Should we rentvest or buy a PPOR ?

Question

We're a couple in our early 30s considering starting a family soon and are debating our housing strategy. We have $400K saved for a deposit on a potential inner-city Brisbane home, but the market seems overpriced. We're considering rentvesting instead.

Should we buy an investment property now and rent a home, or continue searching for a PPOR in our desired area? What are the potential benefits and drawbacks of each approach?

Answer

Deciding between buying a primary place of residence (PPOR) and rentvesting can be a significant decision, especially for a young couple planning to start a family. Both strategies have their own set of benefits and drawbacks, which can impact your financial and personal lifestyle goals.

Buying a PPOR

Benefits:
– Stability and Security: Owning a home can provide a sense of stability, which is often valued by families.
– Capital Growth: If the property appreciates in value, you could benefit from substantial capital gains in the long term.
– Emotional Investment: There’s a personal satisfaction and emotional attachment that comes with owning your home.

Drawbacks:
– High Initial Costs: The costs associated with purchasing a home (e.g., stamp duty, legal fees) can be substantial.
– Less Flexibility: Moving can be more cumbersome and expensive if your circumstances change.
– Market Risk: If the property market experiences a downturn, you could see a decrease in your home’s value.

Rentvesting

Benefits:
– Investment Flexibility: You can invest in a property that may offer better returns or is located in an area with higher rental yields.
– Living Flexibility: Renting in your desired area allows you to live where you prefer without the commitment of a mortgage.
– Diversification: By investing in the stock market or other properties, you can diversify your investments, potentially reducing risk.

Drawbacks:
– Lack of Stability: Frequent moves or changes in rental situations can be disruptive, especially with children.
– No Capital Gains from Residence: While your investments may grow, you do not benefit from capital gains on the home you live in.
– Rental Expenses: Renting can sometimes be more expensive monthly, depending on the area, and these payments do not contribute to asset accumulation.

Given your situation and considering the current market conditions in inner-city Brisbane, rentvesting could be a strategic choice. It allows you to invest your saved funds into a property that might offer better value or returns while renting in an area that suits your lifestyle and family plans. This approach keeps you flexible and might be financially advantageous if property prices in your desired area are indeed overpriced.

However, the decision should also consider your personal preferences for stability and where you see yourself in the long term. If owning a home in your desired area is a significant personal goal, it might be worth continuing your search for the right property, even if it takes longer or requires adjusting your expectations regarding size or specific location.

Pearler can assist in this decision-making process by providing tools to compare different investment strategies, including the potential returns from various types of investments, such as real estate and the stock market. Utilizing these resources can help you make a well-informed decision that aligns with both your financial goals and personal needs.

You can find out more about this topic here: Renting Is Not Dead Money

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

this question is best for a financial advisor as they will be able to assess your whole situation better than anyone here can as you would need all details of your financials to make it clear decision.

Answer

Hey Diego, good question, amazing work on the savings.

Overpriced compared to what?  What you can afford, or what you want to pay, or where you think it will be in 3 years?  Everyone would like to pay less, but waiting for lower prices might not be a smart move (prices go up over time).

If you can afford to buy + it’s what you want to do (be a homeowner), then I’d say go ahead.  ideally you’re still able to invest on the side so that it doesn’t trap you in a cycle of just paying the mortgage and living week to week.

It honestly all hinges on how important home ownership is to you right now.  If it’s not, then it becomes a question of whether to invest in property or shares for the next say 10 years before you eventually buy your own place (assuming you do).  That comes with its own set of pros and comes and personal factors which will influence which option is right for you.

So think about all those things and the path forward will become clearer.

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