To Buy a Home or Rent a Home
An age old question for real estate investors is: Do I buy my own home to live in, or do I rent a home?
There is no right or wrong answer to this question, it is more a matter of where you are in your life and what your financial goals are.
Depending on where you live and the current state of the property market, renting can be a cheaper short term option.
Renting is very suited to the younger generation as they are just starting out in their careers and haven’t had time to save for house deposit.
Ultimately, most people will have rented at some stage in their life and will be owner occupiers in other stages of their lives.
Even long-time owner occupiers of houses and units will find short term house rental beneficial, when they want to move to a different location or upsize/downsize their properties.
Pros and Cons of Renting
Pros
- Low commitment: A small rental bond and 3 to 6 month lease signup are the normal requirements for getting into a rental home.
Renting is normally cheaper in capital cities compared to buying. - You can live near where you work, and if you have to move around for your job, it’s an easier transition.
- If your income goes up, you can upgrade your property without much hassle.
- The landlord is responsible for the maintenance of the property. This is a great advantage for alot of people who do not want to spend their time doing maintenance chores or who are not physically capable.
Cons
- Regular inspections mean you have to keep the property to a certain standard of cleanliness and repair which means living to other peoples standards and not your own.
- You do not receive any capital growth as you do not own the property (and therefore not building equity for further investments).
- The landlord can sell the property out from under you, potentially forcing you to move when you don’t want to.
- Rents almost always go up on a regular basis (such as every 6 to 12 months).
Pros and Cons of Owning
Pros
- It’s your house so you can do as you want with it (within local council restrictions).
- You should receive capital appreciation over the years which builds equity for further investment.
- If interest rates go down, so do your monthly repayments (assuming you have a mortgage with a variable interest rate).
- Over a longer period of time, your income tends to go up due to inflation, yet your mortgage repayments remain roughly the same. This means it is easier to make further repayments or more money to spend on other things.
Cons
- There is a certain level of maintenance involved in living and owning a property. A unit or townhouse will normally be less hassle than a house.
- Every 5 to 10 years may have some larger expenses such as replacing a hot water system, repainting, fixing plumbing, replacing carpet and upgrading fencing.
- Mortgage repayments can easily take 20 to 30% of your gross income. After paying income tax, you might find it difficult to live on your remaining money. This will depend on the ratio of your income to the level of debt you have taken on.
- Most mortgages are 25 to 30 years in length which can be seen as a negative that you are committed to something for that long, but it can also be seen as a positive in the fact that at the end of the term, you will never have to pay for your shelter again.
As you can see there are advantages and disadvantages to renting and buying a house.
Now you can apply these to your own situation and make an informed decision as to whether you should rent or buy.
I agree, renting is usually cheaper in major cities compared to buying.
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Hey superb article. Well according to me, renting a house is better and best alternative compared to buying a house. To rent a home is very affordable option from financial point of view.
Owning a home that is going to maintain it’s value or increase in value is the ideal situation. But, in today’s economy, if you don’t already own your own home, you are probably better off renting a home. I still see home property values decreasing in many areas of the country and I think most people would be better off to wait a bit longer.
There are 2 estimations. One is if you are a worker then renting a house is better and best alternative but if you are a business man then buying a Home is the affordable option as per the financial point of view. Thanks
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I live in Ukraine, at the capital of it, Kiev city. Real estate property here is way too expensive, starting at $1000 per square meter. In contrast, you can buy a good piece of land in a distant village for as little as $5000. I was lucky with the place to live, so my strategy is to move to the middle of nowhere, set up all the services i need there and live happily ever after
Renting or buying is somehow depends on the place. However, I find your article very useful for those people who are still skeptical whether to rent or buy a house. Thanks for the share.
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Renting can be an advantage for those who want to have saving for other expenses, but on the other hand it can be better to have a property you can call “your own”. This kind of issue can vary to every state if it is more practical to rent than to buy and you aim to settle in an area for short term period then renting can be the most appropriate.
Great Day!
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If this matter will be brought to a debate, I’d rather stay on the side of buying a home. Buying is still a wise decision especially when you got a stable job, better credit and for the most part, capable of working as hard as you can. Why not do things as early as possible? If you’re wondering about being moved to another place because of the nature of your job, then simply leave it to a family member or the best thing to do is to rent it out. It’s another source of income, right? There is what they call rent ratio before purchasing a house. This idea works like: when the result shows that the ratio is above 20, then you better rent whereas below 20 ratio means that buying a home is favorable.
I hope it helps. Great article!
Nice write up.
The way the market is these days, I think it is personally better to rent than buy.
You put together a nice pros and cons list.
Renting you are only obligated by a lease, and you can change residency anytime. Buy a home, you are pretty much stuck there. I like to move around.
Nice post, also i agree with the comment over : “Buying is still a wise decision especially when you got a stable job”…
But in these days of crisis… ouch…
Whenever our requirement are big then we need a big house if you are not a bachelor then you should buy a home otherwise you can live as tenants. When you are tenants, you have to compromise many things which are regular inspections of property as in the article and other advantages and disadvantages written in the article.
The way it was explained to me was whether I’d be able to afford buying a home or renting it. It’s important to calculate your costs and compare them. It also helps if you have an idea of what your next 5 years are going to look like. If you’re planning on living somewhere for more than 5 years, buying a home might be worth the investment.
I tend to favor home ownership when the location fits with where the job or career is located; and the home itself is reasonably affordable. If an owner can pay off the mortgage faster than 30 years, all the better.
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If were to ask, I would prefer to buy my own house. Renting is good but you cannot expect to do renting in your whole life. Renting for me is temporary. We rent houses and apartments because we are not yet prepared to settle down. As what you have said, renting is for the younger generation and to those who are just starting up for their career. When I was in college, I used to rent an apartment but now that I have a job, I decided to buy a house for myself.
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I think this is a good time to buy a home given market conditions and prices. In Arizona homes are less than 50% of their 2006 market value is almost all neighborhoods. I liked your pros and cons list.
From what I have experience, renting and owning a house has their own pros and cons, same as what is being cited here. However, in my opinion, owning or buying a house is more practical than renting. When you rent a house, you are paying for it, but no matter how long you pay while staying there, it would still not be yours. If you buy a house, paying the mortgage already makes you the owner of the property.
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Very well written! Both renting and buying have their own pros and cons, but to me renting is better from a financial point-of-view.
Good pros and cons list. Honestly I would be glad to experience them both. Ofcourse buying a home requires financial stability, and renting allows you to move around easely, but in the end I would go with buying a home and living by my own standards.
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Hey great article as i was thinking of renting a house that i have in another country looking at the pros and cons i think i will be doing the right thing. Thanks for helping me make a desion.
I have recently had many conversations with rent vs. own being the topic. Here in Utah there are many places where a mortgage payment can actually be cheaper than a rent payment and get you more house still. Of course there are other benefits to renting as have been discussed…
I agree that renting is cheaper, but in the long run owning helps you build equity instead of just throwing that money away. It depends on your circumstance I guess.
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In my opinion, buying a home is better than a home at rent because you can modify your house when you want. You will never face landlords interference. And there are so many things those makes you comfortable in your own house.
This is a good discussion in citing the pros and cons on which to prefer. But personally, I find owning more convenient. You may have a lot of expenses at first, but this will provide you security than renting, the landlord may lease your house unpredictably.