“Rent money is dead money!”
“You’re making your landlord rich!”
If you’re renting, you’ve probably heard these phrases more times than you can count, from passionate homeowners and well-meaning parents.
But these statements miss the bigger picture. There are several factors at play in the Rent vs Buy discussion – many of which are glossed over in common conversation.
In this guide, we’ll take a deep dive into the benefits and drawbacks of both renting and owning (because yes, there are downsides to owning too!).
We’ll look at the financial, practical, and emotional impacts of each path. So if you’re stuck trying to decide whether to renting or buying is the best choice for you, this article will give you the clarity you need to move forward.
Let’s dive in!
For some, owning a home is a purely financial decision. But for most people, having their own place is about lots of other stuff.
Here’s a quick breakdown of why buying might be a better fit for you:
Owning a home gives you total control over your living space. You’ll never be kicked out by a landlord who wants to sell or renovate. Plus, it’s yours to do with as you please – redecorate, plant a veggie garden, put up solar panels, etc.
When you buy, your mortgage repayments are effectively locked in, which shields you from rising prices and rents. Even if interest rates change, at least you don’t have to worry about what rents will be 30 years from now.
The reality is, many people struggle to save without the non-negotiable commitment of a mortgage. It shouldn’t be this way, but that’s just the reality of human nature..
Once your mortgage is paid off, your living expenses will drop significantly. That means you can afford to reduce work and maybe even semi-retire!
You get to buy an expensive asset for little money down. Then when you sell your home later, any capital gains are tax-free.
If you’re able (and willing) to renovate the property yourself, you could improve the value of your home using ‘sweat equity’, creating more tax-free gains.
Your place of residence doesn’t affect your ability to get a government pension or other benefits. Banks are also happy to let you borrow against your home at decent interest rates, which provides a lot of options.
OK, so buying might seem like the obvious choice right now. And if you listen to most people in the Aussie property cult – you’d be forgiven for assuming it’s all sunshine and rainbows.
But owning does come with some downsides…
Because of the high transaction costs, moving is not a simple or cheap process – more on this in a moment.
If you don’t like your neighbours, you’re kinda stuck. If your area becomes congested, overdeveloped, or loses the appeal it once had, you can’t easily pick up and leave. If a great job opportunity pops up in a different area or city, it’s not an easy decision to make.
Home ownership limits your ability to adjust the type, size, cost and location of your housing as your life, priorities, wealth and tastes change.
For most people, home ownership results in having a lot of money tied up in the roof over your head – a single asset, in a specific location.
As prices rise and you pay off the mortgage, more of your net worth becomes concentrated in your home. This leaves you with less diverse sources of wealth and income than you could otherwise have.
If Aussie property ever takes a serious hit, your main asset could fall by hundreds of thousands of dollars – huge losses in percentage terms when leverage is involved. Like many older Aussies, you could end up equity-rich but cashflow-poor – wealthy on paper, with most of that wealth not accessible or usable.
Two of the most underappreciated aspects of buying vs renting comes from things that homeowners rarely talk about.
The costs of buying and selling are a massive drag on your equity over time. As a first homebuyer, you might avoid some of this up front thanks to stamp duty concessions or government incentives. But after that, it gets expensive – very expensive.
Selling a home typically costs 2–3% of the property value, in agent’s fees, marketing, conveyancing costs and various bank and government charges. Then, when you buy the next property, stamp duty alone is often be 4–6%.
All up, you’re likely looking at an 7% round trip every time you move. That’s $50,000 on a $700,000 property (possibly more).
And people move on average every 10 years. So that’s an invisible cost of around $5,000 per year – which rises over time as property prices grow and stamp duty ‘bracket-creep’ kicks in (as this article and this report highlight is becoming an increasing issue for the housing market).
Owning a home usually comes with worse cashflow than renting – often, much worse.
As I write this in June 2025, average rental yields across Australia are 4.5% for units, and 3.1% for houses, according to SQM Research.
Let’s take the middle ground of this point: say 3.8% as the cost of renting.
