Saving money is a tough task in these days of high-cost living. It seems easy to choose buying property over renting the property when it comes to investment. The advantages of buying property are numerous, but is the decision that simple? When you buy property, what do you give up? There is lots of information online about Property Investment, using a Mortgage Broker and Property Purchasing, so this article will focus on some of the pros and cons of owning your own home vs renting a property.
When buying property there are many things you need to consider. Firstly, how much can you afford for a deposit? This may vary depending on where you want to live, but typically it won’t be more than 20% or 30% – sometimes even less! Make sure you have the property inspected by a qualified property inspector to make sure everything is in working condition, and even record the inspection with your smartphone. It’s also a good idea to get any property checks that may be required (or whatever they are called where you live). This will check for matters such as asbestos. If there is anything wrong with the property, let the seller know before you purchase it.
Secondly, what do you want from the property? For example, if you like quiet areas but want convenience due to children or work commitments then living near a school or kindergarten might be desirable – but this will cost more than other properties in other areas. You should always compromise on something when buying property just so that the property meets all your needs otherwise you will just be miserable and this could end in property foreclosure.
For property loans, it may seem like your first choice should be a property loan with your bank or other lending institution – but property loans can be problematic if interest rates suddenly rise so keep that in mind when looking to buy property. It’s a good idea to shop around and get different property loans from different places before you commit yourself to one property loan.
Property buying is not an easy task, so make sure you do lots of research beforehand and have sufficient savings for the deposit and the rest of the cost that goes into purchasing property, such as legal fees/utility setup costs etc… Nowadays many people use online calculators for home affordability calculations. These types of property calculators are so easy to use – all you need is your family income, property purchase price, property deposit amount and other property-related costs. The property calculator can also give you an idea of how much spending money you will have left every month after property-related expenses.
Overview of Pros:
- You get a place that’s yours (instead of paying the owner rent!).
- You build up equity in the property which adds value to your property by owning it. This means as time goes on, your property gets more valuable.
- You usually pay less for property maintenance because it’s mostly up to yourself or whoever else you employ to look after the property. There are some things such as rates and water usage that will be taken care of by the property owner, but property insurance and property taxes are yours to take care of.
- You can enjoy many tax deductions for home loans interest payments, property maintenance expenses etc… (check with a professional accountant or property lawyer if you have any doubts about property tax deductions).
Overview of Cons:
- If you lose your job or get sick, property foreclosure may be an option where this is not true of renting. This can create financial hardship so make sure you have sufficient savings just in case.
- Property value fluctuates according to supply & demand. For example, if there are lots of houses popping up in your area then it means people will buy the new properties instead of buying older ones – thus making older properties less valuable. It can be hard to keep the property in top condition if you’re on a budget, but this is where property maintenance comes into play.
- Property usually costs more than renting property by default due to property maintenance, property insurance and property taxes etc… The main way around property costs when you first buy it is through property renovation – which means “fixing up” the property so that it’s worth more! This can be a lot of fun, but at the same time can take years for your property value to rise depending on how much work you need to do with your property.
So those are some pros and cons about buying vs renting property. What other things should I consider? Whatever you decide, make sure you think long term about any decision you make when you look to buy a property just so that your property helps you meet all your property related financial goals in the future, such as property equity growth and property finance loan payments.