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June 05 newsletter

Should you rent or should you buy?

Welcome to the June 2005 newsletter from the Shape of Money.

After the bountiful gains experienced through residential property investment in recent years, it seems to be almost heresy to suggest that one should do anything other than buy.

But all good things come to end - well, at least until the next cycle.

While the decision on whether to buy or rent is, for the most part, based on lifestyle, it would be remiss of the Shape of Money to not to bring to your attention some of the economic and financial factors which may be of interest.

Run the numbers through the calculator

To that end, we have created a rent or buy calculator.

The factors in the calculator are those which we can measure, such as rent, rates and insurance costs. You, the buyer or renter, will need to make some assumptions on intangible values, such as whether spending Sunday in the garden is fun, or whether you're uncomfortable about the landlord being able to drop that "sorry, the house is for sale" letter in your mail box.

It is a common myth that renting is "dead money": far from it. Under the right economic conditions, it can be a wise decision to park your deposit in the bank and spend the day at the beach instead of with the weed eater.

The calculator determines whether the cost of home ownership is less than the cost of renting. Home ownership comes with interest repayments, rates etc, balanced by the gain or capital appreciation of your home. The cost of renting is obviously a weekly rent bill, reduced by the increase in the value of your investment assets. In this example, it would be the investment return on your deposit, plus or minus any differences between rent and the interest costs.

Confused? Then click on the calculator, run some numbers, and see what result you get.

Random page of the month

The recent foot and mouth scare reinforced the reasons for having some investments overseas.

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