The Alternative to the Age Old Question of Renting vs Buying

rent vs buy

With house prices outpacing wage growth and reaching new highs all across Sydney, many of us are starting to question how great the Australian dream of owning your own home really is and if it is even possible.

However, many force themselves to see that owning their own home is the only option, with the alternative of renting, representing dead money and not building up any equity in an asset.

But in the recent years, in response to Sydney’s recent housing boom, many savvy households have adopted a third alternative to just simply renting or buying.

Their strategy involves renting in your current place of residence and having a mortgage for a portfolio of investment properties.

Clearly, this is an interesting alternative to the simple “rent or buy” decision and it comes with a number of very distinct advantages.

Firstly, the rent you pay for living in your own home over the long term will be less than paying the interest costs on a home loan for living in your own home.

Secondly, you are still able to build equity in your investment properties and often, these properties are able to provide better return on investment as you selected these properties, not because you wanted to live in them, but because they offer strong capital gains and rental return potential.

Furthermore, this strategy offsets much of the interest repayments of your mortgage with the rental returns of the investment properties whilst any losses are tax deductible.

Are you thinking about making the switch to a home ownership strategy such as this one? If you are or would like more information regarding it, contact a financial advisor who can help you determine whether or not this strategy best suits your financial needs.

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