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Is Rent "Dead Money"?

Is Rent "Dead Money"?

Old Apr 11th 2013, 2:25 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by commonwealth View Post
ok would you buy a newly built studio apartment approx 45sqm
close to train station, 15 mins to Sydney CBD
with fitouts eg washer dryer dishwasher bed aircon
strata etc approx $1K per qtr
no stamp duty plus get $15K govt grant

for $450K?
Is this the new development in Waterloo?

The stamp free and government grants are certainly a good incentive - I think you could probably find a studio a bit cheaper though - That seems to be 1 bed prices. Strata seems about average.

Personally, I don't think that rent is dead money, as you are using it to pay for a service - the service of having somewhere to live. The issue I have with rent is that it will always increase, whereas with a mortgage, you start paying it downwards from the outset, and it will decrease, plus you also have the possibility of a capital gain on it.

I don't think that you will go far wrong if you're buying in the inner city - The transport infrastructure in Sydney favours living close to the CBD. I live 5 minutes from Redfern station and work in Martin Place - It's pretty joyous to hop on the train for a 7 minute trip, or walk to work on a nice sunny day - like I did today. As transport costs increase, there will be an increasing desire to move closer to the city, so factor this into where you are looking


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Old Apr 11th 2013, 2:30 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by Swerv-o View Post
The issue I have with rent is that it will always increase, whereas with a mortgage, you start paying it downwards from the outset, and it will decrease,
That is an excellent point ..... if interest rates behave.


Originally Posted by Swerv-o View Post
plus you also have the possibility of a capital gain on it.
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That's what worries me about Sydney ..... For some reason I just feel that if it crashes it will crash big.
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Old Apr 11th 2013, 2:34 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by Peepster View Post
Nah, I don't reckon it's worth it. Wait till you've found your Mr Right and then buy something together. If you won't be able to afford to go out as much then you're reducing your chances of meeting that Mr Right. Invest in yourself and being fabulous.
he is fabulous....! can he invest any more...
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Old Apr 11th 2013, 2:48 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by Beoz View Post
That is an excellent point ..... if interest rates behave.

Yes, if they behave. I treat the interest as essentially rent to the bank, so the more money I save and dump into my offset account, then the less rent I pay to the bank. I think I was fortunate and managed to


Originally Posted by Beoz View Post
That's what worries me about Sydney ..... For some reason I just feel that if it crashes it will crash big.

Sydney's a funny place - It seems that many of the suburbs have individual economies all of their own, based upon facilities, access etc. I think that picking somewhere that is close to good transport links and other desirable features is the smart play, because these will always be draw characteristics. I bought in Chippendale because it is between two universities, only 5 minutes walk to Redfern Station, 10 minutes walk to King street and Broadway shopping centre, while at the same time being a lovely leafy, tree lined suburb with a great cafe and pub culture.

I do have a car, but I think that when the renovations are finished, I will probably sell it. It's just difficult bringing back cement and wood from Bunnings in a taxi. I certainly don't use it for much else though...


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Old Apr 11th 2013, 3:56 am
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Default Re: Is Rent "Dead Money"?

Unfortunately, in our current circumstances the sums just don't add up to buy a home here in Canberra.

On the plus side, we are lean, mean and mobile.
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Old Apr 11th 2013, 4:07 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by paulry View Post
Unfortunately, in our current circumstances the sums just don't add up to buy a home here in Canberra.

On the plus side, we are lean, mean and mobile.
I have argued vehemently about how over-priced housing is in the UK and Australia, and it is. Compared to previous generations we are asked to borrow much more money to buy comparable houses, and due to this we have less disposable income. Because of this we must import all our junk made by slaves in the third world or we would not be able to buy anything to put in our houses.

However, if I put my wage and my wife's wage together and multiply it by a sensible borrowing ratio of 3.5, I find that we can afford some pretty nice houses in Adelaide, so can I really complain? Theory says one thing and practice says another. Sadly, when we do the same calculation with British wages and house prices we can only afford dumps, which really is a pain because it means when we move back we will have to rent there.
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Old Apr 11th 2013, 4:29 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by Zen10 View Post
I have argued vehemently about how over-priced housing is in the UK and Australia, and it is. Compared to previous generations we are asked to borrow much more money to buy comparable houses, and due to this we have less disposable income. Because of this we must import all our junk made by slaves in the third world or we would not be able to buy anything to put in our houses.

However, if I put my wage and my wife's wage together and multiply it by a sensible borrowing ratio of 3.5, I find that we can afford some pretty nice houses in Adelaide, so can I really complain? Theory says one thing and practice says another. Sadly, when we do the same calculation with British wages and house prices we can only afford dumps, which really is a pain because it means when we move back we will have to rent there.
That's a good point about the rule of thumb sensible borrowing ratio of 3.5. If I apply the same calculation, we could also find something acceptable in Canberra. Couldn't do that in London - there we would be looking at 5 or 6 times.
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Old Apr 11th 2013, 4:33 am
  #53  
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Default Re: Is Rent "Dead Money"?

Is Mortgage Interest "dead money"? now that's another view
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Old Apr 11th 2013, 4:34 am
  #54  
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Default Re: Is Rent "Dead Money"?

is that 3.5 x annual gross income?
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Old Apr 11th 2013, 4:37 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by commonwealth View Post
Is Mortgage Interest "dead money"? now that's another view

Again - it's the cost of providing you with the service you need to buy the house - It's neither dead money nor money well spent - just money you need to spend to meet your objectives.


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Old Apr 11th 2013, 4:44 am
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Default Re: Is Rent "Dead Money"?

Lost opportunity. Earning interest the money is taxable.
Originally Posted by commonwealth View Post
Is Mortgage Interest "dead money"? now that's another view
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Old Apr 11th 2013, 4:47 am
  #57  
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Default Re: Is Rent "Dead Money"?

Originally Posted by IvanM View Post
Lost opportunity. Earning interest the money is taxable.

This is why I like Offset accounts - you're maximising the work your money is doing while also being tax efficient.


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Old Apr 11th 2013, 5:07 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by commonwealth View Post
is that 3.5 x annual gross income?
Aye.
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Old Apr 11th 2013, 5:31 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by paulry View Post
That's a good point about the rule of thumb sensible borrowing ratio of 3.5. If I apply the same calculation, we could also find something acceptable in Canberra. Couldn't do that in London - there we would be looking at 5 or 6 times.
Is it 3.5 for the value of the loan, or the value of the property?
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Old Apr 11th 2013, 5:58 am
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Default Re: Is Rent "Dead Money"?

Originally Posted by JoeBloggs80 View Post
Is it 3.5 for the value of the loan, or the value of the property?
For us poor AUDollarless souls both apply but I meant the house prices
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