Jump to content

Rent VS Rent/Buy Help us Decide EB!


  • Please log in to reply
17 replies to this topic

#1 whatnamenow

Posted 08 February 2013 - 06:31 AM

DH and I cant afford to buy for another 12 months ( well not cant afford I'm self employed and need 2 years financials) and in 2 years our financial situation would change dramatically for the better ( both DH and I finish study in 2 years) and the house we could afford in 2 years would be alot more than the house we could afford in 12 months.  Because of this DH and I had settled for continuing to rent and adding to our deposit money for 2 years and then decide to buy then.

However the market at the moment here is really good for buyers.  Seriously good if we could get the mortgage now we could get what we wanted for about $300K or what we could live with for about $260K.  Because there are so many sellers and not as many buyers there are sellers getting more 'creative' about how to sell and through mutual friends we've been offered a rent/buy scenario that would allow us to rent for 2 years while technically putting further 'deposit' on the house, with the reality is that it would just reduce the selling price.

The thing that isnt making me jump on this offer is that its more house/more money than we 'need' its in our want price bracket rather than need price bracket.  However its 1000sqm of high density residential land a street back from the beach which I am thinking would be a bloody good long term investment.  Adding to the complications is the fact that we are not shopping for our 'forever' home.  My kids are older and my older daughter will have left home in 5 years, and my youngest is 50/50 custody and will probably move out in 7 years ( most kids move away for uni) DS will probably live wiht us forever due to his disabilities so plan was in 2 years buy something cheap but big, slowly renovate and then sell in maybe 7 years and buy something alot smaller for just me DH, youngest DD with maybe a granny flat for DS.

So EB do we stay here and rent or take the plunge?

#2 Madnesscraves

Posted 08 February 2013 - 06:50 AM

keep renting.

ITs hard because you really want to get a house to call your own, but really, no rush. save up and get a new house 10 times better in 2 years.



#3 Rubyduck

Posted 08 February 2013 - 07:07 AM

It depends on the house and location really, if I loved the house and location and lifestyle it would offer then I would probably go for it knowing each week I paid rent I was decreasing the sale price but in saying that a lot can change in 2 years, will there be a legal agreement in place it make sure the seller doesn't change their mind and sell it from under you before the 2 years is up and your ready to buy???

#4 whatnamenow

Posted 08 February 2013 - 07:28 AM

QUOTE (Rubyduck @ 08/02/2013, 07:07 AM) <{POST_SNAPBACK}>
It depends on the house and location really, if I loved the house and location and lifestyle it would offer then I would probably go for it knowing each week I paid rent I was decreasing the sale price but in saying that a lot can change in 2 years, will there be a legal agreement in place it make sure the seller doesn't change their mind and sell it from under you before the 2 years is up and your ready to buy???


Absolutly legal agreement made.  We have been going back and forth with terms we both want in a non formal way for the last 2 weeks and when we are all finally happy then it goes to the lawyers to get properly drawn up.  On the condition that until its signed house is on the market and likewise we can pull out until its signed if we cant come to an agreement about terms.


#5 BetteBoop

Posted 08 February 2013 - 07:57 AM

No. I wouldn't buy now. House prices are still dropping almost everywhere in Australia.

The house you lock into now is likely to be much cheaper in 2 years.

I agree with your DH. Saving your money for the next 2 years to have a good deposit and then buying is the best option. A big deposit saves you money on mortgage insurance and it drops the repayments of your loan.

#6 qak

Posted 08 February 2013 - 08:10 AM

QUOTE (Beetlebop @ 08/02/2013, 08:57 AM) <{POST_SNAPBACK}>
The house you lock into now is likely to be much cheaper in 2 years.


Personally I think this is a high risk assumption.  I would buy (with the rent for 2 years scenario)!

#7 MrsLexiK

Posted 08 February 2013 - 09:20 AM

The house you have described sounds like our dream house original.gif I am in an area where house prices haven't dropped at all over the years (maybe other suburbs have in the area but not ours), we've had a couple of houses be sold twice since the GFC in a few streets in our estate and each time they have gone for more then before with no improvement.

