The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK PROPERTIES CREW and PROPERTY LEGENDS in the industry share their experiences and knowledge. Hacks and tips to make you a smarter property GURU :) Learn with exclusive content, advice, insider info and HOT real estate industry PRO SECRETS. For sale, for lease, residential, commercial, buying off the plan, finance, mortgages, interest rates, first home buyer, investments - all topics covered. The untold real estate info you've been waiting for.
The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK NEWS - BUY OR RENT? ESSENTIAL TIPS FOR MAKING THE RIGHT CHOICE
Can mastering the decision between renting and buying a home transform your financial future? Tune in as we break down the complex yet crucial aspects of real estate choices. Bidhan and Harry guide you through the labyrinth of financial commitments involved in purchasing a home—think deposits, stamp duties, and ongoing maintenance costs. Compare these with the more wallet-friendly, low-upfront expenses of renting, and you’ll get a full-spectrum view of what each path entails. We also unpack the long-term perks of property ownership, including capital growth and asset-building, while not shying away from the pitfalls like fluctuating interest rates that can catch homeowners off guard. Renting, on the flip side, offers unmatched flexibility and freedom from unexpected costs, although it might leave you feeling like you’re just enriching your landlord.
Imagine the impact of stable versus fluctuating income on your lifestyle choices, including the ability to take sick days without stress. This episode delves into the current trends in the rental market, highlighting its relative stability compared to previous years. You’ll discover the lifestyle advantages of renting—like fewer financial burdens—and contrast these with the equity-building benefits of owning a home. We provide actionable insights for those facing this life-altering decision, considering crucial factors like interest rates, levies, and personal priorities. Whether you’re on the fence or already leaning one way, this discussion is packed with valuable advice to help you make an informed choice tailored to your circumstances. Don’t miss out on this comprehensive conversation that could potentially shape your financial future.
All right, here we are, live and ready to go.
Speaker 2:Let's do it.
Speaker 1:It's Bidan and Harry today talking about renting versus buying, a very, very hot topic. Stay tuned and we will take you through the ups and downs of buying versus renting. Let's do it, cheers. All right, here we are. How are you, harry? I'm well, I'm ready for another talk another evening minutes, oh yeah. So how's the day been for you? Busy day.
Speaker 2:Oh, another busy day in real estate. What time is it? Eight o'clock, and we've been here for what?
Speaker 1:12 hours now 12 hours but that's uh every, every other monday, for us nothing new nothing new. Yes, so renting versus buying? I think that has been the most discussed topic in every household yeah because you're not very far off paying that rent and you can top a few hundred dollars and it could be a mortgage. What do you think?
Speaker 2:yeah, well, let's talk about the disadvantages and the advantages, right, the pros and cons with with um, with renting. So, when it comes with rent to renting, like you've got the disadvantages, like you know, you don't have to necessarily, you don't have any holding deposits, but you essentially so you need a big capital you need a big yeah, like if you're buying a property, you need to be capital because there's stamp duty.
Speaker 1:Well, first thing, first there's the 10% deposit. Yeah, and in northern regions the average two bedroom apartment is 800 grand you need 80 grand upfront. These days, few of the owners accept 5% as well, so let's go with that. Yeah, you go. 40 grand minimum. You need the solicitors, pretty much all those due diligence costs. Let's add five more grand, yeah. And you could stamp duty there, but first-time buyer, no stamp duty, that's it, but if you're not, a first-time buyer. There's 30 to 40 grand there as well.
Speaker 2:Yeah, so essentially what I was saying before is, if you compare that with renting, all you need is the holding deposit, which equivalents to two weeks of rent, and then you've got your bond payment, which equivlets to four weeks of rent, and that's all the necessary payment you need, yeah, to secure the property so let's say average two bedroom unit.
Speaker 1:What is the rent for in northern beaches?
Speaker 2:average two bedroom depending on where it is the size, the location you're looking at maybe lowest end of 700 are pushing 820 to 800, for instance, yeah, 100.
Speaker 1:So two weeks rent would be 16 yeah and how much holding deposit for.
Speaker 2:So yeah, so that'd be about, oh so, four weeks, which is the bond, would probably be about, yeah, 30, around the 3000, between three to three and a half thousand so roughly five grand, roughly five grand, and then you've already secured that property.