Mortgage interest rates as of June 2025 are currently around 5.5% to 6%. Then, there’s the following costs, which often amount to 1% to 1.5% over the long term:
— Council rates
— Water rates
— Insurance
— Strata fees (for units)
— Repairs
— Long term maintenance
— Updates and additions
This might seem high, but you’ll eventually spend money on the following: painting, roofing, fences, carpets, flooring, air cons, bathrooms, kitchens, gardens, electrical and plumbing, etc.
And of course, the never-ending trips to Bunnings to decorate and furnish every aspect of the property exactly the way you want that you don’t do as a renter. You might push back against this, but you know it’s true. There’s a reason Bunnings is one of the most profitable businesses in Australia!
Again, taking the middle ground of these extra costs, you’re looking at 7% in total annual costs (currently) relative to the price of the property (interest rate + ongoing costs). Compared to the average rent cost of 3.8%, this is far more expensive – roughly 3% extra per annum, or $20,000 per year for a $700,000 property.
You’re also forced to pay down the principal of the loan. While this does become home equity, it’s also a cashflow commitment. Interest-only loans are an option, but are rarely chosen by homeowners and often come with higher rates.
The numbers always change, but as a general rule of thumb, renting is usually a few percent cheaper than owning each year. And yes, your mortgage might be cheaper since you put in a deposit – but the same money could be invested as a renter, bringing its own returns.
All of this means:
— Less money available for saving and investing
— Less ability to diversify your wealth
— More pressure on your cashflow every month
— Less flexibility in your finances and life (as this article explores)
Buying a home isn’t always the best choice. But there are lots of reasons when buying can make more sense than renting:
— If you’re certain you want to live in a particular area long-term
If you know where you want to live for the next decade or more – and nothing on the horizon seems likely to change that – then owning a place can be a great decision.
— If you expect home prices and rents to rise dramatically
Let’s say you think the cost of buying or renting in your area is going to skyrocket, and locking in a property now gives you peace of mind, that may be worth more than the flexibility or cashflow benefits of renting.
— If you need forced savings to make progress
The brutal reality is most people won’t save money unless they have to. If you’re someone who would spend the savings from renting rather than invest it, then buying a home can be a powerful way to create effortless wealth. It’s nothing to be ashamed of either – it’s smart to recognise where your weaknesses are and work build systems around them.
— If the property won’t stretch your finances
If you can buy a home and still save and invest, that’s a great scenario, even if it’s more expensive than renting. But if the higher costs leave you with barely any spare cash, it’ll likely be a stressful and unenjoyable experience. I can’t imagine being a happy homeowner unless I could also invest alongside – that would feel too restrictive and frustrating.
— If you truly hate renting
Some people just can’t stand renting. Whether it’s the uncertainty, dealing with inspections and agents, or not being able to personalise your space, the whole experience is just annoying. If you’re in that camp and you’re willing to pay a premium for the certainty and control of owning, I get it.
— If you expect to rely on the Age Pension later in life
The family home is treated more favourably than other assets when it comes to government benefits. So if you think you’ll be relying on the pension in retirement – even partly – then owning a home could create a better financial outcome than having the same money invested.
— If you can buy for the cost of renting
There are some situations where owning can cost a similar amount to renting – due to the interest rates at the time, or the specific location involved. If that’s what you’re facing, and you’d prefer to own, then it would be wise to do so.
You’d be forgiven for not realising there are some powerful advantages to renting.
Especially when society is yelling: “Get in now, don’t miss out, renting is a one-way ticket to poverty and financial vulnerability for life – you’ll never be wealthy or secure or have friends or be good looking without owning PROPADEE!!!!”
Jokes aside, here’s are some benefits of renting:
You can switch suburbs, cities, and property types with almost no friction. No massive selling costs, and no waiting months for settlement.
If you’re sick of your current property, instead of spending a ton of money to renovate it, you can just pick something different, finish your lease and go.
That kind of mobility is incredibly valuable. Whether it’s for work, lifestyle, or just trying something new. You can experiment with different locations and property types. Maybe you live by the beach for a while, then try out a city apartment, or see if you enjoy a slower lifestyle in a regional town.
I won’t dwell on this more as we covered it earlier. But renting is typically a lot cheaper when everything is accounted for.