I do know someone who did what you are thinking of doing, however her parents had to pay capital gains on the whole price including the "deposit" they had paid - I would ensure that if you go down that path that the other party ensure the agreement is wordered correctly so that that does not happen as I could see that being an issue for friendship down the track.

I would be looking at the price of the house now, and how much you think you will be spending on renos over the 7 years.  Will this house need anything done in 7 years time or will you be able to sell it in 7 years and be able to afford the smaller house with a granny flat?

#8 Cirrus

Posted 08 February 2013 - 09:25 AM

(These are Qs to consider - I'm not asking you to give details)

Would this couple sell you the house if you had the money, or is this a way for them to make extra money from people based on the fact that not everyone is in a position to buy?

I would not assume that they are just being creative but that they are looking to get more money out of their property than they would either selling or renting it.

Obviously the benefit to you is that you could decide not to buy it after 2 years with less consequence than if you had already bought a place and changed your mind. However you sound pretty certain about being better off - so this may only be relevant if house prices drop and you decide to get something else. What kind of loss would you face at that point from the extra money you'd have spent on this place?
How do the weekly payments compare to rent for something similar? Would you be better off saving?


You could use some home-loan calculators to work out how much total interest you would be paying if you bought now for the asking price on this home. Then compare that to the extra costs with the rent to buy scenario.
Hopefully the extra money you will give the owner will not be many times higher than you would be giving the bank in interest.


House prices may go down. House prices may go up. With each housing option (wait 2 years or buy this one) think through the worst case scenario and how you would cope with it.

If the rent you are paying now is similar or less than the interest you would be paying on a similar house - if I were you I would save money rather than taking a gamble on the current house prices being as low as they'll go.





#9 *cough*

Posted 08 February 2013 - 09:27 AM

House prices are rising in Perth. Just read the report the other day. Don't assume it will be cheaper.

#10 Sweet like a lemon

Posted 08 February 2013 - 09:46 AM

Buy. Rent money is dead money. Don't wait until the market reverses again and you're paying more for a house than it's actually valued at. This is what happened in 2007 and people now are sitting with massive mortgages on properties where even in a reverse market they will never get back what they've paid.



#11 AllyK81

Posted 08 February 2013 - 09:54 AM

Rent money is not dead money. That is a line we've been sold from lending institutions.

The housing bubble and urban sprawl in Australia has been caused by people's desperation to own property.

OP, you sound like you're weighing up the pros and cons in an intelligent way. If you are not 100% sure, I would hold off. Provided you are saving, you are not losing anything by giving it more time.



#12 Phascogale

Posted 08 February 2013 - 10:18 AM

QUOTE
Rent money is not dead money. That is a line we've been sold from lending institutions.
This probably depends on your price bracket and what you can afford.  If you have a large disposable income and are happy to live in a cheaper home and are disciplined savers then you can invest in other things and not be worse off.  And if you invest in property then you will have somewhere to live (hopefully paid off or almost) if worse comes to worse without the need to pay for further rent.  Then in this case rent money isn't dead money.

At least if you have a mortgage you will eventually own the property you are living in.  If you rent (and have no other investments) that you will probably have paid out a similar amount of money to your mortgage but you'll still need to continue to pay rent because you don't own a house while you won't with a mortgage.

There is a big difference in having to pay $15K-$20K in rent a year and having to pay, say, $5K a year for rates and service charges when you are retired because you own your own home (I'm not including the usage charges for any services) and yes there will be maintenance as well.  And you can always sell your property and use the money for whatever you need to (even if you do end up needed to rent because of circumstances) - you won't get that with a rental.

But to the OP - it's a difficult decision.  Realistically prices can do anything so you can't really count on anything.  They may go up, but they may also go down.  I'd be reluctant to go into a rent/buy arrangement but if you have an iron clad agreement, it may be the way to go.  

It will depend on how it is set out.  Will you be paying currently market price for the property or will it be the market price in 2 years - which could do anything.  Theoretically you can rent the house out with just a lease and then in 2 years buy it. This way you wouldn't be tied down if you didn't like it but then the people may need to sell it before the 2 years was up.

