Over the years, the conversation has always favoured the "rent side" of the rent vs. buy argument. Most of the time, when the conversation comes up, people are quick to narrow down the conversation to the cost. While the cost is one of the essential factors to consider, it is not the only consideration in the rent vs. buy equation.
Interestingly, there is no one-size-fits-all answer to the rent vs. buy question. The best choice of the two plans depends on many factors. Some of these factors include lifestyle, plans, and many factors. In this article, we will discuss both options and the pros and cons of each.
Rent
Renting is the most prevalent housing option. However, many people see it as a temporary plan because you need to own the place you stay. In the view of most people, renting means you are missing out on building equity.
The CEO of Kovar Wealth Management, Taylor Kovar, made an important statement about renting properties. She says, "The cost of renting is sometimes seen as throwing money away, but people rarely talk about all the expenses that come with home ownership.”
There are several responsibilities you have no business with when you are renting a home. When renting, the landlord is responsible for the home insurance, maintenance costs, repairs, and associated taxes. Most of the time, these costs are usually factored into the rent, but the implication is that the landlord has to make this calculation ahead of time. Hence, when unexpected emergencies show up, it is the landlord's business to get it fixed.
On the other hand, renting an apartment places restrictions on you. Because you do not own the place, there is a limit to how many changes or improvements you can make to the apartment. First of all, whatever changes you make have to be within the confines of the access given to you by the landlord. If you stay in an apartment owned by a liberal landlord, you must consider how long you intend to stay in the house. This is because your changes will benefit the landlord when you move out. Hence, you want to be sure you'll enjoy the improvements for a while before leaving the apartment.
Pros of Renting
1. It has fewer upfront payments and paperwork.
2. Renting gives you the ability to be more flexible and mobile.
3. You are not responsible for tax or insurance on the property.
Cons of Renting.
1. The rent could be increased at any time.
2. You are confined to the design and structural choices of the landlord.
3. You might need to relocate on short notice if the landlord decides to lease or sell the house.
Buying a Property
As the word implies, buying a property means owning the place. You can refurbish, remodel and upgrade the home and its environs to suit your taste and desires. Additionally, you call the shots for whatever needs to be done and how it should be done.
However, buying a property/apartment is more complex than buying a pair of shoes. You should develop a list of property criteria, locations, and facilities you would love to have in your apartment. It would be best to search for credible sellers so you don't get duped. After getting credible sellers, you need to append your signature on much paperwork.
In the rent vs. buy equation, buying a property has a greater upfront cost. Often, this cost varies in different locations and could also be influenced by several factors. Factors influencing a property cost include the apartment's structures and facilities.
Buying a property is not a decision to make casually. It requires more commitment to finances, time, and labour. It also requires your ability to effectively project into the future to ascertain if the location fits your long-term goal.
Pros of Buying
1. You do not answer to any landlord.
2. It gives you more stability. There is no one to give you a quick notice to vacate the property.
3. You can improve and upgrade the home whenever you please.
Cons of Buying
1. You are responsible for the costs of repairs and remodeling.
2. It requires substantial money and lots of paperwork to get started.
3. You could lose your home during a natural disaster.
Rent Vs. Buy: Questions to Ask Yourself Before Making a Choice
You shouldn't just choose to rent or buy an apartment because of your statement of account. There are essential evaluations and considerations you need to factor in before making a decision. Without taking time, let's get started on questions you should ask before you rent or buy.
How Long Do I Plan to Stay Here?
This is a core question to ask yourself when considering renting or buying. If you cannot guarantee staying in your current location for over 3 years, you might be better off renting an apartment. This is because a house is an immobile asset. When it's time for you to move, the house won't move with you. Quite unfortunately, buildings and properties have a low liquidity rate. Hence, it may be difficult to sell it on short notice.
You should also factor in your job when answering how long you desire to stay. Renting may be an appropriate option if your job requires you to move from place to place within the short-term notice.
How Are Your Finances?
Considering your finances before choosing either side of the rent vs. buy equation is not out of place. None of the options come free, so your finances are crucial. It would help to evaluate which options your finances can comfortably accommodate. This will safeguard you from overburdening yourself with an accommodation plan you can't sustain.
What is the State of the Housing Market Where You Live?
The housing market does not operate on a generalized structure. Prices vary from place to place, and affordability depends on the geographical location in which you reside. Hence, the high prices in other parts of the country may not be your business. When seeking a housing option, it is best to conduct your research based on where you live. Consider the availability of houses, interest rates, housing regulations, and prices. If all these boxes are ticked, and you can buy, you could go for it.
What is Your Job Security and Satisfaction
Getting a house signifies a sense of permanence or stability in an area. Before getting an apartment, you want to be sure you are settled regarding your job. "How well do you love your job?" How sure are you about your continued employment? If you had to work this job till you were old, would you be fine with it? It would be best if you had answers to these questions before you decide to rent or buy an apartment.
Conclusion
You cannot solve the rent vs. buy argument with a generalized answer. Several metrics need to be considered before you make a decision. We have several other decision-making guides you could benefit from. You could check out our real estate vs. stocks and best real estate investment strategies.