This means more cash leftover each month to invest in other assets. Lower bills means lower stress, and more control over where your money goes. Your housing costs are not only lower but they’re also more predictable.
As a renter, you’re not left with hundreds of thousands of dollars in a single property. Instead you can build a diversified portfolio with a range of assets, letting you decide where every dollar of your wealth is invested.
Whether it’s Aussie shares, international ETFs, property trusts, small businesses, crypto, bonds, gold – anything really. If you choose liquid assets like shares or ETFs, this means your wealth is also 100% accessible at all times.
Some people just don’t feel comfortable with debt – and there’s nothing wrong with that. As a renter, you have the practical and psychological benefit of being permanently debt-free.
There’s no ownership risks to worry about either. No surprise maintenance issues. No structural defects. No new council fees or strata levies. No arguing with tradies. No potential for your biggest asset to turn into your biggest headache.
You’re simply paying for the right to live somewhere. If something goes wrong, it’s not your problem to fix.
When you rent, you free up a huge amount of capital. That capital can be invested in high-growth or high-income-producing assets. As long as you’re disciplined, the long-term returns can be equal to or surpass home ownership.
Several readers have told me they’re happy long-term renters and have earned excellent returns over the last 10-15 years being able to invest aggressively – now sitting on share portfolios worth $1m-$2m.
By the way, if you’re going down this road and want a simple way to measure your progress, get the dividend tracker spreadsheet I use below:
You’ll no doubt be familiar with the downsides of renting – it seems to be the only thing everyone agrees on!
Here are the most common drawbacks people point to:
This is the number one reason people want to buy a home. Renting means living in someone else’s asset, so you’re never in control. If the owner decides to move in, sell, or renovate, you might have to leave.
This can make it hard to plan long term, especially if you have kids and want stability. That said, in practice, it’s not always as bad as people imagine. I’ve several met people who’ve stayed in rentals for 5–10 years with no issues. Sometimes it’s just luck – good or bad.
The idea of paying rent for life can be highly discouraging. It’s a cost that doesn’t go away, and will rise over time. Meanwhile, homeowners at least have light at the end of the tunnel of one day owning their place outright.
This one’s also a huge factor in the desire to own. But it’s worth remembering: investments can pay your rent too. And here’s something nobody thinks of: your investment income and wealth can compound faster than rent does. This actually makes your rent more affordable over time, even as the price goes up.
Just like property prices, rents go through cycles. Sometimes they go up quickly, like in recent times.
Other times they barely move for years, or even fall slightly. This happened during the 2010s across several markets, before a surge from 2021 onwards.
A hot rental market can also make it difficult to find suitable accommodation at times too. But there can also be periods where it’s difficult to buy something suitable too – especially at a decent price-point.
This kind of unpredictability can make planning a little tricky. But mortgage interest rates can be just as volatile — and the total cost of home ownership is influenced by more factors than rent alone.
Some people hate inspections. Having someone come through your home every 3-6 months to check things feels invasive to many renters.
Personally, this never bothered me. But others detest it. You’re either dealing with agents or your landlord. Most people are fine. But some can make you want to buy a home regardless of cost! 😅
There’s also the consideration of ageing as a renter. Maybe you rent and build an impressive pile of investments. But as you get older, your tolerance for nonsense declines and you probably don’t want to be forced to move because of someone else’s decision.
That said, you can invest and build wealth earlier in life – then use that wealth later to buy a home (maybe even outright!).
Renting is often seen as just a temporary or “lesser” option. But there are plenty of scenarios where it can make sense to be a long-term renter.
Here’s the main ones:
— You’re still deciding where you want to live
If you’re not 100% sure about the area you want to stay in long term, then renting is a better fit. This gives you the opportunity to explore and experiment without committing.
— You’d rather maximise investments
If rapidly building investments excites you more than owning the walls around you, renting can work better. You can direct all that cash you’d spend on ownership and build a portfolio of investments instead.
— You love being flexible and free
Renting lets you operate your life with a sense of nimbleness. You’re easily able to move locations or property types for any reason. If you’re young and plan to follow career opportunities, renting is ideal. Or maybe you’re a digital nomad and travel – renting keeps your options open without the burden of paying for and managing a property. Or it things go the wrong way, it’s far easier to downscale in price than as an owner.
