Jane Wiltshire - Comments

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Rent Vs. Buy – The Simplest Answer
7 years ago

That is 'crooked thinking'! There are only 2 scenarios where buying is better than renting: 1. If there is a HUGE spike in real estate prices - do the sums, it really needs to be huge! or 2. If you are not disciplined enough to rather put money away in a good unit trust (if you're over 55 or just financially savvy) or a good RA if you're under 55 and are fearful. I am not talking about the whole sum but just the difference between what you'd pay for your own house including deposit, growth forgone on the deposit, additional maintenance, rates, etc that you have when you own a house and renting. Most people see a house as a good investment because they take the final price realised and subtract the initial price WITHOUT RECKONING INFLATION!, the cost of upgrades/additions or these additional costs or the opportunity cost of the return that their deposit would be earning in an alternate investment. A house is a good forced saving mechanism and does give you some stability but you pay for this with significantly higher costs and an illiquid asset - look how long it takes to sell a house and get your money as opposed to given an instruction and getting the money within a day (or a month for RAs). Buying a home is an enormous gamble with a large portion of your wealth and your future earning ability and you need to carefully consider the implications before committing. Although I've always 'made money' on my homes (by the warped definition usually used), I'd never buy a single one (except the company house I got at a very discounted price!) if I had my life over again and had the financial knowledge I now have (I am currently completing my doctorate in finance).

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