I saw a post the other day which was basically the old Rent Vs Buy question, or is renting and investing the difference better than paying off a mortgage? I’ve done a lot of in depth financial modeling on this subject and the answer I’ve found is….. it depends! I’ve developed a spreadsheet that can help you to determine if it’s the right strategy for you. It basically calculates the difference between buying using a 100% loan and an installment gearing strategy with a 50% LVR. The reason most people will be better off purchasing a house from day 1 via a mortgage is that it is forced savings, it has to be paid each month or you’re out on your a**. Savings on the other hand can be postponed, reduced or used to pay bills, buy a car etc, etc. Savings are much harder to maintain and can be very tempting to spend! To determine if renting and investing the difference is the right strategy for you, simply plug in how much you would need to borrow to buy the house of your dreams and the other details about how much you pay in rent per week, into my spreadsheet and you’ll get an answer. You have to fight fire with fire when investing the difference. You have to invest into a growth asset that will perform just as well as property and you have to use the power of gearing. Generally the closer the gap between rent and mortgage repayments the better you are buying. Please have a play around with it and see what you come up with. You can alter the fields in Green, the rest is protected (there’s no password so you can unprotect it). Please note it won’t be 100% accurate and the assumption on growth rates can be changed to suit your view on property and shares. I don’t want to start another property vs shares thread!