— You hate debt and home maintenance
Some people simply aren’t keen on signing up for a long term debt contract. And others don’t want the ongoing responsibilities of being a homeowner. Personally, I don’t mind the debt part, but I do find owning to be more hassle than renting – houses especially, units not so much.
When trying to figure out whether renting or buying is the right choice, a lot of people want a magical one-size-fits-all calculation.
Unfortunately, it doesn’t work like that. Multiple factors can give you wildly different answers depending on your assumptions
Here’s why…
— Interest rates will change a lot over 30 years
— Rental yields and growth vary by property and timeframe
— Investment returns are unpredictable and depend on how you invest
— Property prices, ongoing costs, and growth rates will differ
— First-home buyer concessions vary by state, time, and price points (find out what applies here)
Plus, everyone disagrees on what numbers to assume. Will property grow at 3%, 5% or more? What will investments return: 7%, 10%, 12%? Even small changes in assumptions drastically change the result of your calculations.
Despite all this uncertainty, I ran the numbers using reasonable middle-ground assumptions on a $750k property – with this calculator.
The result: Near identical wealth after 30 years
Buying: $2,433,929
Renting: $2,423,382
Figures I plugged in:
— $750k purchase price
— $40k deposit (+$5k buying costs)
— $10k annual ownership costs for everything mentioned earlier
— $550 rent per week (3.8% yield)
— 3% rental growth
— 4% property price growth
— 5% interest rate
— 7.5% investment return (after tax)
This also assumes:
— Zero stamp duty or LMI on this purchase (first homebuyer benefits)
— Lower than historic property growth + investment returns
— Prices continue growing faster than rents (yields keep falling)
— Low deposit so homeowner gets maximum benefit from leverage
Here’s the chart:
Further, I assumed the buyer never moves over a 30 year period, which is unrealistic. Factor in just one move during those 30 years, and the outcome will change by a couple hundred grand.
Bottom line: using reasonable assumptions, it’s fairly even. But both options can easily win depending on what you plug in.
You don’t need to religiously stick to either renting or buying.
Here are some middle-ground approaches:
1- Rent and buy investment property. This will give you leverage and ‘hedge’ against future property price rises. If you suspect you’ll want to own in future, consider buying earlier rather than later. It also serves as a backup if the rental market becomes unbearably difficult. Buy in a place you can afford while continuing to rent where you want to live.
Side note: As a general rule, the more expensive a property is, the cheaper it is to rent rather than buy. Yields on fancy homes are incredibly low, often 1-1.5%. Such homes also come with enormous upkeep and ownership costs.
2- Buy and rent out rooms or subdivide to reduce cost. If you don’t mind sharing, renting out rooms can dramatically reduce your housing costs. Just know this affects your CGT exemption. If the property allows, you could also subdivide your block and use the proceeds to reduce your mortgage.
3- Rent and invest in geared shares or real estate funds. This gives you the flexibility of renting, some benefits from leverage, letting you earn higher returns. You can do this via geared ETFs or by using a margin loan. I spoke more about these ideas in this article. Other options are real estate trusts or property development syndicates to get real estate exposure as a renter.
4- Buy now and rent later. Maybe you take advantage of first homebuyer benefits to buy an affordable place without paying stamp duty (and perhaps no LMI either). This way you get in the market, experience home ownership for a while, and have some leverage working for you early in life. After a while you could then turn it into an investment property.
Each comes with its own set of pros and cons, but are worth considering if you aren’t wedded to any one approach.
As I write this, I’m 36 years old. I’ve rented and owned for similar amounts of time: 8-9 years each.
I’ve also owned investment properties. So I’ve been on all sides of the equation, which allows me to give you a more varied perspective.
I’ve enjoyed the benefits of both strategies over the years. I’ve also lived in and owned various types of property – from small units with no maintenance, to larger homes with big lawns and gardens.
For owning:
I love being able to access increasing amounts of debt against property to invest in other assets. Offset accounts are cool too. But I hate having to pay and deal with all the other expenses and hassles of owning. And I don’t like the heaviness that comes from being essentially tied to one place either.
