Rent or buy? We find out which is better, when
Published on 6th June, 2019 at 04:37 pm
“Why am I helping pay off my landlord’s property, when I could be paying off my own?” If you’ve ever rented a home, you’re likely to have asked yourself that very same question at some point. These types of thoughts are natural, with rental prices being higher than ever, especially in and around major cities. But taking the big step to buy might not be all that it promises, with as many cons as there are pros.
Most of us have had it drilled into our heads from childhood that buying property is the best – if not only – investment to make for the future. But a changing socio-political landscape makes this approach questionable, with many unable to enter the property market in the same way as was possible even just a decade ago.
Consider the home you’re renting. It might be close to work, have a few amenities with a stoep or garden; everything you could possibly want. Should you be paying off a home loan instead of the rent? You’re almost certainly paying less rent than the monthly costs of purchasing it, which can be a deal breaker for most people. You might reason that eventually you could resell the property and make a profit off of it. But considering all the purchasing costs involved, you’d only potentially see a return on investment after 10 years. Unless you can successfully resell at an exponentially higher figure, your real profits (even after a decade) may only be marginal.
While renting may not seem like it holds any benefit for your future, it does allow you a certain kind of flexibility that can turn out to be one of your greatest assets. If you were to pay the difference between your rent and a prospective home loan into a steady and secure investment (even if it’s as little as a few thousand per month), your returns could be surprisingly high over the long term. In fact, it could be higher than reselling a home after 10 years. It’s all about looking at alternatives to investing in property and having the discipline of sticking to it for the long run.
You might still be on the fence about which would work best for you. But ask yourself these simple questions:
- Where do you see yourself 15 or 20 years from now?
- What are you able to afford at the moment?
- Do you prefer flexibility or stability in your life?
- Is your motivation to increase personal wealth and make a profit?
These questions speak to many of the pros and cons of buying property, and it’s important to do enough research to determine whether you will actually get what it is you truly want out of buying property. Very importantly, it’s important that your decision contributes to you feeling positive and enthusiastic about your future.
Sure – in most cases, buying property will be a safe bet. But the truth is that many of us simply cannot afford to buy property, and we’ve sadly come to believe that this excludes us from being in a position to make meaningful investments for the future, which is simply not true. Investigate how you can invest in something that works for you just as well as property would, and rest easy knowing you’re building on something for the future.
At the end of the day, your wisest move will be to speak to a financial expert who is positioned to give you professional advice that is tailored to your specific goals, wants, needs and financial situation. Click here to set up a meeting.
Feeling lost in debating what the best option is for you? Look at the pros and cons of renting and buying to help determine your own goals and position.
| Renting | |
|---|---|
| Pros | Cons |
| Freedom, flexibility and moving is easy | Unable to renovate or change the property |
| You can live in areas you couldn't afford to buy in | No wealth creation from the property |
| No levies, property taxes or maintenance fees | Rent increase likely every year |
| Higher disposable income to explore other investments | No surety that lease will be renewed |
| Buying | |
|---|---|
| Pros | Cons |
| Privacy and independence | High initial costs, e.g. Down payment |
| Long term stable investment | Massive financial responsibility |
| Control over the property | Many extra costs like levies |
| Possible increase in personal wealth | Possible loss of personal wealth due to poor economy |
Think you want to buy?
Buying property for the first time can be a daunting prospect, financial planner Jyoti Gopee-Mothi helps sheds some light.
Your first steps to buying a property:
- Do thorough research and investigate as many properties as you can.
- Save a lump sum of money for transfer, conveyancing and registration costs.
- Make sure to maintain a positive credit record for at least three consecutive months.
- Shop for your bond interest rate at more than one lending institution.
- Sit with your financial planner to do a comprehensive budget.
Click here to read about the hidden costs of buying a property to be aware of.
Always remember:
We all admire the grand home on television, but it’s the people that make a home a happy place. A modest home that meets all your requirements is enough. Once you’ve found a home you’re interested in, spend a little money upfront with a reputable company that can inspect the premises to make sure you’re not taking on unwanted and troublesome burdens like poor and failing structures.
Click here to set up a meeting with an expert financial planner. Plus, you’ll also earn tier points!
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