Renting vs. buying

The great Australian dream is never far from our minds. If we're renting, we fret about wasted weekly payments and wonder if we'll ever be able to afford our own homes, and if we've bought, then we worry about how to afford the mortgage and what we'll do if anything ever goes wrong. Knowing if you're doing the right thing is never easy, but there are distinct advantages and disadvantages of each choice. Read through the list below and work out which is the better option for you right now.

Renting

Pros

• You can move around between properties more easily.
• You can most likely afford to rent a better place than you can afford to buy. You may be able to shell out each week for a new unit close to the beach or the city, but could you actually afford to buy that same property?
• You have no commitment.
• Renting is a great option if you're expecting major lifestyle changes in the short term, such as a working-holiday stint overseas.
• As a renter, any maintenance issues and costs can simply be passed on to the landlord.

Cons

• Rent money is "dead money." Your weekly payments are going straight to helping your landlord pay off his or her property.
• You don't have a foothold in the property market or a property asset for security.
• You're subject to rent rises.
• You have to answer to your landlord and the real estate agent. Any changes to the property or additional tenants, e.g. if your partner choose to move in, have to be approved by the landlord.
• You have no security in your place of residence — the owner could decide to sell, you could be evicted or the lease may not be renewed.

Buying

Pros

• You own a major asset, which gives great security for the future. The equity you will accrue in the property could lead to more purchases down the track.
• Property could be part of your long-term investment plan to help grow your wealth and provide for your future, your family and your retirement.
• The psychological value of owning your own home is priceless.
• You have the freedom to paint, make changes to the property, add hooks, etc.
• A property gives you plenty of opportunity to generate wealth, such as through renovations, subdivision, capital growth and letting to tenants.
• If this is your first property purchase, you can most likely benefit from the Australian government's $7000 First Home Owner Grant (FHOG). Your state or territory might also offer further financial assistance or tax benefits. Contact the relevant revenue office in your area for more information.

Cons

• Buying a property is a huge cost and it may restrict your lifestyle. First you have to save for a deposit and then you have a responsibility to pay your weekly mortgage repayments. You also lose a lot of money through interest.
• You're responsible for all maintenance issues, so when your bathroom tap starts leaking, you can no longer rely on your landlord to pay the costs for you.
• It's not just the property purchase and home loan: You'll also be required to pay other costs you may not have considered, such as council rates, legal fees, etc.
• You have a long-term commitment to pay off your mortgage (usually 25 to 30 years).

Who should do what?

Clearly, those who are on a high salary with plenty of disposable income and few assets would be wise to take their first step into the market and ensure they've got a slice of the property pie. Remember that your purchase doesn't necessarily have to be your principal place of residence. You could choose to buy a property elsewhere in the state or country where you see great capital growth opportunity and continue renting at your current address. By choosing to be an investor, you'd forgo the FHOG but would benefit from a rental income and great tax deductions.

However, if you don't have savings, are on a low income or are struggling to pay your rent or if you expect to experience significant life changes in the near future, such as quitting your job to travel, then now may not be the right time to dive head-first into a long-term commitment. It would be best to start saving for a deposit and learning more about the Australian property market so you'll be armed with knowledge when the time is right to buy.

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