There’s a common assumption that renting is inherently bad and buying is inherently good across the board. In practice, however, it’s not so clear-cut. Both options have pros and cons that vary depending on each individual’s current circumstances. Here are a few of the most common positives and drawbacks of renting versus buying a property.
Renting
Pros:
It’s temporary
This can be a pro or con depending on how you look at it, but some people prefer or even need the flexibility that comes from the temporary nature of a rental. For example, a student or contract worker who’s only in a certain area or country for a short period of time will need the flexibility to leave after a number or months or years.
2. No long-term obligation
Similarly to Point 1, many people prefer the lack of long-term commitment that comes from a rental. They may not be settled in a place in life where they feel comfortable being obliged to pay back a set amount for decades or risk losing their investment to the bank. Without the massive one-time expense of a down-payment and closing costs, many people also enjoy the freedom and flexibility of being able to do so many other things with that cash.
3. Less maintenance
A huge pro to renting is that the tenant generally isn’t responsible for the larger maintenance and repair costs (such as roof repairs, exterior painting etc).
Cons:
It’s temporary
The flip side to Point 1 of the Pros is that there’s no long-term security with renting. You can make payments to a landlord at the same property for 30 years and by the time you retire, you’re still obliged to pay rent every month versus paying off a mortgage which would allow you to fully own the property within the same time period.
2. No equity
Homeownership gives you the opportunity to build your equity overtime (I will do a detailed post on equity later!). With renting, no matter how long you make your rent payments, you won’t build equity in the property. (Simply put: equity is your interest in the property's overall value minus your outstanding debts).
3. Less control
You’re bound by the landlord’s rules (which may include no pets, no parties, etc.) and cannot make changes to the property without the landlord’s approval. Your landlord may also choose eventually to raise your rent, decide to sell the property or evict you for another reason.
Buying
Pros:
Security and stability
Unlike a rental where the landlord may increase rent or evict a tenant for one reason or another, homeownership gives you the security of knowing that as long as your payments are made on time, the property will be yours at the end of the day.
2. Creativity and privacy
Being a homeowner means that you have the freedom to alter and enhance the property as you see fit, and won’t run the risk of having a landlord check in on you to check or dispute the property’s maintenance.
3. Investment and equity
Property is an asset that can be used as leverage to borrow and buy more properties or other assets in the future. Another way in which property can be an investment is through renting.
Cons:
Maintenance and responsibility
A huge drawback to property ownership is that maintenance can be extremely expensive, and unlike renting, the owner is responsible for it. The responsibility of long term payments as well as occasional payments like maintenance are deterrents to buying property for many people.
2. Cash, down payment, interest on mortgage payments and property taxes
Perhaps the most common reason as to why many people don’t own property yet is the difficulty of coming up with the upfront costs (down payment) then closing costs (legal fees, bank fees and taxes). Moreover, there are more continuous payments such as the interest associated with your mortgage payments and property taxes.
3. Less flexibility
Tenants have the freedom to move from property to property whether domestically or internationally with little hurdles. To do this as someone with a mortgage involves a few more steps or hurdles that must be dealt with before packing up and leaving. Although the option is there to sell or rent your property out once you vacate, it’s not as quick of a resolution as just picking up and heading out.
In the end, whether you choose to rent or buy ultimately depends on your lifestyle, goals, and current circumstances. Reach out to 1OAKBahamas for guidance in navigating this decision. Let’s work together to explore your options and find the perfect fit for your future today.
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