For renting:
I love being able to switch locations and property type any time I want with renting (even the idea of it). It’s also fun to have problems fixed without having to pay anything outside rent, and having every dollar in investments. But I dislike someone else being able to choose whether I continue staying in a place or not – especially if I like the home.
Right now, I own, but I’m open to renting at any point in the future. In fact, as you become wealthier and essentially location-independent, I think renting is often more in line with a freedom-based lifestyle. Especially when fancier property might start to appeal, you can enjoy very low rental yields.
1- Don’t buy too much house. You don’t’ want to back yourself into a corner where you can’t also save/invest a healthy amount each month. Not only is this a miserable way to live – no fun being a mortgage slave – it also restricts you diversifying and growing your wealth in other ways.
2- If you buy, stay there as long as possible. See transaction costs!
3- If you rent, take investing as seriously as you’d take a mortgage repayment. Be as committed and non-negotiable about it as possible. Homeowners effortlessly get a good long term outcome due to repayments and price growth – you need to proactively create the same result.
4- If you buy, make sure it’s out of desire and for the right reasons – not fear or societal/family pressure. You don’t need to own a home to have financial security, or even to retire early.
5- If you rent and invest, you can always use wealth to buy a home later. Unless you’re financially hopeless, you will NOT be ‘locked out of the housing market’ – that’s overly dramatic nonsense which I’ll cover in a future article.
Overall, renting gives you more freedom, buying gives you more security. Which is more important to you?
Will you actually save and invest the cashflow surplus from renting? If you can’t commit to investing like you would a mortgage payment, then owning will likely work out better.
Overall, look at the pros and cons of both, run the numbers, and consider where you are in life and what you value most.
It’s not even about which option has the most pros vs cons. It’s about which one has the downsides you can tolerate, and the upsides that appeal most.
For each of us, renting or buying might have one ‘pro’ that outweighs all the cons.
Do this and the answer should become clear. If you still aren’t sure, then I’d say it almost doesn’t matter – if you manage your money well, you’ll get a good outcome either way.
Ultimately, both renting and buying offer distinct advantages. The best choice really comes down to your personal goals and lifestyle.
If flexibility, maximising cashflow, and focusing on investments are your priorities, renting is your best bet. But if stability, security, and having full control over your living space appeal more, then buying will bring you the peace of mind you’re looking for.
As we’ve seen, the financial outcome is tricky to predict. Frankly, the numbers can go either way, or end up fairly close. The real deciding factor is in the details of your purchase and your circumstances.
Whatever path you take, the most important thing is mastering your finances.
Because whether you’re paying off a mortgage or growing an investment portfolio, it’s wise decisions and consistent action that builds lasting wealth, and ultimately, financial freedom.
Thanks for reading – I hope you found this guide useful.
Here are some other resources that can help:
🏡 Mortgage Broker
If you’re looking at buying a home, investing, or refinancing, I can recommend my personal broker – More Than Mortgages – who I’ve worked with for over 10 years. Check them out.
📘 My Book
Whether you rent or buy, my best-selling book Strong Money Australia gives you a clear, actionable roadmap to financial independence. Available on Amazon, Audible and Spotify.
📊 Sharesight
A tool I use to track my investments and help simplify tax time. It records dividends, franking credits, and capital gains automatically. Try it here.
Enjoyed this article?
Join 12,000 readers getting my free fortnightly newsletter – practical articles, podcasts, and insights to help you build wealth and create a freedom-based lifestyle.
This detailed guide breaks down the true costs and long-term outcomes of both strategies. Includes calculations, personal experience, and decision-making framework.
After going through a difficult divorce, Ronald rebuilt his wealth in his 50s, focused on his future, and managed to retire at 59.
Money, freedom, and a better life - delivered to your inbox
Practical insights to help you build wealth & actually enjoy it.
Thank you for the detailed blog on this topic. I’ve been caught between these two for a while now and this certainly helped me decide to keep renting for now.
Glad you found it useful!
The cost of moving for renters also needs to be factored in. I know friends that have been in places long term, but also others that have ended up moving 3-4 times in as many years. The return on hassle for that is real!
