The ‘Rent vs Buy?’ question is more relevant today than ever before with property prices favoring a buyers’ market, however, uncertainty remains among potential buyers around location hotspots, future return on investment, and short and long-term financial implications.
In this article, I will be discussing the pros and cons of Renting and Buying.
For prospective owners who wish to stop paying rent, it does depend on where the individual sits financially, but if they have adequate equity, it makes sense for them to contemplate paying their mortgage and look at real estate as a mid and long-term investment.
BUYING
Buying means to acquire possession, ownership, or rights to the use or services by payment, especially of money, buying land, purchasing a building, etc. Talking about buying land or a home, Homeownership brings both tangible and intangible benefits. Not only do you have your own home, you can make decisions about the look and design of the space, but you also get a sense of stability and pride of ownership.
Buying- Pros
- Opportunity To Build Equity
When you hear people talking about real estate and owning a home, one of the most popular words you’ll likely hear is equity.
“What is equity”
Equity in real estate is the probable market value of a home minus any liens against the property, such as a mortgage. One of the great advantages of home ownership is the opportunity to build equity.
- Long-term investment:
Whether you’re buying to live in the property or lease it, or even sell it, you are paying your mortgage towards a longer-term asset
- Opportunities:
Unlike renting, buying a property presents you with several opportunities that could generate plenty of revenue. Some homeowners now live off revenue generated by property leasing, offering them even more financial gain.
· Owning A Home Provides Tax Advantages
There aren’t many people who enjoy paying taxes but it is a necessary evil. A great benefit of owning a home are the tax advantages that it provides. Buyers who understand important real estate tax tips quickly realize that owning a home provides some solid tax advantages.
Arguably the biggest tax advantage of owning a home is the option to deduct paid monthly interest from your tax returns.
- Selecting a neighborhood to buy a home in is very important and is also one of the luxuries of owning a home. Buyers can pick where their home is located in proximity to their employer, what school district the home is located within, and many other location-based options.
Buying- Cons
- Fluctuating market:
Like any market, fluctuations can cause some financial losses if the owner is leasing the property or if the value decreases.
- Less mobility: If one of the advantages of homeownership is stability, that means it may take more thought to accept an attractive job offer requiring you to pick up and move to another city. The offset to this concern is the speed with which homes are selling.
RENTING
Rent means to regularly pay money to live in a house or room that belongs to someone else, or to use something that belongs to someone else.
The biggest myth about renting is that you’re throwing away money every month. This is not true. After all, you need a place to live, and that always costs money in one way or another. While it’s true that you aren’t building equity with monthly rent payments, not all of the costs of homeownership always go toward building equity.
When you rent, you know exactly your housing costs each month. This amount is indicated on your lease so you can plan accordingly. In some cases, your landlord may also include other costs within that amount, such as utilities.
RENTING- Pros
· Access to Amenities
Another financial benefit of renting is having access to amenities that would otherwise be an enormous expense. Luxuries such as an in-ground pool or a fitness center come standard at many midscale to upscale apartment complexes with no additional charge to tenants.
· Lower Insurance Costs
While homeowners need to maintain a homeowners insurance policy, the equivalent for renters is a renter’s insurance policy. This kind of policy is much cheaper and covers nearly everything owned, including furniture, computers, and valuables.
· Few Concerns About Decreasing Property Value
Property values go up and down. While this may affect homeowners in a big way, it affects renters substantially less, if at all. Your home value can impact the amount of property taxes you pay and the amount of your mortgage. In a rocky housing market, renters may not be as adversely affected as homeowners.
RENTING- Cons
- More long-term expenses:
Years of renting will build up significant outgoing costs with no tangible asset to show for at the end. By considering your longer-term plans and monthly rental payments, you can assess how much you will end up spending and make an informed decision that will best suit your financial needs. Since the recent decline of property processes seen across the region, many are now taking the opportunity to benefit from lower house prices rather than continuing to pay rent.
- No Equity
Monthly rent payments consist of money that is not being invested in long-term security nor is it building up savings. Homeownership, despite popular opinion, is an equitable long-term investment. Like any investment, it has risk, chiefly with the value of the property and house. You can take steps to increase the value of your home and property and decrease risk.
- Rent fee might go up annually
The owner of the rental property might do some remodeling every year and increase your rental payments accordingly.
- Bad landlord
Usually, all landlords are smiley and nice from the beginning and then later they might show their real faces. It is especially the case when a tenant rents an apartment in the same building as the owner. The more often a renter sees the property owner the more likely the occupant will have a conflict of interest with this person.
- The Cost of Renting
If you rent an apartment, you’ll have to make a monthly rent payment to your landlord for the privilege of living there. Unlike a mortgage payment, where you are gradually paying off a loan for the home you own and live in, this rent payment doesn’t buy you anything except the right to stay in the home for another month.
CONCLUSION
Owning a home can be beneficial for homeowners over the long run, due to the amount of equity they acquire in their home. Renters have nothing tangible to show for years of rental payments. However, renting might be a better option for those who want to avoid the hassles associated with homeownership, the costs of upkeep, and property taxes. Of course, it depends on an individual’s lifestyle, financial situation, and whether they’re working or in retirement.
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Investing in the real estate sector is interesting and rewarding. You can start small and grow your investments with time. You can buy land for personal building purposes or as an investment.
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