Many people dream about having their own property. However, deciding to buy or rent a home will have an impact on your financial well-being and way of life. When you choose the option that best suits your situation, in addition to a steady income (affirming your ability to afford payments and related costs), you can acquire a home that’s within your capacity to maintain. But it’s important to note the glaring differences between renting and owning an investment property in Canberra. While renting has more flexibility compared to homeownership, since you are not bound to your property, the latter is a far bigger investment in the long run—albeit at a certain cost.
What You Need to Know
Renting is not easier than owning a home, and homeownership isn’t always the better choice. Several factors are at play including lifestyle, finances, personal goals. Below we list down some important things you need to know about leasing and buying property:
1) Both renting and owning provide a living space and require a steady income to comply with regular payments.
2) Renting has a flexible setup and the amount you spend each month is often fixed or predictable; the property owner takes charge of the repairs on your behalf.
3) Homeownership gives you a sense of stability and the satisfaction of owning a property, along with tax deductions and equity (where applicable).
4) Renting does not mean you’re leaving money on the table when you could have saved it, and owning property will not increase your income unless you decide to lease it or resell at a higher price.
A well-known fallacy about renting a home is that you’re throwing money you could have invested elsewhere. The truth is not everyone can afford to buy a home or qualify for a mortgage. It takes time for some people to get to that station in life. But everyone needs a place to live in, and one way or another, money will always be necessary. Though you can earn from equity or monthly rent, only a handful of homeowners actually build equity.
The advantage of renting is you know how much money you need to spend on your house month after month. The amount will have been specified on your lease contract, which offers you enough leeway to plan your monthly expenditures. If lucky enough with your landlord, you’ll also have a clear idea of other costs (e.g. utility bills, storage, and association fees for condo rentals).
It is possible for renters to pay a higher rental price after every lease renewal. Depending on where you live, the rent may increase drastically. This won’t be the case in areas with active rent ceilings and controls. In such places, landlords cannot increase rent prices on a whim. Local policies will place a limit on how much rent they can charge.
Renting allows you to move to a different and choose a new home right after your lease expires. But it also means you’re subject to your landlord’s behests. Should they sell or demolish the property, it automatically requires you to vacate the place. There are landlords who will not hesitate to increase the rent to a price beyond your means. For your protection, try securing a renters’ insurance before you sign a home or apartment rental contract.
The tangible and intangible benefits attached to owning a home have a lasting impact on homeowners. Besides owning property under your name and having sole discretion, such an achievement makes you feel stable and proud.
The caveat? If you change your mind about where you live, it will be difficult to bounce back from the repercussions. Note that real estate is classified as an illiquid asset, which means you can’t just sell it on a whim. Selling in a rush, particularly when the housing market is volatile, usually results in losses as you will not be able to sell at your preferred price. You may have listed the property publicly, but selling transaction costs and other related expenses will chip away at your savings if you’re not careful.
All in all, homeownership costs far exceed renting but only if you’re paying a lower mortgage than the rent. There are also attendant expenses that renters need not trouble themselves with such as property taxes, homeowners insurance, maintenance and repairs, pool cleaning (if any), garbage collection, and water and sewer service among others. Maintenance and repairs are particularly costly. Pipe problems and roof leaks alone could cost thousands of dollars and it takes a lot of preparation to prevent unexpected expenses from spiraling into liabilities.
Homeownership is in itself a type of investment. If you pay attention to what affects your home positively or negatively, you’ll be able to make the most out of your living space and even convert it into a stable passive income source some time in the future.
Renting vs. Owning
At the end of the day, whether you rent or buy property, it is important to mind your priorities. Whichever fits your current situation is the best choice for you. You may decide to rent now and purchase property later when your means permit you to. What’s important is that you set your priorities and expectations straight while also minding your financial capacity.