Would you be happy in this house?  Would it be the house you would buy in 2 years anyway.

I'd be more concerned at the legal aspects, but if they were okay and the house is what you wanted and would want to buy anyway then it would be worth seriously considering.

#13 whatnamenow

Posted 08 February 2013 - 10:27 AM

QUOTE (MrsLexiK @ 08/02/2013, 09:20 AM) <{POST_SNAPBACK}>
I would be looking at the price of the house now, and how much you think you will be spending on renos over the 7 years.  Will this house need anything done in 7 years time or will you be able to sell it in 7 years and be able to afford the smaller house with a granny flat?


not to many reno's needed.  Kitchen could do with an upgrade, and I personally would probably repaint a little.  It would as always need the basic care and attention that any house needs.  Personally i think if this house was anywhere else ( on a standard block away from the water) then i probably wouldnt consider it but one street back from the beach on 1000sqm block zoned high density? I'm trying to consider that when the market does pick up then close to water is usually the first to go up AND as our small town grows it will also increase in value.

It really is just creative selling.  Houses here are not moving unless they are in the very very cheap end ( around $200K.)  The house is also on the market for straight sale and will continue to be until either we sign an agreed contract or it sells as a straight sale.  No extra money.

We currently pay a huge amount of rent (basically a mortgage repayment on a cheap house) a week.  We basically have the choice to continue to save $300 a week more towards our deposit or pay $200 a week more and get this house ( we would continue to save the extra $100 a week towards an added deposit)

#14 Sweet like a lemon

Posted 08 February 2013 - 10:32 AM

QUOTE (AllyK81 @ 08/02/2013, 10:54 AM) <{POST_SNAPBACK}>
Rent money is not dead money. That is a line we've been sold from lending institutions.

The housing bubble and urban sprawl in Australia has been caused by people's desperation to own property.

OP, you sound like you're weighing up the pros and cons in an intelligent way. If you are not 100% sure, I would hold off. Provided you are saving, you are not losing anything by giving it more time.


Our repayments are less than the average rental in this area for an equivalent sized house / property. Our property is currently valued at 125K more than our purchase price. There is no return on rent money. There is no equity in rent money. We didn't buy at the best time but went on the worst house in the best street scenario. 30K worth of renovations and 5 years later we are in a position to comfortably upgrade our house and property size. Because of the pathetically low interest rates on savings accounts here you would need some very stable and desirable investments to see the same return on your saved moneys.

#15 Pobbs

Posted 08 February 2013 - 10:40 AM

Be careful. Those rent to buy schemes [most of them] are very, very dodgy, and designed to trap people like yourselves.

The repayments are normally a lot more than interest rates [which I think are sitting at 3%?] and unless you have a legally binding agreement that you have had your solicitor go over and give you the good and bad news with it, proceed with caution.

Make sure it has clauses that if they go bankrupt, you get the 'deposit' portion of your money back from the proceeds of the house sale, etc. Etc.

PS. If you were in a flexible interest rate, now would be the time to look into fixing it...

#16 whatnamenow

Posted 08 February 2013 - 10:41 AM

QUOTE (Phascogale @ 08/02/2013, 10:18 AM) <{POST_SNAPBACK}>
It will depend on how it is set out.  Will you be paying currently market price for the property or will it be the market price in 2 years - which could do anything.  Theoretically you can rent the house out with just a lease and then in 2 years buy it. This way you wouldn't be tied down if you didn't like it but then the people may need to sell it before the 2 years was up.

Would you be happy in this house?  Would it be the house you would buy in 2 years anyway.


Current market price,  Simply renting it isnt an option. It isnt the house we would buy in 2 years as I'm a little budget concious and would purchase something nice and cheap probably in the cheaper back suburbs.

