Buying a house is indeed a luxurious dream of many of us but the question is whether it is preferable to purchase or rent a home? There are multiple factors that define a buyer’s journey of buying a house like their budget, location, time period of staying in the same city or the country, etc. If you’re struggling with buying vs renting a home, the following article will help you find the right answer, keep reading.
Choosing to buy or rent a house is one of the major life decisions that doesn’t only affect your financial health but also your lifestyle. Ownership in real estate is hype as a safe investment which is the foundation of tax deduction and builds equity. Whereas, renting a house also comes with plenty of advantages that include no responsibility and involvement in long procedures of purchasing a home.
The right answer of “should I rent or buy a condo” is totally based on several factors which are subjective to the buyer. If you’re confused between renting vs owning a home, read on to find your answer.
Difference between renting vs buying a home
The vital difference between buying vs renting a home is the ownership that builds equity, is a foundation to tax deduction, and influences your lifestyle. Think about it, real estate investment is the key that opens the door to constant cash flow. If you’re a small family or an individual living in a big home, you can rent the other portion to the renters and ensure a constant alternate earning method.
1. Rent Ratio
The ratio of property’s price to its rent per year. If the price of the house is 20x the annual rent price, then it is worth investing in the property.
2. Rental yield
If you have purchased a house and its rental value is lower than five percent per year of its actual value, then it is not at all worth investing in the property.
3. EMI value
If the EMI’s of your purchased property is more than thirty percent of your monthly income, then you shouldn’t think about taking out a loan to purchase a property.
Having your own home is a long and good investment but not everyone qualifies to purchase property since there’s a well-designed procedure to follow. If you still have doubts about “is it better to rent or buy a house”, let’s understand some pros and cons of both.
Advantages of Buying a home
1. A good Investment option
A property is an asset that has a higher chance of a rise in worth over time. so, you can consider buying a house as a big investment that comes with plenty of luxurious benefits like the freedom to sell it when the prices are high to make a profit. You can also rent it to tenants for regular side income.
When it comes to renting vs buying a home, it gives you a benefit which is “security”. A homeowner has the rights and freedom to sell it whether they want, make modifications to it and use it as a rental property.
Disadvantages of Buying a home
1. Upfront cost
While buying a home, the owners are needed to give a down payment that includes other charges such as stamp duty and registration.
2. Hard to move out
If you’re not a regular real estate investor then you will find it hard to move out of your house for any reason. For example, if you get a job in a different state or country, it would be hard for you to leave until you get a reliable buyer or at least a tenant.
3. Big Responsibility
Huge Expense is the other name of buying a house—from utility to property tax to maintenance cost to modification cost, it requires having a strong pocket.
Advantages of Renting a house
1. Easy to relocate
It’s easy for tenants to move out from a rented house since it is a short-term plan. So, if you’re someone who changes cities and countries often, it is best for you to rent a house instead of buying one.
2. Low upfront cost
When it comes to choosing the right option between buying vs renting a home, you should consider the upfront cost of both. While buying a house means a huge upfront cost, renting one only includes an advanced rent and security deposit. So, if you don’t have a big budget, renting a property is the right option for you.
3. little to zero responsibilities
As we’ve discussed already, buying a property requires you to take a big responsibility on your shoulder. On the other hand, renting one doesn’t seem to burden the renter—they are just required to pay rent on time and clean the house properly for their own cleanliness. If you compare between owner and a tenant—the owner has to pay maintenance expenses, repair costs, and taxes.
Disadvantages of Renting a property
1. It never be yours
You can’t do modifications in a rented property as per your choices, in most cases. Some house owners don’t even allow the renters to paint or hang paintings without permission. And even the slightest mistake can lead you to lose the security deposit.
2. You have to follow rules
When you rent a house, the powers belong to the homeowner. They occasionally can surge the rent and ask you to leave whenever they can. Such uncertainties make this option of renting a property a not-so-better idea for individuals.
Which option is best for you to buy or rent a house?
There are several factors that you can consider in order to make the right decision:
1. Your financial situation
Your budget is the prime factor that will help you make the right choice. Buying a house requires you to deposit a huge upfront amount. If you opted for a home loan, please read and understand the above-given EMI value point carefully.
2. Your Location
You’re required to consider whether you’re planning to stay forever or have plans of moving abroad. A house’s location is fixed and this makes it hard for homeowners to move to different countries and cities. Buying a property needs you to be sure of your location.
3. Lifestyle and flexibility
Owning a property means you have the right to modify it as per your lifestyle whereas tenants don’t have such perks. They are required to follow the rules of a homeowner. So, consider whether you’re okay with following the rules and regulations of others.
Apart from these, your credit score, closing costs, down payment, rent of the property, nearby resources, amenities are some other factors that will help you make the right decision of should I rent or buy a condo.
If you’re still searching for the answer to “is it better to rent or buy a house”, then you should know that it is a never-ending debate. But now you know the advantages and disadvantages of renting vs buying a home including things to consider, you will be able to make a well-versed decision based on your requirements.