Choosing to buy or rent, is a major decision that every individual has to make which can affects your financial health, personal goals, and lifestyle. Whichever option you choose in is determined by your budget, the number of people that will live with you, and the geographical area you wish to live in.
Apart from it telling on your finances either positively or negatively, there are other pros and cons that make owning and renting a property distinctly different. Renting a property doesn’t come with all the responsibilities associated with home ownership and you have more flexibility, as you aren’t necessarily tied down to your property. Owning your home gives you a sizeable investment, but it does come at a big cost — both upfront and over the long run.
What’s the right answer? The good news is that the answer is up to you. To make that right choice, take a look at the following factors to consider.
1. How Are My Finances?
If you do not have a strong knowledge of your financial position before pursuing a loan to buy a house, then you are going to have a less-than-ideal experience.
Points out that if a house is listed at a good price, that’s immaterial compared to your own finances.
2. Is This the Right Time to Buy a House?
Do you feel pressure to buy a house? Likewise, you also don’t want to get caught up in the idea that right now is the time to buy a house because you’ve reached a certain age or stage of life, and if you don’t buy a house now, you’re somehow failing in life. It’s an easy mind game to play. Maybe you’re getting married soon and feel like you and your spouse are better suited for a house. Maybe you’re hitting a certain age, like 30 or 40, and you feel like you should be living somewhere that has a white picket fence.
What Are the Pros and Cons of Owning vs. Renting?
The pros of owning a house are generally:
1. More space.
2. More freedom to do what you want, without criticism from a neighbor or your landlord, like being able to remodel the kitchen.
3. It is an investment. You will not make money on your rental payments. After years, you probably will on those house payments.
The cons of owning a house are generally:
1. A lot of maintenance costs.
2. Property taxes.
3. Once you move into a home, unless you keep it sparsely furnished or move into a really small home, you will accumulate things. Thus, moving becomes harder – plus, you generally need to sell the home before you move.
There are two perspectives from which you can look at renting and buying of property. They are the buyers’ perspective and the seller’s perspective.
Buyers’ Perspective:
Renting a house offers flexibility and little responsibilities because the cost of maintenance would be avoided, although purchasing a property would mean that you would accumulate a larger net worth
over time. If your work also requires that you travel and move around a lot, the flexibility that renting offers would be an advantage. Another advantage of renting an apartment is that you know exactly what your monthly or yearly cost for rent is and will usually not have to spend anything else in the apartment.
On the other hand, owning a home could mean that you will have to pay for unexpected and expensive repairs now and then. Also, there is a myth that paying monthly or yearly rent is a waste of money, as they may not be aware that owning a house could be more expensive than initially anticipated.
Owning a home has benefits like the pride that comes from owning a house, a sense of stability, and being part of a community. Conversely, if you are renting a home, stability is not guaranteed and if the
rent is increased such that you are unable to pay for it again, you may have to leave that home before initially intended. Even though you can build wealth by owning a house, it must be noted that it is possible for your house to also lose value over the years. This could be caused by a significant migration of the population away from the area due to work interests or an increase in the number of residential buildings around which would lead to lower prices. If you try to move after owning a house, it
becomes difficult and also more expensive. Some costs that you will incur as a homeowner depending on where you live include insurance, pest control, water (well or bore-hole), repairs and maintenance, etc.
Sellers’ perspective: Leasing out or just keeping it for it to appreciate.
A rise in the market values of the vicinity around the land/property you own can also lead to an appreciation in the market value of your property. Nigeria’s real estate market value has seen its fair share of growth in the last 5 years, which makes this a lucrative opportunity for investors. The increase in the value of the property is only realized after it is sold and this takes a while in some instances.
Rent on the other hand will bring in regular income and the value of your property could also increase simultaneously.
After considering the costs of renting and the costs of buying, you may discover that you are financially better off if you rent a place than if you buy a house, or discover that it is better if you own your own house. You can also do your calculations to find out whether or not it makes sense for you to rent or buy by comparing your estimated total cost of renting to your estimated total cost of ownership
Additional Points
· Whether you choose to rent or buy your
home depends on your financial situation, lifestyle, and personal goals.
· Both provide you with a place to live
and require regular income in order to make the payments.
· Renting offers flexibility, predictable
monthly expenses, and someone to handle repairs.
· Home ownership brings intangible
benefits, such as a sense of stability and pride of ownership, along with the
tangible ones of tax deductions and equity.
· Renting doesn’t mean you’re throwing away
money every month, and owning doesn’t always help you build wealth in the long
run.