Speaker 1:Two bedroom property you could rent. You get five grand. Yeah, Five grand is what you would need beforehand for a bond, rent and all the other due diligence, and then you could buy a property two bedroom. You need roughly 50 grand, yeah, but but, there is a but. There is a but.
Speaker 2:But the advantage of that is you own an asset. You know what I mean. You can essentially sit back and enjoy that capital growth over time.
Speaker 1:Exactly, but with renting you're paying someone else's mortgage.
Speaker 2:Correct. So renting essentially is you're paying money, but essentially that's dead money. It's not contributing towards any payment. That's just money going straight to the landlord's mortgage and you're essentially paying his asset Definitely going straight to the landlord's mortgage and you're essentially paying his asset Definitely. I think that's one of the biggest downsides to renting. But of course, at this time of day, you know, not many people have the option. It's essentially, a lot of people are just forced to rent purely because not too many people.
Speaker 2:It's very difficult to actually secure a property in today's market in terms of buying.
Speaker 1:But, yeah, I think that's one of the most annoying knowing reality is there's all this, yeah, and with the interest rate fluctuation as well, it doesn't help the buyers to do their due diligence and buying a property there and because you never know, you might enter the market at, let's say, two to three percent in just right up.
Speaker 1:Three years ago any bought a two-bedroom apartment. Now your repayments have been growing up every year. So if the repayments aren't growing, as with a salary, then you are stuck there big time. Yeah Right, I know rent has been increasing as well, like we've seen two bedroom apartments come from 600, 650, 700, or 800 now. But those are very little increments and you can kind of cope up with it, correct? Yeah, and worst come worse come worse. You can always move out to a cheaper place or a cheaper civil yeah but if you own that asset you gotta be there.
Speaker 1:That's it. There's no easy way out. Yeah, so you gotta sell the place or rent the place, or you know there is. You know lots of things and you invest in a hard and money. So having that 50 grand, is no joke like try saving a 50 grand right it is that's a lot of money there and that invested in the place. You can't just snap and get out of there yeah. I think renting is easy because you don't own it.
Speaker 2:That's it yes, and you don't pay any, any liabilities for the property, right? So, especially so, especially as a buyer, you've got to pay for council rates, you've got to pay for strata Strata's a killer, because there's no escape guys. It's a cost that you have to pay for the property, for the maintenance of the block, and that's going to be paid every quarter. So no escaping those outgoings from the property. Whereas if you're a renter, you just sit back and relax.
Speaker 1:You don't have to pay for any any maintenance is all landlord.
Speaker 2:Obviously, depending on what it is, it's something strata related, but you just get to sit back and essentially relax, but at the same time, I guess I'm sorry to cut you off. Yeah, that's all right.
Speaker 1:With the maintainings I get. We were having a chat earlier. It has to get accepted there, yeah, so there is a bit of a timeline, there's a bit of a delay yeah, hypothetically, if something does pop up, you know whether it's a water leak or regardless.
Speaker 2:If there's a maintenance issue with the property, you do need to notify the landlord, or you need to notify the property managers, and then we need to request that from the landlord and then wait for approval to send the work order to the tradesman. So there is that time lag, which is quite annoying for tenants at times.
Speaker 2:Uh, because there's a small waiting period where you know we've got to arrange for tradesmen to get in there as soon as possible, so you can't actually get the problems fixed as quickly as if you were an actual buyer, because there's a step that we have to follow as a property manager. Yeah, there's a procedure.
Speaker 1:Let's say the tap is leaking in the kitchen. If you're on the place, you'd go to Bunnings. Buy a sealer, buy a replacement tap.
Speaker 2:You can get it done in the next hour if you really wanted to.
Speaker 1:But if I a tenant, I would have to call hey, harry, I'm the tenant from one, two, three, uh places, street, street, street. Uh, the tabs leaking, can you please arrange something? Yeah, and he'll say okay, cool, he'll try to contact the owner. Owner might be available, might not. That'll happen. Owner say okay, get a tradesman test, will go there, provide a code. Yeah, comes back and it's a long process. Yeah, but at the same time, you don't have to pay for maintenance, correct?
