Buying VS Renting a Home
Renting a house requires a deposit to secure, and to protect the landlord from future damages caused by the renter. It may sound like a good idea to rent a home but to think in the long run, you do not have your own property of your own.
On the other hand for homebuyers, it may sound like a secured future but one of the largest costs of owning a home is your monthly installments, which includes the loan’s principal and interest amounts. Let’s discuss the important factors you need to consider before making a decision.
Your Financial Status
Before you get into either of the options, know that both options equally require your financial commitment each month. Take some time to ask yourself these important questions below:
⦁ If you want to buy a house, will you be able to afford the 10% downpayment?
⦁ Are you entitled for any government housing scheme? [eg: ⦁ BSN MyHome (Youth Housing Scheme) ]
⦁ If you are to rent, will you be able to afford the monthly rental cost?
⦁ Are you ready to move around from time to time?
You can actually calculate the Rent Ratio of a property to decide whether renting or buying a house is the best for you. So what is Rent Ratio? Rent Ratio is the amount of years the rental fees will take to cover the cost price of a property (Property Guru). Below is how you calculate:
Rent Ratio = Average cost of listed property / Annual property rental sum
Here is an example, an average home in Selangor cost RM 480,863. Let’s say the average rent of a house is RM 2,000, which means the annual rental cost is RM 24,000.
Take RM 480,863 / RM 24,000 = 20.04
20.04 is the number of years of rental fees. Which means it would take almost 21 years to cover the cost of the property. If your intention is to stay in that property for more than 21 years, it is better to just buy that property instead of renting it.
Cost and Responsibilities
Not only owning a home requires down payments, you will also have to fork out money for the following:
- SPA legal fees
- Stamp duty on MOT
- Loan agreement (legal fees)
- Stamp duty on loan agreement
- Quit rent (cukai tanah)
- Property assessment tax (cukai pintu)
Buying a house means you have the full responsibility of the house. Meaning any repair issues, maintenance, is all on you. If you want to repaint the house or install any shelves, you will have the full ownership to do it. Whereas if you are renting, any repair works and maintenance will be settled by your landlord, you just have to pay a monthly rental and maintenance fee. On the other hand, you might not be able to make any structural changes to your rented home.
Let us list down the Pros and Cons of Buying and Renting a House
|Complete ownership of the house||High down payments and miscellaneous fees
|Avoiding unreasonable landlords
||Financial risk (depreciation of houses)
|Only monthly rental + maintenance fees||Increase in rental fees|
|Short-term basis||Irresponsible landlords|
|Less emotional stress||No appreciation of your money spent|
Either way, there are many factors to consider before you rent or buy a house. Take some time off to think about your financial status, your investment plans and your long-term goals (you will realise how it is very much related to buying or renting a house). In a nutshell, neither buying or renting is better than the other. It all comes back to you, which one will you choose?
Want to know more about property investments? Talk to us today and we will get in touch with you!
SHR Properties is a real estate company which offers comprehensive services including real estate property investments, development, sales, marketing, operations, and management. The company creates quality urban projects based on customer-oriented mode of management for a better living and working environment. They also provide professional expertise and resources, along with asset management, risk analysis and other services.