Considering whether to buy or rent the place you call home is a major life decision, with a number of considerations that need to be made when doing so. There are pros and cons when it comes to renting and when it comes to owning a house as well. Placing advantages and disadvantages alongside each other can help you to decide which carries more weight for you. For example, if you rent, you might have more money to spend at the end of the month, but if you own a home, you have a long-term investment.
Here’s a list of the major pros and cons for both renting and buying, to help you determine which best suits you:
Advantages of owning a home:
You are able to build equity over time (equity is ownership of an asset of value).
You have full creative freedom to decorate and renovate the house as you please.
Money spent on improvements can improve the value of your investment.
The value of your home will likely appreciate over time and when it comes to selling, you could make a profit.
There is the option of buying to rent, allowing you to generate income from your property.
There are possible tax reductions, especially if you work from home.
Ownership offers security and peace of mind in your place of residence.
Disadvantages of owning a home:
There are high upfront and recurring costs e.g. bond repayments, homeowners’ insurance that will likely leave you with less disposable income (especially in the short- to medium-term)
You are responsible for maintenance and repairs. And there is always something that needs to be maintained, including the roof, geysers, gas supplies, paintwork and more!
Interest rates may fluctuate and could negatively affect your cashflow when/ if they increase. Note: the current interest rate is at a 50-year low!
You have less mobility to move around and selling your home after a short amount of time could mean that you wouldn’t make a profit. You need to be prepared to settle, unless renting the property out is a viable option.
Advantages of renting:
You have more mobility and you are able to relocate at short notice, depending on the terms of your lease agreement.
Major repairs and renovations are the landlords’ responsibility, not yours.
There are lower upfront costs (usually just the damage deposit and a month’s rent in advance).
Buying a property is often a financial stretch that takes discipline; you are likely to have more disposable income for luxuries and unforeseen expenses.
You only have to insure your personal belongings, not the property.
Disadvantages of renting:
Being bound by the rules of the lease agreement, means you have little or no freedom to renovate the property, having to first consult the homeowner.
The owner and/or house rules control what is allowed and what is not e.g. number of visitors allowed at the property, whether you can operate a home-based business from the property etc.
You don’t get any long-term financial benefits (return on investment) from renting a property. You’re paying off someone else’s bond and not building your own equity.
You are not likely to get any return on money spent on improvements. At best, you may get your damage deposit back.
There will always be uncertainty, with no guarantee that a lease will be renewed when it expires. Your fate is in the hands of your landlord.
At the end of the day the decision whether to rent or buy depends on your needs and capabilities. However, homeownership is something to work towards. Property is a stable, long-term investment. There is also the peace of mind and pride that comes with owning your own home. It may be an important part of your legacy.
Contact a Just Property agent near you to explore your options. Find a branch here.