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To Buy Or to Rent A Property?

Finance & Money

Posted on Tuesday, February 18, 2020

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There are both pros and cons to owning your own property or renting a property, which will be based on your personal circumstances.

If you are currently asking yourself whether you should buy or rent, it’s a good idea to start by looking at your personal preferences, for example whether you need the flexibility to live and work in different locations, the current housing climate and state of the economy, or what your financial situation is for the foreseeable future.

Here are some of the benefits of buying property versus renting: 

 

The benefits of buying

  • Buying property, if your financial circumstances allow it, offers the potential to increase in value over time so that when you decide to sell, you can earn a profit.
  • As a homeowner, you have the right to do what you want to the property. Renovate, repaint, landscape the garden and change the décor to your heart’s content. You can turn it into something that matches your style and requirements.
  • Buying to rent is another option and it will give you, as the homeowner, the ability to generate income from renting out your property.
  • If your bond repayments are made on time each month, you can improve your credit profile.
  • As a homeowner, you have the option to refinance your bond if you need to withdraw a large amount of money to pay for major purchases.

The benefits of renting

  • As a tenant, you have far more flexibility, meaning that you are able to relocate for a job or travel without the worry of monthly bond repayments or who is going to look after your property.
  • The only insurance you need as a tenant is to cover the contents of the home, while all maintenance work on the property is for the homeowner’s account, as is building (or homeowners) insurance.
  • Moving on is easier as a tenant than a homeowner, as you don’t need to go through the stress of finding someone to purchase the property or take over the lease. This is the responsibility of the homeowner, unless you move out before your lease period ends, in which case you may be penalised.

A few more factors you need to consider when deciding whether to buy or rent:

  1. The additional costs of homeownership – it’s not just the bond repayments. Other monthly costs include rates, taxes, insurance and maintenance on the property. You will need to budget for these monthly.
  1. A profit through resale is not guaranteed – while property has always been a relatively safe investment, it’s not a 100% certainty that you will make money when you sell. This has a lot to do with economic factors and/or the desirability of the location. 
  1. As a tenant, you cannot make changes to the property – you are bound by the lease agreement and don’t have the freedom to change or adapt the property to suit your needs, unless you have the consent of the homeowner.
  1. Annual rent increase – when renting, you are subject to annual rental fluctuations, which are directly affected by inflation. When you own a property, however, your bond repayments may go up or down depending on the interest rate, which is determined by the Reserve Bank of South Africa.

 

As you can see, there are both pros and cons to renting or buying property. Only you can make that decision based on your individual circumstances. Use the information we’ve shared to guide you in drawing up your own list of pros and cons, which may help you decide what is best for you right now.

 

The information contained in this article is for information purposes only and does not constitute professional advice.

 

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