The Barefoot Investor by Scott Pape

Author:Scott Pape [Pape, Scott]
Language: eng
Format: epub
ISBN: 9780730324225
Published: 2016-11-05T00:00:00+00:00

Mistake #4: They rent but forget to save

Renting is generally cheaper than owning because you don't have to pay interest or upkeep. So, financially, you'd be better off renting and then investing the difference into the sharemarket, at least according to a research report by none other than the Reserve Bank of Australia.

It makes sense. While some people argue that rent is dead money, so is paying interest to a bank. And over a 30-year mortgage you'll spend more money paying interest to the bank than you paid for the original cost of the house.

And when you add in stamp duty, legal fees, wear and tear and selling costs at the end, you'd be better off renting and investing the difference.

The only problem?

No-one ever saves the difference.

I can work wonders with a spreadsheet and convince you any number of ways you'd be better off, but you don't live life in a spreadsheet. In the real world there are off-spreadsheet factors, one being that as a renter you don't have the security of tenure. And that extra cash can easily be frittered away, especially if you move every 12 months or so.

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