Rent Or Buy? – Solving This Dilemma With Conventional Wisdom

For a lot of people, the decision to rent is not a choice.

Many people do not feel financially safe enough to buy a house even when they know that mortgages are readily available.

Other than that, renters might not really have a good reason to settle down on a place to call home over the long term.

Well even if you have been renting all your life, surely there will come a time when you have to put serious thought into buying your own house.

It could be due to you making extra cash, marriage, a change in your perception of real estate and finances, a need to relocate, expecting arrival of babies, etc.

Whatever the reason, you are not alone.

In fact, the question of whether to rent or buy has been asked for ages.

People from all over the world have already went through the mental and emotional turmoil on their housing decisions.

And this is the wisdom anyone can learn from.

Advantages of home ownership

Many homeowners advocate buying your own home to save on rental, and pump that money which would have been used to pay rent into home equity.

But let’s take a closer look

Stability

You no longer have to worry about the prospect of your landlord attempting to renegotiate the tenancy agreement to increase rental again.

You now have to just pay your mortgage installments to keep the lenders off your back.

And you can have a degree of certainty of how much you have to pay monthly when you are on long term fixed rate mortgages.

Equity

One of the biggest factors turning renters into homeowners is home equity.

By owning your home, you would be able to profit from the property’s appreciation in value.

And as your outstanding mortgage get lower and lower from your recurring repayments, the bigger your equity grows.

Eventually, you will be able to cash out this equity as “profit” when you sell the house, or use this equity as cash flow via a home equity loan.

Personalization

In a rented home, you will have to live by the landlord’s rules and regulations. This might prevent you from customizing the place to your personal liking.

You won’t be able to paint the walls with your favorite color, you might not be able to hang up that piece of art you picked up at the flea market, you might not even be able to change your bedframe to a design you like.

As a renter, you can’t send in your own interior designers to beautify the place as it’s not really yours.

Buying your own home flips these restrictions upside down.

You now have the freedom to decorate and design your home to a place you really wanted to live in.

The more you customize it, the more it feels like home, and the more you won’t want to leave.

Advantages of renting

While it is without doubt that if you can choose to own or lease a house, the choice is the former. But that decision is really not that easy to make when real estate variables are taken into consideration.

No long term commitment

The biggest draw of renting is that you do not have to tie yourself down to a house or location.

You have the flexibility to relocate without the shackles of a mortgage bogging you down.

If you have a bad neighbor who you just can’t get along with, or you find that the amenities in the area is just not as accessible as you first imagined, you can move to another place with little emotional or financial baggage when your tenancy expires.

Lower cash out flow

In actuality, renting is much cheaper than owning a house.

A renter don’t have to stress himself out on property tax, homeowner’s insurance, repairs and maintenance, etc.

These are costs that are borne by a homeowner or landlord.

The key difference is that tenant does not own any equity in the house. This is offset from the lower cash out flow required.

This also indicates that if you are at a stage of your life where cash flow is more critical than equity, renting is the smarter thing to do.

Little to no responsibility. The best part about being a tenant is that you can throw every problem about the house to your landlord. You don’t have to worry about fixing the lights above the dining table, the leaking pipe below the dishwasher, the door knob that is refusing to turn, etc.

You can just dump all those problems and issues to your landlord. And he is expected to rectify them as soon as possible.

Failing which, you will have a little extra leverage when the time comes for tenancy renewal.

The major points that we have discussed above are all about numbers. Since buying or renting a home is more than just about numbers, you need to ask yourself some serious questions to determine what exactly would be most suitable for you. These are some key questions to answer.

How long do you intend to stay?

It makes perfect sense that the longer you intend to stay at one place, the more sense it makes to buy instead of rent.

Because when you are staying put, you might as well make the most of it by building up the equity.

Even if you move out in future, the equity will help you laugh all the way to the bank.

What do you intend to do with the savings when renting?

If you have already decided to rent, you need to ask yourself what you are going to do with the saved money.

If all that money is going to just sit around doing nothing, you might be better off letting them appreciate by buying a house.

Certificates of deposits, stocks, treasury bonds, etc, are common places people put their excess cash.

These investment vehicles also have their risks. So risk-adverse consumers might still let their reservations prevent them from investing in them.

If that is the case, why not put them into the safest investment there is – a house.

Are you ready to take responsibility for a house?

Maintaining a house is not a walk in the park.

You should only buy one when you are ready to assume responsibility in maintaining it.

Being lazy and leaving repairs unfixed could cause safety hazards to your family.

Other than that, you will have to start paying a number of bills on time. The costs of home ownership is no simple matter.

These include utility bills, cable subscriptions, appliance replacements, plumbing repairs, furniture and fittings, taxes, insurance, etc.

Ultimately, don’t buy or rent a house for the wrong reasons.

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