Also being able to secure a rental in in a hit market. If you are FIRE or older there is likely to be less properties you will be approved for if up against a couple with two regular PAYG incomes.
If you can afford to buy, then take advantage of first home buyer grants etc, pay done a chunk as quickly as possible to save interest, then if you decide to live elsewhere and rent it out for a while it’s more likely to be positive/neutral cash flow. Best for both worlds as you still have the security of a roof if you need it.
It’s a hassle for sure, but the cost really isn’t that high at all.
And yes, the hot market thing is definitely a factor too. I mentioned this but mostly in relation to pricing – good point.
No mention at all about how hard it is to find an Affordable rental these days in some cities… you home city is a prime example Dave.
Speaking from experience of a parent trying to help his son in the Perth market.
Had to help him buy as he just could not find a rental closeish to work at a price he could afford
But it’s not exactly easier to find an affordable home to buy than to rent – so I’m not sure I agree with that argument as a pro for buying. Now obviously family assistance can make things very different.
It would be interesting to know what you think if the buyer intends to pay their mortgage off sooner than 30 years. For example I have calculated I can pay mine off in 7 years. Personally I am giving myself between 7-10years no more than this whilst still investing. Mind you not as aggressively but enough that I feel comfortable buying vs renting in this time. Once the mortgage is done it’s full steam ahead into more investing.
I think that’s an incredibly good outcome. And it represents someone with an excellent financial position. So in that case, it doesn’t matter which option is chosen – I’d focus instead on the qualitative factors discussed to decide whether buying or renting is better suited (which it sounds like you’ve done!).
Thanks for the detailed article. I think many of us subconsciously follow societal norms get a job, save and get on the property ladder. It’s even been said get the biggest mortgage you can afford. I know when I discovered FIRE (Financial Independence Retire Early), I was house rich but cashflow poor this was despite buying in a regional town and not buying too much house. I know when I was renting I felt like I was missing out on property. In retrospect I should have invested more aggressively but then I did not know about index investing. For someone starting out its important to have clarity about one’s goals and not blindly follow either the renting or owning path.
Thanks for sharing.
I think the reason we get told that is because it’s familiar, it feels safe, and it can work out incredibly well. It’s all the previous generations really knew or felt comfortable with (which is fine). But to act like it’s always the best option or that you can’t create an equally good outcome with other strategies is just ignorance.
There’s a definite FOMO aspect at play here – that’s a good point. Especially since that’s what most ppl want to discuss and you’ll only ever hear good things + the numbers ppl want to tell you 😉
Great article Dave. What I found missing is any discussions of tax which actually becomes very important when comparing the two options. If you have a large chuck of equity in a house the returns are essentially tax free but compared to market returns taxed at a marginal 30-47% eventually make it very hard to beat.
Thanks for all your writing.
Thanks Mike. I did mention tax benefits for housing: leverage and tax-free gains, plus also the ‘system’ treating it better.
Share returns are not necessarily taxed at those rates. Capital gains are tax-free assuming you’re just buying/holding, and dividends often come with franking credits, which can result in very little out of pocket tax – or when living off the portfolio, extra money refunded in cash. This means overall the tax rate on total returns is actually very low. In the calculation comparison I did deduct for tax and assume a much lower return than historically partially to account for that.
equity is all well and good, but liquidity is king. Try selling a bathroom to buy a car.
It would definitely be nice if it was easier to cash out equity from property in ‘retirement’ without paying a super high interest rate and being over 60
I think another consideration needs to be added above for the buying option.
Saving for retirement I chose superannuation as my primary vehicle. I always said the biggest risk with this was political risk. That’s what we are now witnessing. I feel the same about home purchasing. I fear that the concessional treatment of the family home is on borrowed time, be that via inclusion in the assets test for the pension, unrealised capital gains, inheritance tax, whatever.
Politicians won’t be able to help themselves, particularly with the terrible state of Australia’s finances.
Thanks Dave, great article.
Cheers Ian. I think you’re right in that the rules will probably be changed around home exemption. But I do think it will still remain generous, so unless someone is parking mega millions in their home, my bet is that it wouldn’t be something to worry greatly about regarding pension etc. Inheritance taxes though are a separate deal and I can imagine that one rolling out eventually and possibly being unavoidable.
