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Buy VS Rent

This classic debate has been going on and on for decades and baffles all property enthusiasts around the world. Many people who have the chance to enter the property market have various reasons to doubt their ability to do so. On the other side of the coin, there are also quite a few people who love to rent and move around whenever they like. 

With the current RBA interest rate at 0.25%, Australians have witnessed the lowest ever mortgage interest rate in history. Apart from the natural catastrophic events like Covid19, many renters nowadays face some hurdles in entering the property market such as:

  1. Not enough savings to fund a deposit for their purchase of the property.
  2. Too nervous in committing to the 30-year loan term.
  3. Have already invested their funds in different investment assets like businesses, shares, options, bitcoins, gold, oils, etc.
  4. Waiting for the perfect time and best market situation to purchase a property.
  5. Bad credit rating history (credit card issue, outstanding student debt, low credit score, outstanding car loan).
  6. Job insecurity.
  7. Lack of education about property ownership and investment.
Holsworthy 3 bed townhome rented for $550 per week

All the above issues are common reasons why people are still renting. However, there are also some perspectives on the horizon that can be seen as the solutions for the above matters:

  1. Current stimulus from the government for Australians $25,000 Home Build Scheme cash grant on top of First Home Owner Grant $10,000 cash. In total, it could be $35,000 cash grant combining the two for eligible properties. These funds might equate to a 5% deposit and that is sufficient to secure a property in most cases. Combining the 5% deposit guarantee for first home buyers would make purchasing a property is a lot more affordable.
  2. Gaining adequate education about property ownership and how to secure a debt. Before committing to hundreds of thousands of dollars in purchasing or investing property, getting self-educated is essential. It can be through some critically acclaimed property educational books, such as “Australian Property Finance Made Simple” by Konrad Bobilak, “0 to 130 properties in 3.5 years” by Steve McKnights, How to Grow a Multi-Million Dollar Property Portfolio” by Michael Yardney or plenty of podcasts, webinars, and other online resources  from legitimate property experts. We believe that education plays a vital role in shaping up the knowledge that enables us to approach the property market with advanced mindset.
  3. Billionaire investor Warren Buffett famously stated that “diversification is protection against ignorance”. Diversification of funds in bitcoin, gold, silver, oils, futures, forwards, etc without a proper financial education is a recipe for disaster. Actions that don’t have foundations of basic knowledge might lead to unfavourable results.
  4. As property owner for more than a decade, we happened to know one famous quote in the field saying that “the best time to buy property was in the past, the second-best time is today”. Through different market situations, that quote is still relevant and valid nowadays. 
  5. Bad credit rating can be challenging to someone’s lifestyle. In this life, we need to realise that to achieve a goal means that we need to sacrifice something in return. To achieve a healthy lifestyle, for example, we need to sacrifice our time to work out and practise healthy eating habit. There is no gaining only, there are sacrifice to be paid for the goals we set. Bad credit rating history usually is driven by uncontrollable and undisciplined lifestyle. People spend more than they have. A credit card has been one of the biggest debtors in human’s life because the control of spending is making people lose control of what they can spend.

There are some benefits of owning a property. But the main benefit is to have the opportunity to gain through capital growth from the funds that we put in the property. This is the main factor that distinguishes renting and buying. Renting could never give any opportunities to gain through capital growth. Buying could. 

$599,000 townhome suitable for First Home Buyer to gain First Home Owner Grant ($10,000) + Home Build Scheme ($25,000) + 0 stamp duty payable (below $800,000)

We believe that the current property market provides us with a once in a lifetime opportunity to own a home. The reason is there are not many opportunities for people these days to take advantage of their citizenship and get thousands of dollars from the government to back up. If you are renting and would like to enter the property market now, we have a mortgage partner who has wide access to over 400 different lenders for Australian properties. For so many different cases of the job situations and conditions, you would be assessed for borrowing capacity and be advised for the suitable loan options available. It’s best to understand what you can afford, before committing to any property purchase. Note that the current stimulus of $25,000 is only up to 31 Dec 2020. And, probably, we might not be able to see this opportunity again in the next 100 years.

Chandra Leonardi (Principal of CVIG) in a successful duplex collection in Edmondson Park catchment

Feel free to contact one of our members at info@cvig.com.au or (02) 8386 2977.

Below is the calculation estimate or simulation presented by yourmortgage.com.au to show difference between buying and renting a property from capital point of view.

Rent $550 per week vs Buy property priced at $600,000 with 5% deposit only. Variable current interest rate (as at 30 June 2020) is around 3.1% Principal & Interest for Owner Occupier.

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