Buying vs Renting a Home

It’s a good investment

Having a property to your name allows you to generate extra income. If you work out a solid financial plan, you can buy to rent. You need to figure out whether renting covers the rate of your loan and whether you can live at another location and stay within the budget. If everything fits in, you made a great investment in the future. Eventually, you’ll own the property and you can never do that if you rent all your life. Just make sure to make a good moving plan so that everything could go smooth.

Security

You have an asset of great value to your name. This means you can take a loan if you need to start a business or finance something very important. In case of emergency, you don’t need to beg your friends and relatives to lend you the money. The bank will grant you a loan in the amount you need when you have a collateral of such value to guarantee the repayment.

Upgrade and resell

Freedom of choice also means you can alter the property and resell it for a better price. Once again, you need a solid financial plan to show whether the renovation will be worthwhile. However, the value of the location itself may increase over time and you don’t need to invest any further money to generate income. You can speculate a bit and, if you’re lucky and wise enough, you may turn it into a lucrative business.

Circumstances that decide whether to rent or buy

The dilemma between buying vs renting a home is not something above your head. There are circumstances in your life that decide which option would be financially most rewarding. Are you planning to pack your belongings and move soon? Is your monthly income secure? Can you afford to take a loan?

• Local market. If properties in the local market have a tendency to gain in value, it would be good to own a property in the neighborhood. However, if the market changes a lot and home value decreases, maybe you shouldn’t take the risk.
• Current income. Depending on your line of work and cash flow, you can calculate how much to put aside for housing purposes. Economists say that housing costs should take no more than 30% of your overall budget. If the costs of buying or renting exceed the amount, rethink your options. If you have troubles calculating your budget, there are online calculators to help you out.
• Loan rates. Loan rates change and depend on the location, market, politics and what not. But if the rates are low at the moment when you decide whether to rent or buy, taking a loan to buy your own home may turn out to be cheaper in the long run. If the monthly amount you need to set aside for rental exceeds the rate, it’s definitely better to buy.
• How long you plan to stay. There are online calculators for this purpose as well. Depending on how long you plan to stay in a home of your choice, you can easily calculate which option is cheaper. According to the statistics in general, if you spend four to five years living in the same apartment, you’re wasting money renting it. However, it also depends on the location and prices in your neighborhood. Some neighborhoods hold very high prices and you need to spend as many as 10 years to make the purchase worthwhile.