Let us say you are on a fresh start in the metro, and you are on the lookout for a place to stay. You search the web and find tons and tons of real estate ads, either for rent or for sale, and you start to get confused whether you should first settle on renting or take a big leap and buy your first home.
Curious about the pros and cons of renting and buying real estate? Let us find out!
Pros of renting a property
1. Relatively cheaper
Renting is relatively cheaper than buying since you do not need to shell out that much money on the initial payment. Oftentimes, rent terms are flexible, and you can take advantage of that by negotiating the arrangement with the landlord. Rent fees also depend if the unit is unfurnished, semi-furnished, or fully furnished, but this matters based on what you need while you are living at the unit.
2. More flexibility
More flexibility means more freedom, and more freedom means more mobility. If you are the type of person who is always on the go and on the lookout for better opportunities elsewhere, then renting might be for you. This is because you are under no obligation to stay after your contract ends, moreso if you have a month-to-month lease.
3. Low maintenance
Again, if you are the type who works or travels frequently, then that means less burden for you to maintain the unit since you barely stay in it anyway. Moreover, doing repairs and renovations of units is the responsibility of the landlord, so you do not have to worry about doing such.
Cons of renting a property
1. Arbitrary rent fees
While rent fees can be relatively cheaper, they are also arbitrary since the landlord can change the rent fee whenever he wants, especially after your contract ends. Rent fees increase based on demand, cost to maintain the unit, and status of the economy. Thus, rent fees can always change depending on the decision of the landlord.
2. “Bound” by rules and regulations
More often than not, landlords impose certain rules and regulations, in which some can be a deal-breaker for you depending on your needs. For instance, some rental units do not allow homing of pets or entrance of visitors. Some also impose curfews. This all boils down to what you are looking for and what your needs are, so decide wisely.
3. No equity built
Paying rent does not build equity which means the unit you are renting will never be your asset. Moreover, the hard-earned money you are spending on rent is, in a sense, “wasted” because they could have gone into your investment instead of the pocket of your landlord. But again, this depends on your long-term goal. Are you looking for a potential investment? Or are you simply looking for a place to stay?
When choosing to rent or buy property, it all depends on what your needs are and what your long-term goals are.
Pros of buying a property
1. More stability
Buying a property can give you the feeling of stability since the property you are staying at is all yours. Moreover, owning a property, may it be a house or a condo unit, can give you a sense of pride because you know that you put your hard-earned money into something worthwhile and long-term rather than something arbitrary and short-term.
2. Own rules
Owning a property means you make your own rules, and no one can ever change that especially if you bought a house since condominiums still impose certain rules and regulations. But the point still stands because you still get the final say on what you want to do with your property like when you are planning to do renovations, host gatherings, or own pets.
3. Smart investment
Investing on real estate can be fulfilling especially if the money you spent on your property is the fruit of all your hard work and perseverance. You could also turn your property into something profitable by renting it out so that you can boost your real estate returns, and after a few years, you could sell your property after it has appreciated in value.
Cons of buying a property
1. More expensive
The initial cash-out that you need when purchasing a real estate property are high especially for the ready-for-occupancy ones. This matters in deciding whether you are going to pay in full or in split down payments. And that does not yet include the taxes and other fees that are essential when you are starting a new home.
2. Less flexible
If you are the settling type, then buying a property might be for you. However, if you are always on the go for opportunities elsewhere, then you should think hard about putting your money into a home which might not be useful or profitable in the long run. It is also important to note that a house or a condo unit is not something that can be readily liquidated, meaning that if you ever plan to sell it, the process may not be as quick as you expect it to be. But then again, this all boils down to your long-term goal in investing.
3. More responsibility
Owning your own home means you also own the bills for electricity, water, internet, repairs, renovations, and a lot more. You are burdened by a high level of responsibility when you acquire a property since the title has your name on it, and thus, making you solely responsible for what you do with it.
You should look beyond the amount and face value, and reflect on your goals, whether you are planning something short-term or settling with something long-term.
Final verdict
Real estate investment certainly involves a lot of money, but there are other factors that come into play when you decide to rent or to buy a property. You should look beyond the amount and face value, and reflect on your goals, whether you are planning something short-term or settling with something long-term. More than those mentioned, you should also assess your risk appetite as investing in real estate is not for the easily stressed. A lot of things can happen with your investment, so it is up to you whether you are ready to risk your hard-earned money or not.
Sources:
Comai-Legrand, L. (2019, October 31). Pros and Cons of Renting and Buying a Home. First Alliance Credit Union. https://www.firstalliancecu.com/blog/pros-and-cons-of-renting-and-buying-a-home