Renting vs buying: expert tips

While there is nothing quite like owning your own little piece of suburban paradise, whether to buy or rent depends on your view says Mark Foy, principal director of Belle Property Surry Hills.

Mark Foy of Belle Property Surry Hills

“For first homebuyers, you need to consider your personal position. If you take a long-term view you will always build equity over time, riding out the peaks and troughs in the market. You can then draw on your equity to invest in more property so you are building wealth through real estate,” says Mark.

But if you are looking for a short-term cash cow, buying is definitely not the wisest move. “We have seen 20 to 30 per cent growth in the inner city and outer suburbs of Sydney over the past couple of years, and the likelihood of seeing the same growth again soon is slim,” says Mark.

It’s good news for many first homebuyers though. “If you are a first timer and you are looking at a long term investment, and by this I mean seven to ten years, you can buy at any time as you’ll ride out the fluctuations in the market,” says Mark.

One of Mark’s recently sold properties. Photo credit: Belle Property

The wise renter
For those who may be saving for a deposit or simply can’t afford to buy, there are smarter ways to rent. “My advice would be to go for a shared rental. Rent a two bedroom apartment so you can share the costs but still get decent living accommodation,” says Mark who has been surprised by the cost of one-bedroom apartments of late – they often approach that of two bedroom abodes. “I guess it suits the demographic. Single people or couples that are willing to share small spaces seem to have pushed up the price of one-bedders,” he says.

And it may sound odd, but winter is the best time to take out a lease – wait until then if you can. “There are fewer changeovers in winter with more stock on the market. You can generally negotiate a better deal and you won’t be competing with 20 or 30 others,” says Mark.

One of Mark’s recently sold properties. Photo credit: Belle Property

Advice for first-time buyers
While it is far from glamorous, Mark is a big advocate of saving in order to get a foothold on the property ladder. “Save, save save! Don’t go out to restaurants and really set out a budget as to how you are going to spend your money. You’ve got to be wise when saving for a deposit and if this means taking your lunch to work, or catching a bus instead of a taxi, there are many small ways you can cost cuts. It’s what our parents did,” says Mark who sees credit cards as the enemy of savings. “I would advise against a credit card as if you don’t have a credit card you don’t have the money therefore you won’t spend it,” he says.

One of Mark’s recently sold properties. Photo credit: Belle Property

Buying & renting: a mixed approach
If lifestyle is important to you, there is a definite argument to be made for buying an investment property in a suburb that you can afford, while renting in a more desirable area. “In my view, you really want to get in and start somewhere so you can build financial wealth and security. The first property is always the hardest but once you have secured that you can sit on it for five years before thinking about pulling out the equity to buy another,” says Mark of a trend that has been widespread over the past few years.

If you are going to look further afield when it comes to purchasing an investment property, just make sure to consider infrastructure. “If you can’t buy in the inner-city, try and buy along the train line as most people work in the city,” says Mark.

One of Mark’s recently sold properties. Photo credit: Belle Property

Real estate vs shares
While investing in property isn’t the only way to make money, it offers relative certainty when compared to other investment types such as super or shares. “Real estate is tangible and that’s why people like it. Stocks and shares can be lucrative and worthwhile if you know how to buy and sell them and you follow the market daily but real estate is always a good long-term hold,” says Mark.

And with interest rates at historic lows, Mark sees it as a great time to get into property. “Take advantage of the rates if you can and lock them in for a three or four year period,” says Mark who favours a fixed interest rate in times such as now. “They provide a lot of certainty as you can do up a budget and know exactly what your outgoings will be for the next few years,” he says.