Are you one of those people who are trying to decide whether to rent a house or buy one? This can be a difficult question to answer; especially if you need to make the decision soon. Oftentimes, this question is faced by those who are transferring to a new place. This can also be a question for soon-to-be-married or even newly-married couples.
Here’s a fact that people need to understand when it comes to homeownership. To some people, renting a home is a lifestyle choice, while for others; it is the only option available to them. Then some consider buying a home a good investment.
When it comes to homeownership, both renting and buying have their advantages and disadvantages. Let’s look at the advantages and disadvantages of both:
Benefits of Renting
Renting is best suited for those people who do not have the means yet to buy a house. Renting is a lot cheaper than a mortgage, and so this is the best option for those who are not yet financially prepared to pay for costly mortgages.
One of the advantages of renting over buying a home when your income is still meager is that you’re not burdened yet with a home loan debt or mortgage. This means fewer worries of mounting interest charges in the event you fail to pay your mortgage on time.
Renting is also flexible and is ideal for short-term commitments. So if you are a young professional and changing jobs is something that you expect to happen anytime, then renting is perfect for your lifestyle. Normally, when renting, you only need to give your landlord a month’s notice, and then you can move out.
Renting is uncomplicated. For problems regarding the property being rented, it is the landlord who is responsible, not you as the renter or the tenant.
Renting is also about your chosen or preferred lifestyle. You may be able to afford a much better house when renting than you can afford it if you will buy it.
Drawbacks of Renting a Home
A lot of things can go wrong when you are renting, and this can cause a lot of stress on your part. For one, expect that you do not have control over the rate of the rent. So when the rate goes up, you have a very limited choice: you either pay or you transfer or look for another place.
Then, there’s the possibility that you can be evicted. One of the hardest things to deal with is when landlords decide not to renew a lease, and you end up scrambling for a new place to rent. Although the landlord is obliged to inform you about this decision months before, to allow you to look for another place to stay, still it can cause undue stress on your part as a tenant.
As a tenant, you also have no control over making changes to the property you are renting. So there’s not much you can do about wanting to change things in the home you’re currently occupying.
Benefits of Buying a Home
When you own the home you are living in, you can avoid the troubles associated with renting: no visits from the landlord, no need to renew a lease every 12 months or so, no need to see the landlord report things that need repairs or replacements, plus a lot of other things.
Many people, especially those who are about to reach retirement age, anticipate owning their own home so that things will be easier for them when they retire.
So, when deciding which is best for you, evaluate your personal goals, preferences, and financial circumstances. Make an informed decision and your choice will always be the best.
Buying vs. Renting: 5 Tips to Help You Decide
Homeownership used to be a necessity several decades ago. The plan used to be so simple: graduate from college, find a job, buy a house. A simple plan for a simpler time. Today, there are many more possibilities and the notion of renting a home is not as farfetched as before. These tips are meant to serve as a guide for you to decide whether renting or buying is right for you.
1. It all depends on whether you’re in it for the short term or the long haul
Buying a house and then selling it again after just a few years will burn a hole in your pocket. Some may argue that they will only sell when the market is in their favor, but if that’s easy to do, all of us would be real estate moguls.
As a rule of thumb, buying is better than renting if you’re planning on keeping your home for five years or more. The New York Times calculated that you could potentially save $10,460 – an average of $1,743 per year that you stay.
2. The nature of your work is a big deciding factor
If you need to be flexible, there is really no other option than to rent. You could be asked to move when the housing market is down and be forced to absorb any loss. Also, houses take time to sell even when the economy is good.
Having your money tied up to your old house will limit the amount you can put as a down payment and increase any financing expenses in your new home. You are spared from these problems when you opt to rent. You gain mobility and you can relocate as often, quickly, and as painlessly as needed.
3. Do you have a business?
Owning something outright is not as trouble-free as it seems. Plunking down a huge sum of money on a home may leave your bank account dry when a business opportunity opens up. When faced with this scenario, you have the added challenge of juggling whatever free money you do have.
You also have to consider upkeep and taxes when you decide to buy. When you rent, you get to free up a large part of your money to be used as capital for your business. Consider your priorities and go from there.
4. There are things that you simply can’t buy
Credit card ad holds even in real estate. Many office spaces and production facilities are rented for this specific reason. Most prime locations are not for sale and their owners rent them out to businesses because of all the traffic they get.
You can buy a remote lot out in the middle of nowhere and put up your business there, but that’s hardly a sound decision. This is also true with some types of jobs and the need to be located close to them. The thing with renting a place close to work is that you have to go where the money is.
