If you’re in the market for a new home, you’re probably looking at your options to determine what you can afford and whether you should buy or rent.
Homeownership has been the conventional way to build and grow personal wealth. House prices are continually rising, which means that if you own a home, you are also building equity, which improves your investment and your financial future. However, investing in a home isn’t for everyone. Sometimes, renting is a better solution.
The Emotional Aspect of Buying a Home
Emotions often override the financial aspects of choosing and buying a home. The word “home” has more meaning than just a building where you live and keep your stuff. It’s a haven that garners emotional attachment. However, if you balance emotion and reason, a home can be a valuable investment.
Renting means having a landlord with which you have an agreement that restricts what you can or cannot do with the property. Essentially, you pay out every month to live there, but in the end, you don’t own it. You’re paying for someone else’s house. Therefore, if you’re looking for a home for you and your family, buying is better than renting regardless of the financial aspects of ownership.
Why are more people choosing to rent?
In Australia, younger people are drawn to renting. The Reserve Bank of Australia reported that first-time home purchases fell by one percent between June 2014 and July 2015. It appears that the trend is to spend money on renting, once considered as dead money, so as not to be tied down with property.
The new generation wants the freedom to move when and where they choose and buying property ties them down. It’s all about perspective. Do you prefer to own property that grows your financial future, but makes it more difficult to move if you want, or do you want the freedom of renting that comes with spending money for the use of another person’s property, essentially buying it for them? It all depends on your point of view.
The Downsides of Renting
There are downsides to renting as well. Landlords can sell their homes, which means you must find another place to rent and move at their command or whenever your rental terms are up. Buying means you get to stay there for if you pay the mortgage, taxes, and upkeep for the home.
The Basics of Buying
Buying property involves making informed decisions like location (where) and the type of property (what). It also involves understanding the hidden costs (stamp duty, real estate broker fees, mortgage payment, interest, maintenance, renovation, unexpected repairs, etc.) and the potential return on investment.
In the end, the decision to buy or rent is ultimately up to the individual. Emotions play a role in deciding whether to rent or buy. If you plan to stay in one community for many years to raise a family, buying is your best investment.
However, if you move around or travel a lot and don’t want to be tied down to a mortgage, property maintenance and repair, window cleaning, and the other responsibilities that come with homeownership, renting is best for you.
There is no right or wrong choice because everyone’s circumstances are different, calling for different life decisions.