So the benefits are there for now, which greatly assists the appeal of housing, but that could definitely be diluted and it does seem likely at some point.
Dave, a great article the best I have seen on the whole topic. We are in retirement, self funded, and at our stage a settled home where we want to live with established friends and community involvements is really worth a lot. Ownership at the retirement stage does offer many benefits and comfort.
Regards
John
Thanks John, that’s quite a compliment 🙂 I totally agree – sounds like the perfect choice aligned with your priorities.
I think it is worth mentioning that buying can be flexible as well, if the property stacks up as a decent rental.
We recently converted our PPOR into a rental, and are now renting at the coast. This way we can capture any capital growth, whilst maximising lifestyle.
I would generally feel uncomfortable not owning at least one property.
That’s fair enough, and I do think there’s a good argument to be made for that, whether rental or home. I’ll be doing an article on that in the future 🙂
And yes, that buy-then-rent-later strategy is worth mentioning, which is why I did mention it 😉 Under ‘alternative strategies’ – #4 on the list. I’ve now numbered them to make it easier to reference.
Hello Dave,
Thankyou for this article . It would have taken you forever to plan and execute this article !! …so Thankyou for your time and awesome writing as always .
As you mentioned it all comes down to mindset and how one manages their finances throughout life and either way how fortunate are we to have this/these choice/s. 👍.
By the way , you can add me to the FIRE number as at the age of 52, I recently left my job and am happy and free 👏👏👏.
Take care and never stop learning and living .
Haha yes, I don’t even wanna know how many hours I spent on it 😅
Thanks for letting me know – huge congratulations mate, well done!
Another excellent article Dave!
I personally think that rentvesting id the best way to build wealth, investing both into properties and shares.
And investing into 2-3 properties, you get the benefits of leveraged gains and there are so many options down the line with a share portfolio and a few investment properties.
Plus by rentvesting, you’re able to take out the emotion part of purchasing a property and have the flexible to research and jnvest in markets all across Australia, not just your suburb.
Thanks for your thoughts James. The hybrid flexible approach seems to be pretty popular, which is good to see. If you’re looking to buy next year, I’ll be looking to sell, let me know. Can’t say I’ll give you a discount though 😂
Another aspect of rentvesting is that it can be done while living at home, or while living in a share-house, when living costs are very low.
Thanks Dave for such a really comprehensive article!
You did mention the benefit of owning a house in terms of the Age pension, and also not wanting to move when you are older. I think this latter point is vastly underrated by younger people.
There is a lot of emphasis on the flexibility of renting. But if you are 80 years old and not very mobile, or perhaps don’t have a good support network, then being turfed out of your rental on a regular basis is really difficult, physically and emotionally. Elderly people rely a lot on support networks that may be lost if you have to move.
I have a rental property which was rented to an elderly couple. The wife died and the husband had a hard time paying the rent. I actually reduced the rent a bit for him (not all landlord’s are dreadful!). However when he was in his 80s it was all too much for him. But he really struggled to find anything and he had to settle for something that reduced his quality of life. Really disruptive thing to have happen at that age.
As you point out there are qualitative factors to take into account not just the pure economics of it. As most people here are probably a bit younger, it might seem a bit odd to think about what might happen to you as you age, but I think it’s worth thinking about when considering this issue.
Good points Anne, thanks for sharing and you’re right to point it out.
Of course, it’s worth remembering the context of this audience, especially the younger cohort your message is for: the vast majority will be self funded and fairly wealthy by their 70s and beyond, meaning a home could be purchased at a future date when renting was no longer appealing.
Thanks for this article, good to have some sensible discussion on a very controversial topic in Australia!
Regarding the cost vs buy calculation, and this is probably asking the obvious but is your example ultimately stating that the home buyer ends up with a home/house/apartment after spending the same amount of money as the renter who has a similar amount of wealth in non housing assets ie shares etc?
Glad you enjoyed the read Catherine. Yes, the two examples end up with the same wealth – one with a home paid off worth $2.4m, and the other with a share portfolio worth the same amount, which would produce its own income. Each person has tipped in the same amount of money over the same timeframe.
