Renting or Buying a home | Sunk Costs Compared

Please continue the video with the long term projections, not just the first year

It's simple...you know based on interest rates what your morgage repayments will be so if you can factor in a higher rate to something crazy high and can make the repayments....it's cheaper than renting. Why? Because renting is so unpredictable and unstable

Thank you Irene very informative! Could you please make a video talking about what is you investing style? do you invest every month? waiting for the lows? what is your style? I'm a beginner I want to invest monthly from my paycheck

A couple things you didn't factor in that are very important:

1. Assume a higer LVR at 90% (add LMI to your calculations)
2.Continue to assume a 3% return on property after inflation... but that annualised return is on the geared (borrowed) funds.
3. Assume a $100,000 deposit for a $1,000,000 purchase with a 3% return. Your $100,000 investment, thanks to gearing, now returns 30%
4. Yes, gearing does mean that any losses on property are also multiplied - but there's a reason banks will lend 90% of the value on a residential property and not on other asset classes
5. There are significant tax advantages to owning your own home. You did mention stamp duty as a cost, but there's no CGT when you sell your home. If you buy right you can sell at retirement and downsize.
6. Balanced portfolio - you are already investing 11% of your total income into other asset classes through Super - also very tax effective.

But mainly - you didn't account for the accumulated benefits of gearing with reference to purchasing a property through borrowed funds.

here a scenario where a couple pay a house of in 4 years.. I did it in 3.
Average income single 75, couple 140k. buy in a regional town close to work for 450k 3 bedroom brick house 1970s build. serviceable, can be renovated to add value but otherwise good condition.
there buils are 35k a year. leaving 110k to save. they save 20% deposit in a year. they buy and move in. they now save 120k per year. with a 340 k mortgage.
they pay the house off in 3 years.

they now have 140k to live on... do this twice and in 8 years, sell both and you'll have a paid off house in Sydned in 8 years vs 30 years.

$8000 pa maintenance costs, where do you get this figures?

Aust property valuation is 13x wages!
Aust property to gdp is 420%!
Household debt to gdp is 220%!
It's a ponzi! Wake up. Look at the real data under the hood. Aust property bubble has surpassed the US gfc and the great Japanese property bubble in 90s!

Just steal a house. There's a chronic shortage of police so it can take weeks to months for them to drag you out

When you rent if anything breaks or leaks the owner pays for it - that includes special levies which are not a small amount in older buildings - you did not factor that in - significant over time.

$8000 on maintenance seems high. I dont think Ive spent $8k total over the last 5 years.

Not that it matters, just changes the calculation a bit.