Should I Rent or Buy?
This might seem like a silly question – if you have the financial wherewithal, surely it’s always better to buy? You can get a foot on the property ladder, that all important first investment, so why would you want to rent?
The most obvious downside of renting is that you’re pouring good money down the drain, or so it feels. When you’ve moved out of the property, you have nothing to show for it. All the money you have spent on rent has simply gone to pay someone else’s mortgage and given that other person a healthy whack of equity in their property!
Advantages of Renting
The Area - Firstly, it’s not uncommon for people to choose a certain area because of work, or because of a particular school. If you can’t find the right property in the area for sale, then renting, even if it’s simply short term, might be a better option.
It might also be that you’re not sure of the area itself. What if you don’t like living there? Maybe it’s a long way from where you came from and you want to test the water first.
Fewer Responsibilities and Commitments - It might be a good idea to rent if you’re planning to stay somewhere short term – for a work contract for example. If you’re renting you can leave a place with very little notice. Selling a property can take much, much longer.
It’s also relatively low cost to move in, requiring far less as a down payment to move in – usually around a month’s rent in advance and the same amount as a deposit. And upkeep is easier and cheaper too – if the boiler breaks in a rented house, the landlord will fix or replace it at no cost to you. If it’s your boiler, you can expect a hefty bill!
The same goes with any structural problems – if the roof caves in on you in rented accommodation, at least you can be thankful it’s not going to be your responsibility to get it fixed.
Family - Another good reason to rent, and based again around the ease of having temporary dwellings, might be to be close to family. Perhaps to spend time with a sick relative, or to accommodate new arrivals quickly!
Disadvantages of Renting
No Equity You can’t escape the fact that unless there is some unforeseen disaster, property value will usually rise, leading to equity in a property. Equity is the amount between what you paid for the property, and its increased price. The money you make on it, in other words. If you’re renting, you won’t be accruing any equity.
Lease Restrictions -You will be bound by the conditions of your lease. Most rentals have reasonable leases, but whatever the conditions are, you will have to adhere to; you don’t have a lot of freedom.
Rent Increases You could be subject to rent increases, sometimes much greater than is reasonable, and potentially without much warning.
Advantages of Buying
Equity and Investment - Owning property will almost certainly mean you can build up equity. It’s an investment, which, if you buy wisely, can be a sound venture.
Décor and Design - No landlord telling you what you can and cant do with your own home! If you want to paint the walls purple you’re completely free to do so.
Renting it Out - If you find for one reason or another you can’t live in the property any more, you are always left with the option of letting it out. This means you can hold on to your investment, and usually the rent will cover, or at least mostly cover, the mortgage repayments.
Home Sweet Home - Apart from the financial advantages of owning your own property, there is an unmistakable feeling of ‘living in your own home’.
Disadvantages of Buying
Cost of Moving - Unlike renting, where you need a fairly small amount to move in, buying property costs a lot of money. Apart from the deposit, which could be thousands, you’ll find round every corner is a charge, from lenders fees, to conveyancing and searches. It is always a lot of money.
Moving Quickly - If you own your property it can often be hard to pick up and leave quickly unless you can rent the property out. You’ll be faced with having to sell which can take months. And if you are able to let the property, you may have to engage a letting agent to handle it, which can be an added cost. Not to mention the financial strife of maintenance as a landlord… tenants may not take care of your property as carefully as you!
Negative Equity - It’s not normally the case in a healthy economic climate but it does happen. You buy your house, and the property market has a hiccup. Suddenly the house is worth less than the sum you bought it for, and indeed less than the money you owe to the mortgage lender.
Cost of Upkeep - Finally, the cost of maintenance can be high. Work that needs doing on the house, repairs, renovations and so on, are all coming out of your pocket.