Hi Dave,
Excellent analysis and your financial modelling showing near-equivalent outcomes is really insightful.
I think there’s one area that could use much more emphasis though: how these factors should be weighted for the average Australian.
Some key statistics:
• 83% of retirees receive part or full Age Pension support
• 45% of Australians cannot cover an unexpected $1,000 expense
• 55% can only cover living expenses for three months if unemployed
These suggest that for most people, the “rent and invest the difference” strategy faces serious implementation challenges. If nearly half the population can’t manage a $1,000 emergency, will they consistently invest surplus rental cashflow for decades?
You rightly point out that many need forced savings mechanisms, but I think this deserves more weight given how widespread this behaviour is. The mortgage becomes the wealth-building strategy for those who’d otherwise struggle with investment discipline.
Similarly, the Age Pension consideration affects over 80% of retirees, making the family home exemption the primary retirement vehicle for most Australians rather than a niche benefit.
Your analysis works well for financially sophisticated readers here, but perhaps the decision framework could start with: “Will I actually invest the difference consistently?” If uncertain, the scales tip heavily toward ownership regardless of pure maths.
Keen on your thoughts on weighting these factors by the reality of behaviour.
Cheers,
Scott
Hey Scott, I totally agree with the behavioural element – most people are best off buying because they simply won’t/can’t save/invest the difference.
Of course, it’s worth remembering that I’m not actually talking to the average Australian – this blog self-selects for motivated, thoughtful people who are not completely hopeless with money and who will (and do) invest the difference.
It’s just a truism of human nature that whatever is available for many people gets spent. Age pension will also decline in use over time as super slowly grows to replace it, so larger amounts of people will become somewhat self-funded, but you’re right the rules encourage home ownership to maximise outcomes.
I’ve put an extra sentence in the ‘how to decide’ section to push the behavioural point further.
I believe that most people who buy are generally going to stay in the same spot for a decade or more.
So, they are looking long term for the kids who will go to local schools for a decade or more.
I feel that so many people think short term and real families are more inclined to look at 10-20 year time frame.
I thought so too, and I do like to think that’s true for the most part. In my own life though, I’ve heard of several cases of people moving far too frequently for it to make sense, while not really thinking about how much cash they’re burning via transaction costs. So I really wanted to stress that point, since not many people seem to talk about it relative to the other factors.
Another great article, Dave! Well done!!
Would you be able to write one about being locked out of the housing market?
I’d love to hear your thoughts on locking in a price now, so I can manage repayments in the future — especially since my income doesn’t grow at the same pace as property prices!
Thanks so much!
Yes, I absolutely will be writing about that – it’s something many people worry about – stay tuned! 🙂
Was this article assisted with AI? It seems to read that way!
Covered a lot of topics, but you didn’t talk much of the emotional or ethical concerns. I’m a landlord as well as a property owner and I find it extremely difficult to raise my tenants rent simply because I can and because I want more money. It feels like I’m putting my boot on the neck of the person that doesn’t have as much as me. As a result, I’ve always rented it at well below market rents. I bought it as my future retirement home and it’s the only reason I presently own more than one property.
Another aspect is status. Many people want to continue buying and selling to “upgrade” and have the fanciest most show-home worthy property. Its ridiculous.
I really wish there was not such an obsession with property, but here we are…
The goal of this post was to help people deciding between renting or buying – the discussion around the ethical concerns of property investing seems like another conversation for different post.
The status thing is one aspect I suppose – I didn’t add that in because as you say it’s kinda silly and you aren’t gonna persuade anyone differently since it’s almost instinctual to try and compete with ones peers. Even if people agree with you in theory, in reality they’re still gonna play that game.
The post was so long I did try and cut it down and probably trimmed some of the emotion out of it, but the text was written by me.
Missed one reason, and that is if you have pets. I know Australia is more lenient here, but I moved back to Europe a few years ago and renting something when you have more than one pet or a pet of a larger size can be hard.
That’s a fair addition. We are talking about Australia specifically here, but that’s interesting to know – Europe is often seen as a renters paradise by most Aussies, mostly for reasons like long tenure etc.