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Is rent money dead money?

There is something to be said for owning your own little piece of the world. It’s the great Aussie dream to have a house to live in and grow with, but should it be your biggest asset? Is it even an asset at all?

Rich Dad, Poor Dad author Robert Kiyosaki says that a house you buy to live in is a liability, “an asset is only something that puts money in your pocket. If you have a house that you rent out to tenants, then it’s an asset. If you have a house, paid for or not, that you live in, then it can’t be an asset. Instead of putting money in your pocket, it takes money out of your pocket. That is the simple definition of a liability.”

Savvy property investors don’t live in their own homes, they rent them out, claim the tax benefits and earn all the capital growth that comes with property value.

Why do we think rent money is dead money?

ding dong
Ding dong, is your rent money dead?

In Australia, the general consensus is that property is a safe and somewhat sure bet. It’s the go-to option for investing that will generally increase in value over time. It forces us to save, can provide leverage and gives us a sense of security.

If you consider rent money to be dead money you should also consider the huge amount of interest you will pay on your mortgage as dead money.  And while you will own the home after 20-30 years of mortgage repayments, it will limit your options and choices in a number of ways:

  1. Lack of diversification. Having a mortgage puts all your investment eggs in one basket rather than allowing you to diversify through a range of options… like shares, bonds, index funds or your mate’s mature online dating start-up.
  2. Opportunity cost. With all your money tied up in property, you can’t invest it elsewhere for potentially greater returns if the opportunity arose.
  3. No flexibility. If you rent, you have the freedom to move whenever and wherever you wish at very short notice.
  4. Maintenance costs. Home ownership means home maintenance, so if your oven explodes or your roof leaks you have to pony up the cash to fix it.
  5. Transaction fees. You have to pay transaction costs such as stamp duty, legal and conveyancing fees, building inspection costs and loan application fees when buying a property, which can add up.

Over the past 25-30 years, Australian property has provided massive returns and many have reaped the rewards. The problem with property in Australia is that it has been incentivised as an investment, with tax benefits for those that buy and rent to tenants, which is why first home buyers are locked out.

Is rent money dead money? It really depends on your circumstances. Buying property is just one option of many when it comes to building wealth and securing your future.


  1. Mrs. ETT Mrs. ETT May 5, 2017

    We bought 20 years ago, because it was what you did. I definitely don’t consider our house as an asset, and don’t include it in our Net Worth calculations. It’s coming up to 40 years old, and is going to start costing us serious money soon.

    I have to acknowledge that the stability has been very reassuring. One year we helped a friend move out after 1 week’s notice at Christmas – their third forced rental move in 2 years. That was incredibly stressful for them.

  2. Miss Money Box Miss Money Box May 5, 2017

    I think having stability is a very nice thing, and definitely one of the big reasons why people buy property.

  3. Miss Balance Miss Balance May 5, 2017

    I will eventually buy a family home for the stability factor, however for the moment renting is much more cost effective in my area and frees up more money for investments now that will hopefully grow in future when I have less to throw into it.

  4. Dividends Down Under Dividends Down Under May 6, 2017

    We have been firmly in the renting camp and definitely don’t think it’s “dead money” – the amount of money we would spend on interest, council rates, potential body corporate fees, maintenance.. It’s way more than what we spend on rent!! All of those categories for home owning expenses is “dead money” that we aren’t willing to add to our budget at this stage in life.

    However, since being pregnant it really has become more of a desire to own our own place, just a real pull for stability and reassurance. Having to organise maintenance and being at the whim of how our rental agent/landlord decides to do it isn’t much fun at the moment, and also the 6 monthly rental inspections just feels like an invasion of our personal space lately…
    The desire for the “luxury” of owning and being in control of our own place is really strong! We decided that at the very least we will sign another year lease and see what happens, after the 1 year we would most likely not be in the position to buy BUT we could at least upgrade into a bigger rental that actually has aircon, and potentially rent in a cheaper area that we are looking at buying in (to see if we really do like the area first).

    Mega long comment!

    Mrs DDU

  5. Miss Money Box Miss Money Box May 7, 2017

    Thanks for your comment Mrs DDU, it’s all about where you’re at in your life I reckon. There are pros and cons to both renting and buying.

  6. Aaron Aaron May 7, 2017

    Love this. I used to think I needed to work towards owning a place to call home. I now think it’s a load of rubbish. Let me paint a picture…
    Consider if you spent life-savings of $200k towards a property in Sydney worth $700k. You just lost $200k you could have (poorly) invested for $6000/year just by sticking it in the bank, $10-15k/year on moderate risk shares, or $20k/year on something riskier.
    What did you actually get? First, $27k stamp duty debt plus lawyer and agent fees. You’ve saved yourself rent now (kind of). At $550/week thats $28k/year so you can consider stamp duty like paying a year of rent in advance, except that you’ll never get it back.
    Second, you got a mortgage debt of $600k which will set you back at least $4800/month if you want to get yourself out of this hole you’ve just dug yourself in around 15 years. On top of that add council rates, Sydney water, Strata (and the occasional “special levy” strata likes to charge every once in a while). That could cost you $3000 per quarter or $12k/year – that’s half the rent you used to pay! The interest portion of your loan repayments are $28k year.
    So you’ve committed to living 15 years in a place that is smaller than you’d probably like 15 years from now, lost your life savings, paid a year of rent in advance, replaced your rent with equivalent cost in bank interest repayments, committed to paying the equivalent of half your rent over again in strata and council fees, and then also have to find another $3500/month to pay down the principal or you’ll risk losing it all. Congratulations on your new home!
    If you buy an investment property, your interest losses are investment losses, as are your strata fees and such. In short, it costs a landlord a lot less to own your place than it could ever cost you.
    The other fear I have is the pyramid scheme of property valuation. The only reason I can imagine to buy a property now over other investment vehicles (e.g. shares) is to ride the gravy train of property valuation. If my thinking ever catches on though, the only people buying will be other investors and eventually the music will stop, probably when all the trailing edge of the baby boomers all sell up their retirement nest eggs at once.

  7. Miss Money Box Miss Money Box May 7, 2017

    Thanks for your great comment Aaron. I am totally with you. I’ll be renting for the foreseeable future.

  8. Pia Pia May 9, 2017

    I’m in the house owner camp, but because having had to move almost 10 times in the last 10 years due to various reasons, I’ve had enough of moving. I want to be able to stay put for a good number of years, not move because I have to or because some landlord has decided to make his money tree shake harder. I also prefer not having to deal with real estate agents who never come out to fix problems but are super quick to hassle you if they think you are in the wrong. Even when we had a really good landlord, he then got caught up in his new business and would never respond to maintenance issues that weren’t classed as emergencies.
    So these aren’t quite financial benefits for owning, but for my sanity? Hugely beneficial.

  9. Miss Money Box Miss Money Box May 9, 2017

    “…some landlord has decided to make his moneymoney tree shake harder” – that made me chuckle. Renting in Australia isn’t ideal. How wonderful would it be if we had long term leases available to us like those in Europe? *Sigh*. Security is very important, and moving sux. I totally see your point.

  10. Wealthpedia Wealthpedia May 20, 2017

    We all need home for security of our family. Can’t ignore the fact that it’s an essential thing for everyone and a dream of all

  11. Wealthpedia Wealthpedia May 20, 2017

    Home is a “want” not desire

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