The question of whether you should buy your primary residence or rent it is one that most people have been asking for years and will continue asking as I don’t think there is a clear-cut answer given that there are multiple factors to take into consideration.
Growing up I was often told that you need to buy your house so that you have an asset in your name and that if you rent you are just paying off someone else’s bond, and I believed this. So, when I got married my husband and I immediately bought a little house together. We thought it was a great investment and we were following the advice we had both been given over the years.
But then we realised something – this house wasn’t an investment at all because every month we were just putting money into it and getting nothing in return. Yes, we would eventually own the house outright, but that would take 20 years. And even after those 20 years, it would still not be providing a return as we would still have to cover the costs for repairs and maintenance.
And that is when we came to the realisation that the house you live in is neither an asset nor an investment while you are paying the bond. Once the bond is repaid, it becomes an asset but it only becomes an investment if one of the following things happens:
- You sell it and make a profit
- You move out and start renting it out
- You refinance your bond and use the additional equity to invest it in a high return (and then usually high risk) investment that provides a monthly income that covers the bond repayment
We then had a look at our financial goals and what we wanted to achieve, did some research and calculations and came to the conclusion that for us (and this is a personal opinion) it would be better to rent the home that we want to live in and use our available debt to buy investment properties.
At this point we were looking for a slightly bigger house and also found that we couldn’t afford to buy the house we wanted to live in, but we could afford to buy a house similar to the one we already owned.
So this has become our strategy for now: rent our lifestyle (the house that we want to live in) and buy investment properties to fund that lifestyle for the foreseeable future.
BUT just because this works for us, doesn’t mean this will work for everyone. Buying a property is about more than just looking at the numbers as there is an emotional aspect involved. Along with owning the house you live in, comes a sense of pride and security. You know that no one will kick you out, you can put as many holes in the wall as you want to and you can really make it your own. If the interest rate remains unchanged then you also know what your monthly expenses will be, whereas you don’t always know what the annual rental increase will be.
As you can see there are pros and cons to both options so ultimately you have to make the choice that will make you happy and that fits in with your financial goals and objectives. My aim with this post was just to get you thinking about all the aspects involved and ensuring that you are making an informed decision and not one based on someone else’s opinion.
If you would like me to go over the numbers with you, feel free to get in contact. I would love to assist you where I can.