5. Consider the intangibles
Buying or renting a house is not all about making a sound financial decision. You should also consider highly subjective factors. Moving is very stressful for children. Leaving friends and familiar surroundings to move to a strange new place where they don’t know anybody can severely affect their wellbeing.
There are times when the monetary gains are not worth the stress you get from moving. Maybe you have settled down quite comfortably in a nice neighborhood and not even a promotion can get you to leave. Perhaps the wise decision, in this case, is to stay put and just commute to work.
Make Your Own Final Decision
When faced with the dilemma of having to choose between renting or buying, there is really no clear-cut answer. Instead, you must weigh all your options to know what’s going to be right for you.
Priorities can change and your plans could be rendered obsolete overnight. Stability is nice to have, but so is mobility and flexibility. Only you can put one higher than the other, and only you can make the final decision.
Buying or Renting an Apartment: Which is the Better Choice?
If you live and work in the city, should you buy or rent an apartment? Buying allows you to have a place to call your own while renting gives you the flexibility to transfer if a particular location is no longer appealing.
Choosing between the two options will depend on your current financial situation, what your current career situation is, and what your priorities are.
This guide will assist you in evaluating the pros and cons of apartment rental or ownership and which one would be the best for you.
Why Renting an Apartment is a Good Idea?
The following are the reasons why renting an apartment is an ideal choice to make:
One of the advantages of renting an apartment through sites like Property Guru is the amount of flexibility it gives you.
Yes, purchasing an apartment does give you a sense of security and stability, but what happens if your company relocates you to another part of the city, or even to another region in the country?
You could tell them no and jeopardize the possibility of getting a promotion, or you can agree and find yourself having to pay for an apartment that you are not using. It is due to instances like this that renting seems to be more advantageous for people that are still in the early stages of their careers.
If you are just renting a unit, it wouldn’t matter if your company decides to relocate you, since you can just give sufficient notice to your landlord and transfer to another apartment. There are also instances where you may want to resign and transfer to another company that is offering you a higher salary and a better position.
Do you believe that staying with your old company, just because your apartment is closer to their office, is the right decision to make?
Of course not! You need to advance your career via whatever method possible. Instances like this show that flexibility trumps stability for young professionals that are still in the early days of their career.
If you are a new hire at a company or are still at the beginning of your career, renting an apartment is far more affordable than buying one.
Yes, people state that you should start investing in purchasing an apartment as early as possible due to rising home prices; however, the problem with this idea is that you are making a long-term purchase based on a small income. As you get promoted within your company, your salary is going to increase which will enable you to make larger purchases.
Starting the purchasing process at the beginning of a career could be a foolish and premature decision, you will be stuck making payments on a small apartment when you could have gotten a much larger one.
There is also the matter of how much of your salary will go into paying for an apartment per month. If you are just renting, the payments are much smaller which enables you to utilize the excess cash towards other pursuits such as taking a vacation or investing in stocks.
Why Buying an Apartment is a Good Idea?
The following are the reasons why buying an apartment is an ideal choice to make:
Peace of Mind
The good thing about taking out a long-term loan to pay for an apartment while you are still young is that after 10 to 15 years, the apartment should be fully paid off.
The only bills you would need to worry about are your utility bills and association dues which are much cheaper than the monthly rent that you used to pay. Having a place to call your own also gives you peace of mind since, in case you are ever in an accident, you could take a few weeks of non-paid leave to get better without having to worry about paying the rent.
Long Term Investment
Owning an apartment is also an excellent long-term investment since you can rent it out for the first 10 to 15 years of its economic life and then you can sell it at a later date for a much higher price than what you paid for it.
The rental income would help to pay for the monthly loan payments while the proceeds from the sale of the apartment could go into your retirement fund. You could even choose to rent out the apartment fort he entirety of its economic life and live off the rental income that it generates.
Choosing between renting or owning an apartment is all about where your priorities are. Either choice has its pros and cons that need to be considered carefully before committing to them.
In the end, choose based using your financial capability and what other people say you should do. If you can’t afford to buy an apartment, then you should definitely not do so.
What do You need to Avoid?
If you’ve saved some money and want to put it into a rental property, excellent! Real estate can be a very profitable investment, and renting out a property is a great way to get a consistent income stream separate from your career, which can lead to more savings, a more comfortable lifestyle, and even early retirement.
Before you purchase a rental property, however, there are several things you need to avoid to ensure that you’re getting a good property that will make you money instead of sucking you dry.
