The benefits of buying vs. renting

Perth property investment

If you are looking to find a new home, the next big question is whether you are going to rent or make the big decision to buy. Housing affordability is a big issue in the Perth property investment market, so you will need to consider whether it is more cost effective to continue renting or to buy a property yourself. There are plenty of pros and cons associated with both choices that you will need to carefully consider before making any big commitments.

Looking to rent a Perth property

Pros

  • Flexibility: The biggest positive to a Perth rental is the flexibility you have to relocate as renting is a short-term commitment. As a tenant, you will be able to move once your lease is up and you are saving on the additional living expenses that come with a home.

  • More Savings: When you’re not budgeting your deposit payment each week, you will have the opportunity to spend that disposable income on other things such as travel or other investments (especially if you’re not looking to make a property investment any time soon).

Cons

  • Ongoing costs: As with all pricing, the cost of living (and renting) is on a steady incline due to inflation and property market values. If you continue to rent, you could be spending money that could potentially be put towards paying off a mortgage. Whilst the initial mortgage payments may be higher than renting, the long-term investment will eventually pay itself off. With a mortgage, you would also be investing in an asset that could be used to fund your retirement.

  • Overspending: Without the necessity to make fixed payments each month, you may be tempted to overspend on your disposable income, leaving you with less cash in the long run and no investment pay-off.

Looking to buy a Perth investment property

Pros

  • Stability: Owning your own home allows you the freedom to renovate and make adjustments to your property as you please. This means no dealing with landlords and regular rental inspections.

  • Return in investment: Owning a home or Perth investment property is a long-term investment strategy. Housing prices have a strong history of increasing over time.  However, these price hikes won’t happen overnight, and you will need to be patient during weak periods of growth.

  • Option for equity: The equity in your property is the proportion of your home that you actually own (portion paid off). Given that the value of your home is generally increasing and you will eventually pay off your home loan, the equity (or profit) will also be increasing. You then have the option of using this equity to diversify your investment portfolio into shares, fund your retirement, or even invest in a second investment property.

Cons

  • Interest: When budgeting, you should be prepared for fluctuations in payments such as interest and fees over the lifetime of the loan. Be sure to check whether you have a fixed or variable interest rate, especially after your fixed rate period ends.

  • Opportunity costs: Buying a property is a long-term investment and you may have to make some sacrifices financially in order to make your mortgage payments. This means your Bali trip may have to be put on hold for a couple of years in order to free up some disposable income.

  • Additional ownership costs: Unlike with a Perth rental, there are additional costs that come with property ownership such as service fees, land rates, repairs and maintenance, body corporate fees and stamp duty. Be sure to take into account these additional costs before investing in a Perth property to make sure you are prepared for all hidden property ownership costs and fees.

Investment advice from a Perth Property Management expert

The decision to buy an investment property is a big step, but the Perth property management experts at Rentwest can offer you the advice you need to make the most informed decision. If you decide you wish to find a Perth rental property, the Rentwest team can provide you with the best rental options for your price range and location. If you are looking to buy, the team are able to offer in-depth knowledge on the Perth property market and can advise you on ways to increase your rental appeal if and when you decide to sell or expand your property investment portfolio.

For more information about Rentwest’s property management solutions, current rentals or property market advice, contact our team on 08 9314 9888 or email us at rentals@rentwest.com.au.