Speaker 2:yeah, that's what we're here to talk about and also another downside with renting is that I think, a lot of the times, coming from a property manager, I would say that a lot of tenants lack a little bit of privacy. Yes, because once every six to nine months, months we've got to do inspections and we've got to liaise with tenants and, you know, we've got to arrange and, you know, do a quick rundown video and we've got to make sure that the property is always up to standard, in good condition, so there's no issues with the landlord.
Speaker 1:So, again, a lack of lack of privacy, privacy, that's a big one, yeah, and I think one of the biggest issues that with buying a property, something with strata title is having a strata levy. That's something big and you'll never see it coming. It's always like you might just buy a property. There's a quarterly strata that you have to pay just to maintain the day to day basis basis and then a window.
Speaker 2:Yeah, crack on the common property and then I don't have to chip in.
Speaker 1:Exactly so I might be, or water leaks, yeah, and then all of a sudden you have to pay 40 grand yeah, that's from from your unit, and coming up with 40 grand from an investment, that is not meaning not many people have that in the you know, just saved in the back of their pot, especially, like you know, um owners that have their mortgage.
Speaker 2:You know what I mean. You know mortgages on. I was looking at a property, I was doing the maths on a 600 000 property, um, depending on, obviously, depending on your income. For my specific circumstance, my repayments would be roughly a thousand dollars to eleven hundred dollars per week for the repayment um. So if you're paying that much money a week, um, and you've got, like you know, 40 grand, that comes out of nowhere.
Speaker 1:It's super difficult to pay that out of nowhere. It just stepped in the property market. Yes, I got investment. You want to get that, you know. Rent coming in to support the mortgage? Yeah, and then bam 40 grand strata levies and you would never see it coming in the back right, because you know all the companies have been set is there. If there's a concrete answer and water leaks, it has to be done yeah, simply, like you know, because it will do for the damage.
Speaker 1:Yeah, and that's one of the biggest concern, owning property at strata levy.
Speaker 2:So are you going to do your research when buying a property?
Speaker 1:big time, and if something's selling too cheap, you gotta ask the question Correct yeah. You gotta be there. But as an investment, if you buy the property, it has few issues. You pay the strata levies. You can always claim it back.
Speaker 1:Like it's an expense for you because it's an investment. Like anything you can do, it can be claimed back, whereas a renter if there's some strata, levies and more going on, uh the use the landlord would pay for it and if it's too much of a hassle you can just move out to a different property.
Speaker 2:That's it, yeah, I think you have that freedom. Yeah, well, I think also with buyers, um, because it's super difficult in today's market from both, for both parties. I would argue actually, if, for whatever reason like coming back to this levy that you can't, you're not able to make the mortgage repayments and you're forced to sell the property, you can actually.
Speaker 2:You might be, and it's very unlikely, it's very uncommon, but you might actually be selling the property at a loss, at a deficit, which is a huge, you know disappointment because you, you know you saved up the holding deposit, you got your pre-approvals from the bank, you've got all the necessary, you've done, you've worked so hard to secure the property exactly and you know you're paying it off slowly, slowly, over time. And then, boom, a levy hits you out of nowhere 30, 40 grand, depending on what it is um, and then you're forced to sell it, and it might be, depending on the market. If it's a booming market or whatever market it is, you might actually have to sell the property at a loss, which is a huge, huge disappointment.
Speaker 1:And it's a big loss of time and money. That's it, and you've got to start again.
Speaker 2:Back to square one.
Speaker 1:And it's all that emotional baggage that you carry. Yeah, next time you buy a property you might be a bit scared. Take, you know, a few more steps back, yeah, or?
Speaker 2:be a bit more, do more thorough research.
Speaker 1:So it's, I think, that peace of mind that you get, like we're having a chat early. If you have to pay that 200 mortgage every week, yeah uh, you'll have to earn a certain amount, correct yeah, before chucking in a sick day servicing, yeah so before chucking in a sick day, you will think two or three times. Because you need that payment, right, you know you gotta go to work get that money coming in, Even if you're sick. Yeah. So they say if you're sick, work, but hard workers, you know that's it.
Speaker 2:That's what it is about.
