Why do you need a house in the first place?
To live peacefully right?
Choosing to rent or buy your home is a major decision that affects not only your lifestyle but also your financial health.
Investing in real estate is touted as one of the lucrative ways to save on taxes and have a stable asset at the same time.
However, for people who can afford to buy a house, the choice between buying and renting is always a tough one.
In the Indian context, it is observed that people who can afford to buy a house tend to put more weightage on owning a house and renting is mostly a compromise.
There are definite advantages and real estate problems / disadvantages of both the options, and they are being summarized below by Hirav Shah, Real Estate Astrologer cum Financial Adviser :
To Own A Property
Merits- The principal merits of purchase of a property are
1.Property ownership brings intangible benefits, such as a sense of stability, belonging to a community, and pride of ownership.
2.Ownership provides financial security and certainty apart from asset creation and appreciation opportunities.
3.Tax exemption of capital gains on account of sale of existing residential house property or other long-term capital assets can be claimed.
4.Tax deduction for interest and principal amount of loan repaid can be claimed.
Demerits – The principal de-merits of purchase of a property are:
1.It is not good for restless or nomadic types. Real estate is the original illiquid asset.
2.You might not be able to sell when you want if the housing market is down. Even if it’s up, there are significant transaction costs when you sell.
3.Changing your mind about where you want to live is far more expensive when you own.
4.The overall cost of homeownership tends to be higher than the overall cost of renting. That is true even if the monthly mortgage payment is similar to (or lower than) the monthly rent.
Here are some expenses you’ll be spending money on as a property owner only.
- Property taxes
- Trash pickup
- Water and sewer service
- Repairs and maintenance
- Pest control
- Tree trimming
- Homeowners insurance
- Pool cleaning (if you have one)
- Lender-required flood insurance, in some areas
- Earthquake insurance, in some areas
- Perhaps the biggest throwaway expense is mortgage interest, which can make up nearly all of your monthly payments in the early years of a long-term mortgage.
To Rent A Property
Merits- The principal merits of renting a property are
1.Renting requires signing a contract that rarely exceeds a period of 11 months and the advance deposit that is made generally ranges in thousands.
2.Renting allows you to live in a premium area that you might not be able to afford to buy.
3. The frequent changes in property prices have negligible changes in rental prices. In other words it’s called being ‘immune to property price fluctuations’ .
4.Its always easy to shift out of a rented accommodation, in a rented accommodation one can almost always easily give a month’s notice and vacate a house if he/she needs to change a home/locality/ city. Basically, high mobility is a big advantage of renting a property.
5. While renting, the responsibilities regarding the property are shared between the landlords and tenants. Major repair costs such as seepage, cracked floors have to be borne by the landlords.
Demerits- The principal de-merits of renting a property are
1.You don’t get any return on the property that one is taking on rent. The real beneficiary is the owner of the house who earns an income. It means the money doesn’t grow.
2. You might have to struggle to get the repairs done in a timely manner. So, maintenance issues are also a disadvantage here.
3.There is no guarantee that the rental agreement will be renewed. Also renewing a rental agreement can lead to an unplanned rental increase. No guarantee is easily a big real estate problem here.
4. One cannot renovate a property according to his requirements. Plus there are also restrictions that are imposed on a rental property like many flats owners will not allow pets into their property. Restrictions while renting a property are immense and can be considered as a big real estate issue.
Real estate is a big business for everyone, from mortgage lenders to real estate agents to home improvement stores. It is a part of our cultural mindset and economy.
However, it’s important to remember that owning a home isn’t always better than renting, and renting is not always as simple as it seems, Opines Hirav Shah, Real Estate and Property Adviser, Astrologer and Strategist.
Which option is best for you isn’t just about money. It is also about comfort and your vision for your life. Ignore people who tell you that owning always makes more sense in the long run or that renting is throwing away money. Also, disregard those who say that it makes more sense to buy if your monthly mortgage payment would be the same or less than your monthly rent payment.
Housing markets and life circumstances are too varied to make blanket statements like these, Concludes Hirav Shah, India’s Most trusted Real Estate Investment Adviser, Property Astrologer, Real Estate and Astro-Business Strategist.