High Property Cost, Low Rents
Before you purchase a rental property, you need to carefully research the area and find out how much houses cost and how much they rent for. Not all locations are created equal, and purchasing in some areas will lose you money.
To figure out profitability, look at how much the property will cost you per month if you get a traditional 30-year mortgage after 20 percent down, including taxes and insurance (if you’re purchasing the house without a mortgage or using a different formula, this information can still be useful just to look at your return on investment). Compare this amount to current rents.
You can’t just look at those two numbers to ensure that you’ll be making money, though. You also have to account for vacancies, property management (if you aren’t taking care of it yourself), and repairs.
If your monthly mortgage cost is half of the current rents, you’re safely prepared for all additional costs, according to conservative estimates. As the gap closes, you’re putting yourself more at risk.
Too Much Damage
A good way to make a property more profitable is to purchase one with some damage and fix it, raising the amount of rent you can get for it and improving its selling price when you eventually sell it.
However, these bring up-front costs, which you’ll need to pay for out-of-pocket, and if you want to leverage your money, property damage can make it difficult or impossible to get a mortgage.
Before you put on offer on a house with a large amount of damage, ensure that you can pay for the necessary fixes and all costs until you can get it rented and start reaping the rewards.
In almost every area, some locations are considered to be better than others, and these areas usually come with higher rental demand, which leads to higher rents and a larger pool of tenants.
If you have multiple tenants to choose from, you can be pickier and get someone that has better credit and good rental history, meaning they will be much more likely to pay their rent on time and consistently. A bad tenant can cost you more money and time than you might imagine.
Dangers to Tenants
Certain property problems can cause tenant injuries, and you want to avoid these as much as possible to keep you out of court. Check that the concrete doesn’t have any large uneven cracks – ones caused by tree roots can get worse over time and should be avoided – any cellars or other dark areas have proper lighting, all stairways have handrails, etc.
It’s also a good idea to avoid properties with pools, even if they’re properly fenced since they’re expensive to keep nice during tenant turnover and can be a huge liability risk. You can’t guarantee that you won’t get sued, but you can definitely minimize the chances by choosing a property that doesn’t have these types of dangers.
Rental properties can be incredibly profitable and great investments, but you need to know what to look for and choose the right property that will get you a great return on your money and will provide a solid income stream for as long as you have it.
Top Ways to Save Money On Your Rent
Your rent is likely your biggest monthly expense. It can be double or even more what you pay on bills so finding ways to save money when trying to live more affordably. This process begins before you even choose a home to live in and it is worth considering the full range of options considered below when trying to find affordable rent.
If you’re looking to move and want to make a saving on your rent, ensure you dedicate enough time to shopping around. There are plenty of fantastic websites dedicated to your property search and you can also visit your local estate agents and see what they have to offer. Not giving yourself enough time means you may settle for something that costs more than you were hoping to spend and you end up putting yourself in a difficult financial position.
If you’re looking to save cash in any area of your life, budgeting is essential. Set yourself a realistic top budget for your rent and don’t go over it. Even if you see your dream home, don’t consider a viewing if it isn’t within your budget limits as you don’t need the temptation. Stick fully to the figure you allow yourself to go to and where possible try and stay a few pounds below it, giving yourself an extra saving.
For many people, budgeting is very difficult, either because of financial difficulty or unexpected outgoings. Bank loans and overdrafts can ease these worries, yet those with poor credit ratings or who have limited timeframes, short term or payday loans may be a suitable option.
Many landlords and agencies are willing to accept a reduced monthly rental amount if you sign a longer lease. Standard leases tend to be 6 months to 1 year but if you’re willing to commit for longer you may be able to negotiate down when it comes to your monthly rental. This is also possible if you can pay extra upfront in advance.
There is still scope for haggling on the modern housing market. Although agencies advertise a set price they can go back to landlords with any offer you make, just like they could do the same for someone purchasing a home. Essentially it’s their job to shift the properties as quickly and efficiently as they can and so they should take into account any sensible offer made by a potential tenant.
Check Out The Area
If you check out the area local to your new home you might find other ways to save cash. For example, if you rent an apartment on private grounds which require you to pay for a parking permit, scout the local area for cheaper parking alternatives. If you currently live quite far from your workplace so need to pay to commute or for petrol to get to the office, consider moving closer and saving on that expense. Small changes can make all the difference.
You shouldn’t sacrifice the quality of your home for value but you should think about how you can make your biggest monthly expense more affordable. Following these simple tips could be the first step to ensuring your next home is much more affordable than your current one.