Speaker 1:Yeah, if you want to get get, nothing comes easy. So paying that $200 mortgage every week, you have to get that work done. So with renting it's a bit easy. You've got $800, $900 per week. That's going to be a rent and even if it goes up, it's not going up by $100 or $200.
Speaker 2:It won't be increasing as high as it was at the start of the year. Obviously, we still are seeing a lot of rent increases. I'm seeing a lot of rent reviews being sent to our landlords. Obviously, not 30%, 40% increases, but we are still seeing about 10%, 15%, sometimes 20% increases still. So, yeah, but we are again.
Speaker 2:As we mentioned in the last video, we are still going through slightly um a stabilizing period, I think, in the rent market. Um, I don't think it's just booming off and we're not, you know, asking for crazy rents still.
Speaker 1:Um, but um, yeah, but yeah, property prices always go up. Yeah, I think, at the end of the day, if you have the capital, uh definitely buy because you'll be, you know, investing in an asset all that money that you're paying in rent instead of. You know you can have an asset here and after 10 years, down the track of renting versus buying, yeah, and kind of say, okay, that is mine, I've said this much and I think the only thing stopping you with that is the risk, the risk factor associated with that.
Speaker 2:I think that's the only thing that will. You know that people will look at and assess and say, hey look, I'd like to buy that, but okay, I've got to take into consideration levies. I'm going to take into consider, take into consideration interest rates and all of these, all of these pros and cons, but you know, at the end of the day, if you're willing to work hard for it and take the risk, um, I think it's incredibly rewarding. Yeah, very rewarding.
Speaker 1:If you look at a longer run 10 years timeline yeah, I think having that property there because every week you're paying that mortgage, 10 years timeline you'll have enough equity there yeah, so for 10 years you might say okay this much. Let's say you have 400 grand equity out of that property. You might have 50 more grand on the side, correct, that could be a thing for a second and a third investment property.
Speaker 2:And I think that's very common. I think it's more common than uncommon for that to happen to you, especially properties on the northern beaches. I don't think. Well, obviously I'm not a sales agent, but from listening to sales agents and what's going on around the office, I think it'd be very unlikely for you to make a loss on a property. But yeah, that's just my personal take on it. Yeah, there's a risk factor, but it's not every shoe fits for everyone. They have their own things.
Speaker 1:That's it. They have their own priorities. Do what's a priority for you. Yeah, if you buy a house, you might not be able to get that brand new car that you like. That's it right now, because it affects your borrowing power highly but if you're renting, you know, and you can't afford that house. Yet that have that car might make a lot more sense right now, because car, car. Right, well, good car on an everyday basis. Tourers are getting popular Bids want a Porsche.
Speaker 2:One day Sports car.
Speaker 1:But a property first.
Speaker 2:But a property first. But a property first. Property to pay off the car. Pay off the car. It's going to take longer, yeah, but I think it's better to have an asset paying for your liability Rather than just having liability.
Speaker 1:So you've got to think what's asset and liabilities, and also you can't raise a house.
Speaker 2:You can't raise a house, but you can live in a car. Live in a car.
Speaker 1:Anyway, going off topic there. But, yeah, that's what I think. So we've seen like, because of how the market is, how the economy is, the only people that are buying new cars and people that are buying the big TVs and appliances or furniture are the people who are not paying mortgage because they don't have that capital or that income to get that house or an apartment yet.
Speaker 1:But they do have some money that they can, you know, make the lifestyle a bit better. They can go on holidays. But people paying mortgage on a daily, day-to-day basis because of the interest rate hike, they might not be able to, you know, go for that fact. Okay, let's go on a holiday. Yeah, because they might have to cut back on a few things in the future. So that's the thing. You have your pros and cons and, uh, at the end of the day, it's always the right decision at the right time. Yeah, depending on your circumstance.
Speaker 2:It really is um just weighing out the risk factor, the pros and cons. Do your research, be thorough.
Speaker 1:We covered everything and if you need anything, we're always here 24-7. If you need help going down this pathway, what's better for you with your finances or anything, our doors are always open, or at least our phones are always there. We'll answer that 24-7.
Speaker 2:Anything you want to add Harry. I think that covers everything. Beards, all right.
Speaker 1:That's over and out from. Harry and Badan. We'll see you next Monday. See you later, bye.