Buying vs Renting - who wins?

Some people prefer being called citizens of the world and others like to have roots in one place – to each his own. In light of such, we have compiled a list of advantages and disadvantages of buying or renting a home:

Buying

Advantages

• When you buy a house you are contributing toward building wealth. Coupling that with regular and timeous mortgage repayments, it increases the credit score.

• A good credit score will assist when the need arises to refinance the bond amount to pay off major purchases.

• The home over a period of time will appreciate in value and can therefore make a profit when you decide to sell.

• There is flexibility in terms of renovations and decorating the home according to your taste, barring any historical and/or zoning regulations.

• There is an option of buying to rent which enables the home owner to generate income to pay towards the mortgage.

• The pride of owning your own home.

Disadvantages

• Being a home owner requires commitment. If you have gypsy tendencies or a job that requires you to move regularly, buying a house can be a noose around your neck.

• It is a big financial responsibility. Not only do you have to make monthly payments, there are regular maintenance, tax, rates and insurance costs that need to be considered as well.

• There is a risk of not making a profit when selling the house in the future. Certain factors like the downturn in the economy or decrease in the value of the neighbourhood can contribute towards the depreciation of the value of the house.

• A hefty deposit is often required.

• Maintenance and repairs demands fall on your shoulders. This not only requires finances but time as well to either do it yourself or finding the suitable candidate to undertake the repairs and maintenance.

Renting

Advantages

• Renting has more flexibility than owning a home. If you need to up and move, all you need to do is hand in your one month’s notice to the landlord.

• Renting allows the possibility of living in an area that you would not ordinarily be able to afford to buy a house in.

• The only insurance that you would need to pay for are the contents of the house;

• Maintenance and – in some cases – repairs are for the owner’s onerous;

• The amount that would ordinarily be used towards maintenance, rates, repairs, etc can be used to invest elsewhere.

Disadvantages

• You are limited in terms of alterations and décor in the home as per the lease agreements. Most landlords do not allow tenants to make permanent alterations.

• A sales agent at Etchells & Young, Michelle Blaauw, said it best:  “You are paying off someone else’s bond”.

• There is no control over rent fluctuations.

• Renting offers no wealth creation or return on investment.

• When emergencies arise and need to be sorted out, you need to go through the landlord or at times the agent who will then go to the landlord. This may be a tedious expedition.

There is no clear winner between the two as they both accommodate different needs for different people at different stages in their respective lives.