Rent is Not Dead Money if You Do This

A listener to my radio interview states, “I was always told that paying rent was dead money” – is this right or am I better off renting?

to-rent-or-buy-1.jpg” alt=”is it better to rent or buy” width=”300″ height=”200″ />The answer is ‘yes and no’ depending on circumstances. Whilst there are many different situations where you are better off renting, a common rule is that it is important to own a property that you rent to others.

The main reason for this is Income tax. Outgoings on your residential investment property are tax deductible but those on your residence are not.

Other advantages

My philosophy is to buy and accumulate, not buy and sell. If your occupation means moving to other locations to take advantage of job opportunities, the home selling and buying costs are prohibitive. However, if renting you simply hand back the keys and move on. Remember, as a renter, it is important to own a residential investment property in a capital city to protect you from increases in house prices.

As an example, let’s take Brisbane. A young person might wish to enjoy the facilities and lifestyle of living in the inner city. It is now common for them to rent inner city but buy a residential investment property in the outer suburbs.

Let’s say they want to backpack around Europe for 12 months – they hand the keys back on their rental whilst continuing to enjoy the rental income and inflation protection of their investment property.

Inflation Protection

With a residential investment your income (rent) and the dollar value of your property increase with inflation. Friends, who rent in Sydney, as they cannot afford to buy, recently bought a new house in Brisbane as an investment. This is becoming more common. Some people are selling one house in Sydney and buying two in Brisbane.

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We have an almost completed 5-bed executive home in Brisbane still available. A contract has fallen over and a new buyer can save $10,000 in stamp duty and $6,500 in land and construction interest. Contact our office for more information.

Steve Taylor

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If you prefer to listen here is my radio interview on Emerald 4HI:

https://stevetaylor.com.au/wp-content/uploads/2014/11/Steve-Taylor-22nd-June-Mixdown-1.mp3?_=1

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At the helm of Steve Taylor & Partners, Steve has been delivering expert advice and product knowledge to clients for over 30 years. We provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.

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DISCLAIMER

Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the above subject. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.

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