The choice between buying property or renting property is a huge decision that can have a major impact on your financial well-being as well as your lifestyle, in both the short and long-term.
Claude McKirby, Co-Principal, Lew Geffen Sotheby’s International Realty Cape Town’s Southern Suburbs and False Bay said that both renting and buying have their own benefits and drawbacks.
“Each option does offer distinct benefits and drawbacks and with the economic fluctuations, higher interest rates and uncertainties that we’re seeing, it’s essential to carefully assess one’s current financial situation and long-term goals before committing to either option,” McKirby said.
To help you make a choice between buying and renting, here is a a look at the advantages and disadvantages of each option.
Advantages of buying
– Building equity
McKirby said that a significant advantage of homeownership is building equity.
“As you make mortgage payments, you are gradually increasing your ownership stake in the property. Over time, this equity can serve as a valuable asset and a potential source of wealth,” McKirby said.
– Stability and freedom
Having ownership of your own home offers you stability and the freedom to personalise as well as modify the property to suit your preferences.
This means that you will have more ownership of your living space. It also allows you to make long-term plans without concerns about lease expirations or increases in rent.
Homeownership can come with tax advantages, such as deducting mortgage interest and property taxes from your taxable income, according to McKirby. These tax benefits can help decrease your overall tax liability.
Disadvantages of buying
– Initial costs
According to McKirby, buying a home requires a large upfront investment, including the down payment, closing costs, and potential home inspections.
– Ongoing expenses
Along with owning a homes comes the responsibility all maintenance and repair costs. These expenses can be unpredictable and add to your financial burden.
– Market risks
The real estate market can be subject to fluctuations, and there is no guarantee that your property will appreciate in value over time.
Advantages of renting:
– Flexibility
McKirby said that renting offers more flexibility compared to buying.
“Renters have the freedom to move without the burden of selling a property, making it ideal for those who anticipate frequent relocations,” McKirby said.
– Lower upfront costs
In comparison to buying, renting generally requires a smaller upfront financial commitment.
Those who are interested in renting property may only need to provide a security deposit and first month’s rent.
– Limited financial risk
Renters are not directly exposed to potential declines in property value, which can offer them a sense of stability in uncertain economic times, according to McKirby.
Disadvantages of renting
– No equity building
McKirby said that while homeownership is an opportunity to build equity or own a valuable asset, renting does not offer people this option.
– Rent increases
In some rental markets, landlords may raise rent prices over time which in turn could make it harder to budget for household expenses.
– Limited Control
Renters have limited control over their living space. This means that will need to seek permission from the landlord to make changes or renovations.
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