#17 MrsLexiK

Posted 08 February 2013 - 10:51 AM

QUOTE (charlottesmum04 @ 08/02/2013, 11:27 AM) <{POST_SNAPBACK}>
not to many reno's needed.  Kitchen could do with an upgrade, and I personally would probably repaint a little.  It would as always need the basic care and attention that any house needs.  Personally i think if this house was anywhere else ( on a standard block away from the water) then i probably wouldnt consider it but one street back from the beach on 1000sqm block zoned high density? I'm trying to consider that when the market does pick up then close to water is usually the first to go up AND as our small town grows it will also increase in value.

It really is just creative selling.  Houses here are not moving unless they are in the very very cheap end ( around $200K.)  The house is also on the market for straight sale and will continue to be until either we sign an agreed contract or it sells as a straight sale.  No extra money.

We currently pay a huge amount of rent (basically a mortgage repayment on a cheap house) a week.  We basically have the choice to continue to save $300 a week more towards our deposit or pay $200 a week more and get this house ( we would continue to save the extra $100 a week towards an added deposit)


I would def be weighing it up if I was you for the points you mentioned.  In the years we have owned our place our mortgage has gone down (but we haven't changed what we are paying) by more then $60 a week, the rents in the area have risen by easily $100 a week. (We are really talking in the last 2 years)

#18 The Falcon

Posted 08 February 2013 - 10:54 AM

I don't know anything about the area you are looking at, but you sound as though you do, so if you think it is a good investment I would do it.  Make sure the aggreement is drawn up by your lawyers and unless this is the sellers main residence as well they should run it past their accountants as well so theey are aware of the tax consequences.




1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

Special Ticket Offer, Save $8!

The Essential Baby & Toddler Show is back this April! Save $8 off the door price for a limited time only!

Why I breastfed my son until he was three

The fact that I not only breastfed my son, but breastfed him for three and a half years, seems pretty incredible in retrospect.

Do babies and young children see ghosts?

Do babies and young children see ghosts? If you’ve pondered the question, you’re not alone.

15 years with Essential Baby: meet Therese

"Life has a funny way of giving you what you need when you need it the most."

Mum causes a stir by taking a stand against leggings

A mum has found herself the subject of debate after claiming tight bottoms cause lustful thoughts in men.

Don't set a parenting goal for 2015 - do this instead

The problem with goal setting as a parent is the measure. How do we really know if we’re succeeding?

5 pregnancy myths that just won't go away

When you're expecting, it often seems like everyone is keen to offer advice about what you should and shouldn't do in the interests of your health and wellbeing.

RPA hospital contacting mums after discovering vaccine storage fault

Sydney's Royal Prince Alfred Hospital (RPA) is trying to contact women who had babies at the facility after discovering a fault in a refrigerator containing vaccines.

'Nutella' not a baby name, French court says

A French court has blocked parents from naming their baby girl after the hazelnut spread Nutella, arguing it would make her the target of mockery.

Why I'm never calling myself 'just a mum' again

I’ve grown three human beings. I feed them, dress them, teach them, care for them and love them 24 hours a day. Yet for eight years, when I meet new people and they’ve asked me what I do, I tell them: “I’m just a mum”.

Rosie Batty named 2015 Australian of the Year

One year ago, Rosie Batty could not have imagined she'd be where she is. Tonight the grieving mum who put domestic violence on the national agenda was named Australian of the Year.

Five reasons to hug more

Hugging – some of us thrive on it, even depend on it – and then there are those who don't care for it really. So, are they missing out?

Help - my three-year-old has started throwing tantrums

My daughter never went through the "terrible twos" but began throwing wild tantrums shortly after her third birthday.

That's commitment

First peek at Sonia Kruger's daughter Maggie

"She smells so good, I could eat her," Kruger tells co-host David Campbell.

Mum assists in own caesarean surgery

A mum who partly delivered her own twins during a caesarean has encouraged other women to take control of their birthing experience.

How to handle common childhood regressions

Regression can be a natural and common part of development prompted by a variety of factors, but that doesn't make it less frustrating.

Disgruntled dad's pram ad goes viral

When buying a second hand pram, there are lots of things to take into consideration. 

Man discovers he's a dad after finding 55-year-old letter

Discovering you are about to father a baby is startling enough - never mind finding out you have a 61-year-old son.

