Renting Basics: Going from Renter to Owner
Before accruing all of the finances they need to make that leap into home ownership, the vast majority of Australian first home buyers would have spent time renting.
While renting throughout your whole life makes sense for some of us, for others the final conclusion of being a tenant comes when we buy our own home. So how can you join the party, and transition from home renter to homeowner?
Transitioning from Renter to Owner
There's a general progression that people on the real estate journey, one that most of us follow at some point in our lives. On the day we move out on our own, we are following generations of people before us, and while not everybody's path is identical, there are nonetheless well-trodden sections to move through.
Despite the increasingly tough property market conditions, the great Australian dream of buying a first home is alive and well, with the proportion of housing finance commitments coming from first home buyers in September 2015 sitting at over 15 per cent, according to the Australian Bureau of Statistics (ABS).
Before accruing all of the finances they need to make that leap into home ownership, the vast majority of Australian first home buyers would have spent time renting. So how can you join the party, and transition from home renter to homeowner?
How Much Will it Cost?
It's easy to read the frequent news reports about skyrocketing house prices and historic low housing affordability and be intimidated. However, should you know where to look, and how to temper your own expectations, finding affordable housing for purchase is not as difficult as you might think.
In fact, on October 21 2015, the Courier Mail reported that in some 111 suburbs in the city of Brisbane, rent is actually higher than the ABS' figures on weekly housing costs for people with a mortgage. The median $453 weekly spend for mortgagees equates to approximately 18 per cent of income spent on housing costs, while renters were finding themselves spending 20 per cent.
As you can see, perhaps breaking out of the cycle of renting is not as out-of-reach as you might think.
How Can you Get There?
One of the greatest hurdles to buying a home can be saving the required deposit. A recent home loans activity report (October 2015) found that for most couples, saving the approximate $100,000 for a home deposit will take on average 4.2 years nationwide. In some of the larger cities where property values are higher, however, that median stretches to as much as 7.9 years.
Having to grind out savings for up to eight years is, for many people, simply an unreasonable ask. There's a silver lining though - you shouldn't have to do it on your own. Each state and territory in Australia offers its own first home buyer incentives, including grants (up to $15,000 in Queensland) that can help you on your way to building your deposit. No-one is saying it's easy, but thousands of Australians every year make the jump, and you can too.
From Tenant to Landlord
Perhaps you're interested in real estate ownership as an income stream, as well as or in place of just owning a home for yourself to live in. Owning investment property is a great way to build your assets, so if you don't necessarily want to move to the place you're buying, that doesn't mean you should disregard the opportunity to buy altogether.
There's even further government benefits to owning rental properties, with the Australian Taxation Office allowing you to claim incomes tax deductions on some expenses, such as:
- Advertising for tenants
- Interest expenses
- Repairs and maintenance
Building up a property portfolio as an investment is one of the further branches that your real estate path could take, so keep in mind that your first home buyer benefits don't have to be targeted towards a property you're going to live in.
Buying your first home doesn't always mean the end of your renting life, but for some people it's the reward at the end of a long real estate journey, often through many rentals and landlords. Savouring that moment where you're no longer paying someone else for their house is just the icing on the cake.