There are few feelings of financial disappointment greater than scrimping and saving(not to mention begging and borrowing) for a deposit only to see the prospects of living where you want, in a style to which you aspire, disappear over the affordability horizon. Various studies have disagreed on whether renting or buying – over the longer term is the better option but what if you could have your cake and eat it too?
It's not just a financial decision. There's the emotional component of living somewhere you love or, to put a negative spin on it, being stuck somewhere you loathe because that's all you can afford to buy.
However, if you work the numbers aggressively enough, you can buy where you can afford the deposit, and live where you can afford the rent. And right now, with interest rates at an all-time low and prices falling, may be a good time to think about the rent-to-live option.
Is it feasible? Well it is if you buy the cheaper property and rent a more expensive one where you prefer living.
For a start, there's negative gearing whereby almost all your costs associated with letting your flat can be offset against your personal income from all sources, making a serious dent in that $750 a week mortgage.
Even before all that, a smart investment strategy - like buying the worst unit in the best building and doing it up - will give you benefits both in rental income and capital gains when you sell.
The same tactics could be used when renting - find the cheapest unit in the best location and build from there. An interim solution would be to live in the investment property for as long as required to meet the first-home buyers grants (which vary from state to state) and capital gains tax waivers then branch out into rent-to-live.
Of course, if you were to be mercenary and didn't mind being despised by your new neighbours, you could list your investment property on Airbnb or other holiday letting agencies. But then, overseas visitors want to live in the same places you do - as you will discover as your rental affordability threshold disappears over the horizon, along with everyone else's, when the new short-term letting laws hit NSW and Victoria.
Courtesy Jimmy Thompson – AFR