Buying vs. Renting: Which One is For You?
Buying Property or Renting Property: Which One is right for you?
It’s just about anyone’s dream to have a place they can call home. In the traditional sense, that would be a place in your name – a place that you have bought.
Due a number of factors, however, renting a home has become as common as owning a home. There will come a time when you have to decide between the two.
This could be at the start of a marriage, with the birth of a child or when you’ve come in to a bit of money. Before you make your decision, however, you have to weigh up the pros and cons of each carefully in order to choose the right one. Each will affect your finances and lifestyle in a different way.
Financial factors
Renting: Standard leases are set for a year, with the rent fixed for this period of time as well. This means your rent won’t go up, which enables you to project your finances more accurately for 12 months. This is a substantial amount of time. You could also strike it lucky and pay very little for a property that would’ve been costly to buy.
Another bonus is the fact that you are not liable for the costs of maintenance, or at least shouldn’t be. This is the general rule, but there is always the exception the rule of course.
On the downside, you are essentially making someone else rich by paying off their bond.
This strategy yields no returns for you whatsoever, and is a huge money waster if you continue to do it for your entire lifetime.
Buying: When you buy a property, the reverse of the last point above takes place – you’re putting money into something that will become an asset and, if you sell it a profit, bring about a return on investment. Even if you don’t want to sell the house or flat, you can still make money from it by renting it to someone else. This could either help pay off the bond, or if it’s already paid off, create a nest egg for your retirement years.
You do incur a lot of costs though when you buy a home. There are all the initial costs, like transfer fees and taking out home loans, and then there are also ongoing costs, like rates and taxes and maintenance of the property. At some stage, you’ll also want to make improvements to the home to either make it more liveable to increase the resale value. These generally don’t come cheap, whether it’s just new tiles for the bathroom or redoing the carpets in every room.
Lifestyle implications
Renting: The biggest plus to renting is the flexibility it offers. If you decide you don’t want to live in an area anymore, you can move – you’re not tied down. You also have limited responsibilities, aside from making sure that the place stays in a good condition.
Renting is not that great though if you’re looking for a place to put your own stamp on. Home owners, by and large, are very reluctant to let tenants make any alternations to their properties. This could mean that you live in a place that’s not 100% and if you want to make alternations, you have to always ask for permission first.
Buying: Owning a home is great, because as opposed to the situation described above, you have the freedom to with the property whatever you want to. No-one can stop you from putting shelves or digging up the garden! You can really create a place you call home.
But of course owning a home is a huge responsibility. You won’t have any landlord to call to help out, and you’ll have to find the time to do the garden and odd jobs around the home. You also won’t be able to move at a moment’s notice should it become necessary.
In a nutshell then, renting is for you if you want few responsibilities and the ability to stay wherever you want to. If you want stability and the freedom to do whatever you want for you house, buying is the correct decision. There really is no wrong or right here – it’s about what suits you and your lifestyle best.
Image attribution: Keoni Cabral
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