you WILL have something to show for it, where as if you rent for 30 years and don’t save or invest a single dollar, then yes, of course you’ll be in the exact same spot as 30 years ago.
As rented for 4.5 years. Do we regret it? Absolulely not. We had afforable rent, and our surplus cashflow went straight towards savings and investments.
Lets take a look at the numbers.
- We moved in to our last rental in Feburary 2017
- Our net wealth was $350,781
- We left in June 2021
- Our net wealth was $931.587
- We were there for around 225 weeks
- We paid a total of $75,600 in rent
Okay, so I didn’t make up the name, not sure where it comes from, but we were ‘rentvestors’, which means we were investing alongside renting. Choosing not to buy our own home.
Honestly, Australia is kind of weird about NOT having your own home. Every time I had to tick the ‘rent’ box on a survey or online form, I almost wanted to say.. “Yeah, by choice”.
I saw it as a generally negative sentiment, it’s like society was saying…Oh… you can’t affort to buy your own place, that’s a shame, I guess your a renter… There is nothing wrong with renting.
- If you’re a ‘renter’ and reading this, then it’s all good, enjoy the flexibility and not having to buy that new hot water system when it breaks down (btw, get familiar with the rental tenancy act, it’s well worth it, but that’s another story)
- If you’re a home owner, then it’s all good, enjoy the security and privacy and forced
Either way, it’s important to live within your means. Spend less then you earn, and invest the rest.
Was renting dead money to us? No
Were we paying off someone else’s morgage? Probably, who cares.
Were we better of buying our own place instead of renting? Personally, I think it was $75,600 well spent. $17,680 a year in rent was a pretty small expense, and so it really allowed us to focus on saving our money, and we never had to worry about leaks or big expenses.
Again, I’m not saying one is better then the other, it’s really hard to compare the two because there are so many other factors at play. We were fortunate enough that the owners were lovely and decided to go private with us, cutting out the real estate agent. This meant no inspections, and they were making more money so they never felt the need to raise the rent while we were there.
So, to rent, or buy?
It’s up to you, there is no right or wrong answer, all that matters is that you’re moving forward, $1 at a time.
Grow, live and invest,