Renting or buying property are both weighted by pros and cons. It is important to note that the most financially viable option is best, so taking out a loan to purchase a home when you could wait a few years before buying it may not be the best choice. Here are some of the pros and cons of buying versus renting a property to help you make an informed decision on which is your best option at the present moment.
Renting a Property
Pros of Renting
- This is better for younger people who are not influenced by any dependants. By renting a property you are allowed more flexibility than when you own a home. If you decide to chase opportunities elsewhere, simply providing due notice of your departure is much simpler than selling a property or even renting it out as an owner. You will be done with it there and then and spread your wings ready to fly far away. You have no responsibility as a Homeowner or Landlord, so your job here is done.
- Being a tenant means you may reside in an area where you may not otherwise be able to afford to buy property. This means you reap the benefits of living in the area without paying the hefty price of owning property there.
- Your insurance costs only need to cover your property in the home. The property owner is accountable for any maintenance and the insurance thereof, like homeowners insurance.
- Once rent is paid the focus of a tenant’s finances can be put towards saving for a house rather than worrying about putting additional funds into the maintenance of the home or home loans.
Cons of Renting
- You will be bound by the lease agreement and the rules stimulated therein. This may mean anything from leaving pets behind or limits to changes you can make to the property.
- All changes, even putting a nail in the wall to hang a picture, need to be cleared by the Homeowner first, and if done without their consent you risk losing your deposit.
- Renting does not offer opportunities for return on investment and all the money paid by the tenant will go straight to the homeowner.
- Annual rental fluctuations are out of the tenants control and yearly inflation is a reality renters must be prepared to pay.
- In the case of an expired lease the homeowner may decide you are not the ideal tenant and choose to not renew the lease. Lease renewal is never guaranteed.
Buying a Property
Pros of Buying
- Investment in property is always a solid place to put your money. You have access to long term benefits as well as the potential for personal wealth growth.
- The value of a property appreciates over time, so you could potentially stand to gain a profit should you decide to sell in the right economic climate.
- You have none of the restrictions you would with a landlord because the property is legally yours. You may alter it as you see fit with anything from décor to landscaping changes and renovations.
- As a homeowner you can choose to lease your property and earn money from renting out the property, which can be put towards your home loan (or used as you see fit).
- Paying off your bond monthly, along with the fact that a large investment has been made in your name, will improve your credit score.
Cons of Buying
- Buying a property is a large and serious financial commitment. You are solely responsible for making bond payments and maintaining the property.
- There are costs that come with being a homeowner which include: rates and taxes, insurance and maintenance.
- There is no guarantee you will make a profit through your resale, if the location is less desirable than when you purchased it or the economy is going through a recession you stand to lose money.