• Sam Wilks

Playing the Real Estate game

People can argue that renting a home places you in a better financial position than buying one. It can leave more disposable income, but the lifestyle benefits are relatively short. Real spending power decreases over time because rents and prices go up generally faster than incomes.

The culture of Buyers

It really comes down to a person’s discipline, but generally people who are paying off a mortgage end up increasing their spending power, the only alternative is if they rent where they want to live and invest where the returns are best.

The equity in their homes grows as property values rise and their re-payments accumulate. The pattern of income availability suits different people at different stages of their life.

The culture of renting

Generally, people’s disposable income peaks when they are young and renting seems the most logical choice for the young, if they buy an investment they can have the benefit from both scenarios. However generally when people have the income disposability they start thinking of having children and people start looking for the security of a permanent place to live.

In Australia, the current buyer data advises that many renting singles or couples without children are reluctant to make the lifestyle sacrifices necessary to buy their own home.

The Permanent Renter

However, its more about postponing the sacrifices as their real disposable income shrinks over time, they will find themselves moving into less popular properties to avoid paying the larger rents due to inflation. Eventually if they rent for a prolonged period without investments, they will find it hard to alter their lifestyle to make way for new expenses, such as children. Even high-income earners are not exempt.

Changing Cultures

Socially as the”Permanent renter’s” fail to grow and contribute in the society, it produces regrets, the relationships of permanent renters break down and one or both partners will seek alternative partners in either the Buyers culture or an initial renting culture

Wealth is not a result of high income, in my experience it is the result of consistent discipline, good values and lifestyle choices. People on low incomes can still grow wealth. It is not uncommon for a couple on a high income to have one to two holidays or trips per year. Worse many on high income invest in mobile liabilities (Cars). Those on lower income can choose to buy a cheaper more reliable car, spend less time travelling and save a deposit substantially quicker. Wealth is not determined by one’s skin color, perceived privilege or upbringing. It is determined by the values, life style choices and actions taken. Studies in America concluded the difference between those that were wealthy and those that were not was the following, finishing year twelve, getting married before you have children and getting a job (any Job). They were the only 3 determinants on greater wealth.

The key to Wealth then seems simple - Get an education, retain good values, and work hard and you will succeed.

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