How much should someone pay for rent before they consider buying?

Lets look at a couple of situations:

Say: @ $250 a week = $13 000 a year

instead of say: @ $100 a week = $5 200 a year

Now look at a loan:

at $150 000
6.1% rate of interest
over a 20 year period
Equals repayments of $250 a week

Nice. SO after 20 years you own a property. Very cool. However, one may ask I don’t want to live here for 20 years. You don;t have to. You sell it. Yup, sell it. Then use the price you got (hopefully the price has gone up) and buy a new house. Carrying over the money you have already paid - sweet.

Ok say you don’t want to buy. How about only paying around that figure of $100 a week. The difference between the two options, what you save potentially is $7 800. You can’t find a place to live that costs $100 a week? Come to Tassie, you can pay as little as $75 for an adequate flat or about $100 for a house/flat. You like the “lifestyle” that you live at the moment. Fine - use that saving of $7 800 to go on holiday:

$600 for return flight to Adelaide for two adults (or $400 return flight to Melbourne for two adults) from Tasmania - we’ll use Adelaide cause its better Double Room with luxurious Spa Room fr. $145.00 for say 4 weeks (28 days) at Quality lodges 3 1/2 star @ $4 060

Still leaving you with $3 140 which you can spend maximum of $112.14 on a candle-lit dinner for two everynight - or spend $20 on a smorgasbord of takeaway like Chinese, Thai, African, Mexican, Cajun, Italian, Russian, etc. Look at all the restaurants here: Eat out

Thus still leaving you with around $90 a day to buy other stuff!! Sweet.

or save that saving of $7 800 in a simple savings account and at the end of the 20 year period you’d have $156 000 (or putting that saving of $600 a month into a term deposit, worked at around 4% for 20 years and you’d have $236 000). Interesting.

You want to live on the mainland and $150 000 not enough? Ok.

So what about a loan of $300 000 for more mainland prices.
@ 5.99% interest
Over 25 year period
Makes repayments of $445 a week - that’s only $195 more than paying before - and you’ll own a sweet property in the streets of Melbourne (well, perhaps close outer suburbs more accurate)

Anyways, worth consideration. Comments anyone?

Posted by Kramy on Sunday, June 22nd, 2003 at 12:05 pm.