Rent or Buy in HOT MARKET?

Question

Hello everyone,

I am a newbie investor - I am just about to make my first investment decision and want to make it right - (of course!) so I can continue investing. My situation is as follows:

- I need to sort out my living situation so looking for a live in/investment property

- The city where I am going to move to is currently hot market so the property prices are high

- I have enough money saved up for a deposit so deciding whether to go into a rental or buy (this would be my 1st property in my portfolio)

- Ideally, I would like to get a property where I could increase its value by a small renovation to get some extra equity, however those properties are hard to find.

- Upon doing my numbers it works out that the monthly payment if I rent is very similar to what I would pay in mortgage repayments (20% down payment). If I buy, I am planning to rent out 1 room.

My question is SHOULD I BUY NOW despite the property prices being so high and risk that the property prices will eventually come down again (estimating 1-2 years time) or is renting a wiser option?

Any thoughts/advice would be much appreciated!

Irena

Irena Bilkova · Answer

Thank you Bear for your thoughts. Yes, I agree, if I can find a place where I can add value that'd be ideal. At this moment (based on my numbers I ran) I am more inclined to buying.

Barry H. · Answer

IRENA - As long as you are truly looking at this acquired property in the new city to be an investment (i.e. you are committed to moving OUT when it increases in value to where you can get some equity out of it), then buying it, renovating and having a roommate is a good decision because there is definitely (my opinion only) a couple more years of upward market in front of us.

Keep in mind, however, that if you intend to stay in that area AFTER you sell it, you are probably going to be renting and waiting for the market to cool.  IF/WHEN it cools, you can buy to live in it ....OR....rent and use your equity earned from your purchase to begin investing again.