Are you confused about renting vs buying a home?
Just so you know, there is no definitive answer to this age-old conundrum. Your decision should depend on your personal and financial situation along with the current market trends and economic situation. So, to put it simply, the answer to your renting vs buying problem is that ‘it depends.’
Like everything else, there are advantages and disadvantages associated with buying a house or an apartment and renting one. However, before you make a decision, you must first figure out what you really want and what you can realistically afford.
5 Renting vs Buying Questions You Should Ask Yourself
Before we discuss the pros and cons of renting a house vs buying one, here are a few questions you need to ask yourself. This will help you figure out which of these options work best for your situation.
Remember, there is no right or wrong answer.
- What is your current budget?
- What are your long-term career and family goals?
- How long do you want to live in the area?
- Do you prefer stability over flexibility or vice versa?
- Will you be able to pay for home repairs and maintenance?
How much money you can invest in a property, how many people will live there in the not-so-distant future and if you actually want to live in that area for more than a few years are some of the most important things that you need to consider. Once you know for sure how much money you can spend and if you can keep up with the maintenance and repair costs that come with owning a property, you can go ahead and make your final decision.
While you figure out where you stand on the renting vs buying spectrum, you can take a look at some of the advantages and disadvantages of renting a house as well as buying one.
Renting a Home
For most young people, buying a house is simply not an option because of budget restrictions. However, if you are stuck in a rent vs buy debate, here are a few benefits and downsides of living in a rental property that you must be aware of.
Pros of Renting a Home
These are some of the most important benefits of renting a home.
- Increased flexibility
- More opportunities
- Less paperwork
- No home maintenance cost
- No need to pay property tax
Let’s further discuss each of these advantages.
Since living in a rental property is a short-term commitment, tenants have the liberty to pack their bags and move into another house or apartment just by providing a short notice. They don’t have to worry about finding someone to move in or take over the lease, as that’s the landlord’s job.
This makes renting a much more flexible option, especially for young professionals whose jobs might require them to stay in different areas or cities for months on end.
Who doesn’t want to live in a lavish, upscale housing society promising a luxurious lifestyle? Now, buying a house or a flat in the area of your liking might be beyond your budget, but there is a good chance that you can at least rent out a unit there. Even if you have limited funds, you can still live in a popular neighbourhood and enjoy access to top-notch facilities.
Similar, people who aren’t sure where they want to settle or don’t have enough funds to invest in a property, renting a home allows them to explore more opportunities. Not to mention, tenants can easily take up job opportunities in different cities or countries without worrying about what will happen to their home.
Needless to say, there is way less paperwork associated with renting a home compared to buying one. Of course, you’ll have to sign a tenancy agreement that will protect your rights as a tenant as well as those of the landlord, but apart from that, you won’t have to worry about any other paperwork or file any documents.
Moreover, those living in rental properties don’t have to pay for property insurance either. It’s solely the owner’s responsibility.
No Home Maintenance Cost
Tenants don’t have to worry about repair and maintenance costs, as the landlord is supposed to pay for them. However, tenants might have to pay a certain amount in case of any damage to the property or as specified in the tenancy agreement.
No Need to Pay Property Tax
Apart from paying the rent and utility bills, tenants don’t really have to worry about any other property-related costs. Whether it is the homeowner’s insurance or property tax, the landlord is the one who is supposed to foot the bill.
Cons of Renting a Home
There are also quite a few downsides of renting a property.
- Lack of Stability: can be forced to move, no guarantee the agreement will be renewed
- No Equity
- Rules and restrictions
- Rent increments
- Moving expenses
Here is a detailed explanation of each of the disadvantages.
Lack of Stability
If you’re looking for stability, renting a home might not be the best option for you. Your landlord can force you to move out of your home on a short notice, which is often not enough to look for a new place that fits yours and your family’s needs. The situation can be even worse if you’re already going through a rough patch and don’t have enough funds to put down a down payment let alone bear all the other expenses that come with moving homes.
Even if your landlord doesn’t suddenly decide to force you out, there is still no guarantee that they will renew your rental agreement at the end of the year.
You can pay thousands and thousands in rent every month but still have no claim over the property.
Although paying rent is mostly cheaper than paying a mortgage, but at least those paying the latter have something to show for it down the road. Meanwhile, monthly rent payments don’t build up equity or grant you ownership. The money you pay your landlord is essentially gone as soon as you hand it over.
Rules and restrictions
There are certain rules and restrictions that come with living in rental property.
First of all, you can’t renovate, remodel or re-decorate the place according to your preference. While some landlords might allow you to repaint the home or change a few things around, most of them aren’t too fond of tenants making modifications to their property.
Secondly, some homeowners may not allow pets inside their home. So, even if a tenant really wants to adopt a cat or a puppy, they simply can’t do so without asking the landlord for permission.
However, if you are living as a tenant, here are a few ways you can decorate your rental property without upsetting the landlord.
While tenants don’t have to worry about the appreciation or depreciation of the value of a property, they do have to worry about the possibility of a sudden rent increase. Even with some sort of rent control measure in place, landlords are free to increase the monthly rent when it’s time to renew the tenancy agreement.