15 thoughts mums have during a tantrum

Ranging from mild to feral and triggered by events both minor and major, tantrums certainly keep life interesting.

Natural pain relief in the early stages of labour

While managing labour pains on your own can be daunting, there are a number of natural pain relief options to help you cope until you are admitted to hospital.

Win an Octonauts prize pack

To celebrate the launch of Octonauts Live! Operation Reef Shield, a spectacular underwater adventure live on stage, we are giving away an amazing Octonauts prize pack to one lucky fan.

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Forgotten Baby Syndrome claims the life of toddler

One baby dies every eight days in the back of a car in the US, victims of 'forgotten baby syndrome'.

For a brief time, I was touched by an angel

For a brief time, I was touched by an angel. You stole my heart, and changed me into the women I am today.

Chinese woman gives birth to quintuplets

After six years of trying for a baby, a couple’s dreams have come true many times over after the mum gave birth to quintuplets this week.

Chrissie Swan has reached her "sex quota"

Chrissie Swan says she and her partner have sex once a year due to her fear of falling pregnant.

Stars help save choking babies

It's an important lesson to learn, but one that busy new mums and dads might overlook until it's too late.

New Girl star Zooey Deschanel pregnant

Actress Zooey Deschanel is expecting her first child with her producer boyfriend Jacob Pechenik.

16 times 'dad reflexes' saved the day

Of course, in some cases they may be the ones who actually got their child into a precarious position in the first place, but we'll ignore that for now.

Couple's 'non-traditional' pregnancy announcement goes viral

Knowing you are not the father of your pregnant wife's baby would usually indicate a rocky relationship ahead for traditional parents.

The trials and tribulations of identical triplet newborns

Pip Donnelly is still playing spot the difference with her newborn identical triplets, Isabelle, Georgina and Frankie.

Win an Octonauts prize pack

To celebrate the launch of Octonauts Live! Operation Reef Shield, a spectacular underwater adventure live on stage, we are giving away an amazing Octonauts prize pack to one lucky fan.

Earthquake baby thriving five years on

Jenny Alexis is lucky to be alive after spending four days buried in the rubble of the 2010 Haitian earthquake, but now she's a thriving five year old.

Please don't say I'm lucky because I was adopted

On the one hand I was having a regular life with friends and sports and sleepovers and school. But I was also always wondering: Did my mother love me? What was wrong with me?

An open letter to non-parents who offer advice on child-rearing

Kitty, when you’re the parent of my child you’re welcome to wade in with an opinion – but until then, I’d prefer you to have a supportive ear and a glass of wine ready.

Couple arrested over baby gun video

A US couple faces charges after investigators say they found mobile phone videos showing the woman's 12-month-old daughter putting a handgun in her mouth.

NSW Health dumps 10-year limit on frozen embryos

A 10-year time limit on storing frozen embryos that were created with donor sperm has been dropped by the NSW government.

How my happy-go-lucky husband became a monster

Sharan Nicholson-Rogers watched her husband change from a happy-go-lucky police officer into an unpredictable man prone to violent and emotional outbursts.

Dads-to-be experience hormonal changes, too

Dads-to-be experience hormonal changes in line with their pregnant partners, a new study shows.

'They were just doing their job': mum of toddler killed in police chase gone wrong

"They were just doing their job. I feel so sorry for them. It is all just too sad."

Miscarriages to be formally recognised by NSW government

Women who miscarry will be able to obtain an optional "recognition of loss" certificate as a formal recognition of their often heartbreaking loss.

Cafe cubby house 'too noisy' for neighbours

Teenage parties, domestic disputes, or raucous late night pubs are the things that usually come to mind when you think neighbourhood noise complaints.

Dad films baby playing with snake

Most parents would not consider a snake an appropriate playmate for their baby, but a US dad who filmed his daughter playing with a python has defended himself against criticism.

Clever breastfeeding products

Check out this range of products designed to help make your breastfeeding journey more enjoyable, manageable and convenient.

 

Back to School Offer

Findababysitter.com.au

We've got you covered for this school year. Use www.findababysitter.com.au to meet local nannies now.

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.