A frequent goal for a comfortable retirement is owning your home outright. But for many, that’s a goal that’s out of reach.
A key goal for a comfortable retirement is owning your own home outright when you get there. Many renters nearing retirement write to me looking for advice, and it’s difficult to respond given the ongoing housing crisis, a problem without an easy fix. In my view, renting is a bad investment, often a necessity, driven by circumstance rather than desire.
She had to sell everything they owned. Now, she’s moved out of the city, away from her friends and community to be able to find a place to rent for $370 per week, which she affords thanks to some help from rent assistance. Jen, 28 and Greg, 29, are renting in inner Melbourne and have given up hope on buying a home for now. They’re young and working hard with a household income of $130,000 between them after tax and their rent is $42,000 per year.They’ve grown up in Richmond, and lived all their lives in the surrounding suburbs of inner Melbourne, so that’s where their roots are and where they’d want to buy.
They might have a share portfolio, a rental property pool, or some valuable managed funds getting them a good and fairly reliable return in strong markets. And they’re able to choose where they want to live, renting because they think it’s a better use of their capital to own financial assets rather than their home.
His big risk, remains that of ageing without a home and having to live in fear of moving more regularly. The reality is, Greg’s doing ok. And he has enough money right now to keep choosing to rent.The last lesson that nobody tells you about in the rental market is the tick tock of the mortgage clock. When you reach the end of your fifties, no one tells you that your time is running out to get a home mortgage, and then, one day, you can’t.
He’s chosen to pay for them to have a private education as a priority, rather than buy a home. He pays $1100 in rent a week for a house that might fetch $1.7 million in the real estate market, and he’s just making ends meet on his single-dad salary. He’s got six more years of paying school fees before he can see light in the tunnel to buy a home. By then he’ll be 54.
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