Buying outperforms renting in the long run – expert
A well-chosen property should rise in value over time, while the balance of your home loan will steadily reduce as you make repayments.
POLOKWANE – Landlord and Real Estate Agent Tshepiso Mashiane says as much as renting a property allows more flexibility than owning a home or a house, buying property is a better investment in the long run.
“In today’s market, it’s way better to buy a house than rent one despite fast-rising prices and higher mortgage rates making it cheaper to rent a home than buying one. Renting and reinvesting the savings from renting, on average, will outperform owning and building home equity, in terms of wealth creation,” she said.
She elaborates on the pros and cons:
Renting:
• If the value of the property rises, you may have to pay more in rent on a monthly basis.
• Maintenance is your landlord’s responsibility, but if the tenant damages something in the house, the tenant will have to pay extra (fine) for the repairs (or the landlord might deduct it from your deposit).
• Your rent is fixed for the term of the lease, which is usually six to 12 months or more, depending on the agreement between a landlord and a tenant.
• Possibilities are, you’re paying off someone else’s home loan through the rent you pay monthly.
• The smarter thing about renting: share with someone in order to pay a less rent. This obviously also depends on the house-sharing rules and regulations as other places do not allow tenants to share or to sublet.
• You don’t have any certainty of tenancy control beyond the term of your rental agreement.
• You have extremely limited options to personalise the property, because when you leave, a new tenant will move it, and the previous tenant needs to leave the house/flat as they found it.
Buying:
• The property is yours to live in as long as you want to, without anyone (owners or landlords) telling you what to do with it.
• You can do anything you like with the decor and outdoor areas and any improvements are likely to enhance your lifestyle and increase the value of your home.
• If the value of the property goes up, the value of your personal wealth should also increase, which is not a bad thing because you’re more likely to make a profit if you decide to sell it.
• You need to budget for building maintenance and repairs, but any improvements made to your home will most likely increase the value of your investment.
• Your repayments may fluctuate, both rising and falling with interest rate changes, if you opt for a variable interest rate.
• Your property is likely to be an appreciating asset, especially over the long term, and it could even be used as an investment property in the future.
• Your bond repayments may be more than the rent you could pay to live in the same area, but paying off a home loan is a form of saving as you are building equity in a valuable asset.
“We know that for most people, buying or purchasing a first home is one of the most exciting steps you can take in life, the excitement is allowed because it’s an achievement. And for first-time buyers, it may seem like a complex process, however, plenty of help and support is available from professional real estate agents in your area,” Mashiane said.
She further adds that a well-chosen property should rise in value over time while the balance of your home loan will steadily reduce as you make repayments. “It may be hard to imagine it now, but one day your home will be paid off completely, and you can enjoy life without a bond or paying rent,” she concluded.
