BUYING vs RENTING
Buy or
rent? That is the dilemna facing many potential homeowners today. It seems that
buying a home is more costly - and time demanding - that renting a home.
However, if you can comfortably afford to do so, and you have plans to stay at
your location for a while, buying a home has significant advantages.
INDIVIDUAL STYLE
The feeling of having a home that is all yours, a home where your own personal style will tell the world who you are, could be reason enough. A swimming pool in the backyard, a water feature in the front, a kitchen in the colour you like – you can do it all your way if you own it. But there’s more…
TAX ADVANTAGES
In some countries your property can become a deduction for income tax purposes. Even in South Africa you can deduct some, or even all of the interest you pay on a mortgage bond, as long as the property is used to generate an income (rent or home office). Interest will compose nearly all of your monthly payment for more than half the term of the bond. This could add up to hefty savings at the end of each year.
Of course this also applies to all maintenance and other relevant property costs
RISING VALUE
Last but not least, the value of your property is likely to increase every year at the average property appreciation rate, or more, if you buy in a good location and the equity in your mortgage is available at low cost.. If you rent, your money is gone forever.
Financially, owning a home is often promoted as a better choice than renting. Even if you cannot get the home you want right now, start with something smaller – and maybe needs a bit of work – use the equity you build up there to move to the next level.
Long-term homeowners build equity both by paying down their mortgage and when their home appreciates in value. In a few years, you will be ready and the banks will be willing to let you invest in your next or even another property.
INVESTMENT BUYING
Many savvy homebuyers increase their equity more quickly by buying homes that need cosmetic improvements (such as decorating) or minor structural renovation (walls need moving). These minor improvements can significantly increase the value of a home over a relatively short period of time with a modest investment.
RETURN ON MAINTENANCE
Most people who rent still want to add a personal touch to the home to make it feel like it’s theirs so they incur costs in painting and decorating anyway. All this maintenance work is purely for the benefit of the landlord whose property increases in value.
If you own your property, every cent spent on maintenance is an investment in your future.
TIME CONSIDERATIONS
There are times when renting a home is the more sound choice to make. For example, if you are only going to be at your place for a couple of years, it might not make sense to buy the home, as this would be the more expensive endeavour. If you buy or sell in a short period of time, you may actually lose equity. Check with your agent first whether they are expecting quick returns in an area.
Also, renting also makes good sense if you've identified the general area in which you want to live but haven't made a final decision as to the specific neighbourhood. If you don't know whether you'll feel comfortable in a particular neighbourhood, it may be better to rent a house or an apartment there for 6 months or a year, to get more comfortable with it.
LONG TERM SUMMARY
Property keeps going up - ask your father and grandfather. They will tell you what they paid for their first home. You do not have to be a math or economics wizard to do the sums.
If there is an opportunity for you to own your own home, the general advice is go for it.
INDIVIDUAL STYLE
The feeling of having a home that is all yours, a home where your own personal style will tell the world who you are, could be reason enough. A swimming pool in the backyard, a water feature in the front, a kitchen in the colour you like – you can do it all your way if you own it. But there’s more…
TAX ADVANTAGES
In some countries your property can become a deduction for income tax purposes. Even in South Africa you can deduct some, or even all of the interest you pay on a mortgage bond, as long as the property is used to generate an income (rent or home office). Interest will compose nearly all of your monthly payment for more than half the term of the bond. This could add up to hefty savings at the end of each year.
Of course this also applies to all maintenance and other relevant property costs
RISING VALUE
Last but not least, the value of your property is likely to increase every year at the average property appreciation rate, or more, if you buy in a good location and the equity in your mortgage is available at low cost.. If you rent, your money is gone forever.
Financially, owning a home is often promoted as a better choice than renting. Even if you cannot get the home you want right now, start with something smaller – and maybe needs a bit of work – use the equity you build up there to move to the next level.
Long-term homeowners build equity both by paying down their mortgage and when their home appreciates in value. In a few years, you will be ready and the banks will be willing to let you invest in your next or even another property.
INVESTMENT BUYING
Many savvy homebuyers increase their equity more quickly by buying homes that need cosmetic improvements (such as decorating) or minor structural renovation (walls need moving). These minor improvements can significantly increase the value of a home over a relatively short period of time with a modest investment.
RETURN ON MAINTENANCE
Most people who rent still want to add a personal touch to the home to make it feel like it’s theirs so they incur costs in painting and decorating anyway. All this maintenance work is purely for the benefit of the landlord whose property increases in value.
If you own your property, every cent spent on maintenance is an investment in your future.
TIME CONSIDERATIONS
There are times when renting a home is the more sound choice to make. For example, if you are only going to be at your place for a couple of years, it might not make sense to buy the home, as this would be the more expensive endeavour. If you buy or sell in a short period of time, you may actually lose equity. Check with your agent first whether they are expecting quick returns in an area.
Also, renting also makes good sense if you've identified the general area in which you want to live but haven't made a final decision as to the specific neighbourhood. If you don't know whether you'll feel comfortable in a particular neighbourhood, it may be better to rent a house or an apartment there for 6 months or a year, to get more comfortable with it.
LONG TERM SUMMARY
Property keeps going up - ask your father and grandfather. They will tell you what they paid for their first home. You do not have to be a math or economics wizard to do the sums.
If there is an opportunity for you to own your own home, the general advice is go for it.
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