This situation could be especially troublesome if you have a fixed monthly income and can’t afford to pay the newly enforced rent, which will ultimately force them to look for a new place.
This is probably one of the biggest disadvantages of renting a home.
Packing your entire life and moving to a new place is never easy, but the costs associated with the entire thing make it even more difficult. Apart from paying for the moving service, tenants also need to put down the down payment and clear their utility bills. Not to mention, if they relocate to a different area, they might have to change their children’s schools or spend more on transportation.
Don’t forget to take a look at some of the most common mistakes renters make while moving into a new house.
Buying a Home
Buying a house is a huge milestone in one’s life, which means you can’t make this decision on a whim. Here are a few pros and cons of buying a house that will help you figure out if ownership is the right choice for you.
Advantages of Buying a Home
When it comes to buying vs renting a house, the former has quite a few upsides.
- Security and stability
- No Restrictions
- Opportunity to generate income
Let’s take a further look at each of these benefits of owning a home.
Security and stability
Owning a house or a flat gives you a sense of financial stability and security. No one can force you to move out of our legally owned property and you don’t have to worry about a sudden increase in the monthly rent. Even if you buy a house in instalments, the monthly or quarterly instalment remains fixed until the end.
If you are planning to start a family and have enough savings, buying a house is a great idea. Even if you start off with a smaller place, you can always flip it for a profit and move into a better home a few years later.
Being a homeowner, you have the complete freedom to knock down the walls to open up your living room and paint the walls to your liking without having to answer to anyone. You can update fixtures, change the décor, fix up the garden and even do major remodelling work to suit your personal style and needs.
Once you purchase a property, you also attain full creative control to alter and modify it. However, just make sure to be aware of the bylaws of the housing society you live in before you make any major changes in the layout.
Opportunity to generate income
Owning a home also allows you a great opportunity to generate income by putting it up for rent. If you have some vacant space, you can simply rent it out and earn some extra money while maintaining ownership.
In case you’re wondering how to go about it, here’s a step-by-step guide on renting a house that discusses all of your queries and more.
Buying a home is arguably the biggest investment you’ll ever make. It’s a big financial decision that comes with a lot of advantages, with the biggest being the sense of empowerment that it provides.
Homeowners don’t have to deal with landlords or a third party and are free to make all of their decisions on their own. Even if you want to move to another place or a different neighbourhood, you can simply sell the property and buy another one without worrying about the funds. In other words, buying a home is akin to having a long-term saving account.
If you’re planning to purchase a house for yourself and your family, take a look at our comprehensive guide on buying a home for the first time. Furthermore, here are a few ways you can save money for your dream house.
Disadvantages of Buying a Home
Here are some of the disadvantages that come with buying a home.
- Requires substantial money
- Value depreciation
- The added cost of maintenance and repairs
- Less flexibility
Let’s discuss each of these drawbacks for better understanding.
Requires Substantial savings
Buying a house requires a substantial amount of money. Even if you are buying it on instalments or plan on paying a mortgage, you still need to put down at least 20 percent of the entire cost as the down payment.
Moreover, there is also a lot more paperwork involved in buying vs renting a home, including change of ownership, sales deed, property insurance and much more. In addition to that, a homeowner also needs to pay property tax. You can head over to Zameen Blog to find out more about different types of property taxes in Pakistan.
Generally, the value of houses and buildings depreciates over time due to old construction style, outdated design and general wear and tear. This means in order to flip the house for a profit, you’ll first need to invest money and time into upgrading it. Of course, the location of your property also plays a huge part in this, as the value of houses located in popular residential areas does not tend to depreciate as quickly as those in other areas.
However, you can read up on the key factors that affect the value of a property for more information on the topic.
Cost of maintenance and repairs
As the saying goes, owning a home comes with a lot of responsibilities. Whether you are buying a recently-constructed house or an old one, you are bound to face maintenance and repair issues popping up within the first few months of purchasing the property.
From updating the light fixtures to fixing pipe leaks, homeowners need to bear the cost of all major and minor renovation work all by themselves. Of course, you can save up some money by going the DIY route, but you can also end up making things even worse.
Here are some signs you should hire an expert for home renovation instead of using the DIY-method.
As opposed to renting a home, buying one limits your options to move around or explore job opportunities in different cities. While a tenant can leave their home after serving a notice to their landlord, a homeowner needs to go through an extensive number of steps to put their house up for sale. They also need to wait patiently as potential buyers visit the property and negotiate the selling price before finally reaching an agreement. This can take up to a few months at the very least.
Needless to say, when it comes to renting vs owning a home, there are pros and cons associated with both. While your financial situation plays a huge part in deciding the right choice for you, it’s not always about money. You also need to evaluate your personal goals while deciding if it is better to rent or buy a home and see what could be better for you in the long run.
If you are still not sure between renting vs buying a home, you can check out Zameen Blog – Pakistan’s leading real estate blog – for more information. Also, feel free to get in touch with us by dropping an email on email@example.com. To stay updated on the latest developments in the property sector, you can subscribe to our newsletter on the right.