To rent, or not to rent – that is the question. You’ve made the decision to be your own boss, but now you’re in a dilemma whether to rent or buy a home of your own. It would be great to have a property to your name, but can you really afford it in the long run? Buying a property will likely be the biggest and most important investment you’ve ever made. That’s why you should take your time and weigh your options carefully. You need to consider the advantages and disadvantages of buying vs renting a home before making such a big call.
The bright side of renting
If you rent, you can easily change your location and move to another home when the situation in your life demands changes. Your current address will not prevent you from taking a lucrative job offer in another city. If you want to be close to your elderly parents for a while, you can move to their neighborhood and stay as much as it takes. Flexibility is one of the greatest assets of renting. Even if your cash flow changes for worse, you will not be stranded. You can always opt for a cheaper home.
Maintenance is not your worry
You don’t have to bother about a leaky roof! If you’re a tenant, you can relax about common maintenance issues because they are the responsibility of the landlord. A clogged or running toilet, the lack of heat or hot water, air conditioning out of order – you name it. The list is endless and dealing with these issues can really make your life miserable sometimes. But if you’re a tenant, all you need to do is pick up your phone and call the landlord.
No risk of market changes
When you buy a house or an apartment, you never know whether the value of the property would increase or decrease over time. Some locations become more desirable and some rapidly lose value. The changes in the housing market are out of your control. However, you won’t be affected by these changes if you decide to rent rather than buy. It gives you stability and peace of mind.
Advantages of buying a home
Freedom of choice
It’s your property and you can do whatever you like with it. You have the freedom to renovate and adapt the place to suit your needs. If you want to have a disco ball lamp in the middle of your living room, so be it! As a tenant, you have to abide by the rules of a lease agreement, but if you own the place, there are no restrictions whatsoever. In addition, it’s up to you to decide whether to entrust someone with cleaning and organizing or do everything by yourself.
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.
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.