First Home Buyer Hub Buy at the right time Rent Money isn’t dead money

Rent Money isn’t dead money

Either from your parents, friends or family, you might have heard the old adage: rent money is dead money.

This is simply not true.

With median property prices in Melbourne and Sydney approaching the $1M mark, and rents at a relatively low point, renting and buying an investment property, instead of a home, could make financial sense.

Renting, and buying an investment property could make financial sense.

Let’s say you earn a salary of $70,000 p.a. and you have managed to save $50,000, you are paying $400 pw and rent a place in a desirable location with a median price of, say, $600,000 for a unit in Brisbane, like Hamilton.

You would currently be paying $20,800 in rent per year, versus interest repayments of $24,300 at 4.50%.

Your mortgage repayments would be closer to $36,000 per year when you look into paying down the principal of the loan.

This isn’t taking into consideration the costs of owning a property which can include council and water rates, insurance, maintenance, strata if you own a unit—which can add another $4 – 5K per year.

So in effect, it would cost you around $10 – 20K per year extra to own your own home, without any tax offsets or advantages.

Rentvesting Allows You to Have the Best of Both Worlds

It lets you balance lifestyle with smart investing.

In this same situation you could continue to rent and invest the $10 – 20K extra you would be paying elsewhere in property or other assets.

Now financial gain isn’t the only reason people buy property: there are emotional and family reasons which we’ll talk more about shortly.

But it’s just keeping in mind that it’s important to look at the numbers to understand if rent money is really dead money.

For the rest of this book, we’ll mostly be focusing on first home buyers who are looking to buy a home to live in, rather than as an investment. But if you’re interested in getting a leg up on the property ladder while still living the lifestyle you want, check out our guide to Rentvesting here.