Rent, Dead money?

Is rent dead money? Are you throwing your money away? Should you rent or buy? This is a complex question but when you are trying to make up your mind keep some perspective.

Is rent dead money? Well, not really, you still have to live somewhere, people don’t say ‘why are you throwing your money away on food, or clothes to wear’. If a person asks you this ask them ‘Why throw away money on mortgage interest, property related taxes, management fees etc.’

As an investor there are one set of rules, as a homebuyer there are another, the same as the difference between a person who buys a car for personal transport or as an investment – when you buy for yourself you can get a functional car or a fancy one, equally there are standard and trophy home, a car as an investment is a trickier proposition.

The argument currently for a property purchase has more to do with credit pricing and the ability to afford to buy in a desirable location than with any widespread belief that the property market will not suffer further price decreases. It is also impossible to time the market so buying ‘at rock bottom’ is not a place, it is an event, and even the most experienced investors won’t be able to say exactly where that bottom was until after it has passed.

So if you are considering buying now then make sure you have the right reasons and that you fully understand why you are buying and how you are going to go about doing it, because done right you can ensure that you set your own position, nobody controls the market so the best you can hope for is to have a handle on the things that you can control such as rate, term, structure etc.

If you are happy renting then perhaps it would be worth talking to your landlord about a long term fixed lease. This could be a win win proposal, if you signed a ten year lease (for instance) and the landlord financed with a 10yr fixed rate and the deal stacked up right then all parties can do well from the set up.

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