From the Desk of Paul
Why I don’t own my home
Founder, Australian Financial Advisers (AFA)
Does it surprise you to learn that I don’t own my home? It’s not because I can’t afford to or have some deep, dark, financial past that prevents me from entering the market. No, this is a personal choice backed by solid reasoning – let me share it with you.
In our lifetimes, we can expect our hearts to beat approximately 4 billion times from the moment we are conceived to when we take our last breath, if we are lucky enough to live to the age of 90.
In that time, many choose to live out the classic ‘Australian dream’ and take out a mortgage to own their own home. Over the time it takes to pay back that mortgage it costs more than just money; up to 1.3 billion heartbeats will have been spent working to pay off that debt… but that’s not for me.
Obviously as part of our core human needs we require shelter, safety and security. From caves to castles and all housing types in between, the practicality of a ‘roof over our head’ shouldn’t be lost to our ego because essentially a basic dwelling serves the same purpose as a mansion. For the vast majority of people, neither a cave nor a castle is a consideration, just a modest home with a few creature comforts is what we’re after… but is it better to buy a home to live in, or to rent someone else’s property?
Is living in the home that’s in your name better than renting a home that’s in someone else’s name?
I believe you can make any space a home; it doesn’t matter if it is your name or someone else’s on the mortgage papers.
Because judgement can often be clouded by emotional attachment, let’s look at property as a form of capital that has been converted into bricks and mortar. Some people choose to spend their money on property where others invest in other asset classes known as stocks and bonds, it’s all capital just in different forms.
When we own (or mortgage) the home we live in we face costs we wouldn’t have if renting, including hefty upfront establishment costs and a number of ongoing expenses.
For a renter, the only ongoing costs are rent, utilities and contents insurance.
For me, the renter’s lifestyle better suits my goals, desires and lifestyle. I do not like the idea of a 30 year commitment to a bank for one property to live in, when my life circumstances are sure to change over the years. Sure, properties can be altered but there’s even more costs involved with renovating or rebuilding.
However, I’m not entirely against property ownership or investment. I personally don’t own my home because the debt is non-deductible, however I encourage people to consider investment properties to be eligible for tax deductions. There are great investment opportunities and tax advantages to be had when strategically converting capital.
I think about property in a different way. I don’t feel the need to own the bricks and mortar in which I live; I instead invest my money in other ways including my current business and new ventures.
If you’re renting, you need to do something productive with the money you save from not having a mortgage. This can range from investing in your own business, commencing a start-up business or going down the traditional route like shares or other funds.
When it comes to purchasing property, these are the rules I follow:
- Rent where I want to live and invest where people will pay rent.
- Everybody will have a different view on whether to buy or rent, it is up to the individual what makes them feel comfortable or happy.
- Stay as close to the average house price as possible as that’s where most people can afford to live within their means or pay rent – this reduces risks associated with the value of the property going up or down, in the event of an owner wanting to sell or an investor minimising potential vacancy.
- Always consider areas that are close to community facilities such as shopping centres, schools and transport infrastructure that allows for expansion past where you live or rent.
Just because a lot of people buy a home, it doesn’t make it right and it doesn’t mean it’s the only option to take. Remember, we’re all given approximately 4 billion heart beats in our lifetime – a 30 year mortgage takes up 1.3 billion or 1/3 of our heartbeats just in paying off the loan to the bank. Think carefully before you acquiesce your heart to the bank along with your mortgage!
Disclaimer: Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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