Rent or Buy: A Guide to Finding the Right Home

At times, it could make a financial sense to buy a house instead of renting. Considering the affordability factor in finding the perfect housing, should young adults tie themselves down with a property? Whether to rent or to buy a house, it is a major decision that affects not only your financial state, but also your lifestyle. The two options both have their advantages and disadvantages depending on your situation

While your own financial capability can be the biggest factor of all when choosing whether to rent or buy a house, there are also a number of things that you have to consider in finding a home as follows.

Advantages of Renting

One of the main advantages with renting is that no maintenance is required. For example, if you need a plumber, you can easily call the landlord to arrange the repair for you. It is also easier to move. This means that you can switch to another house anytime, especially if you have an opportunity to relocate in the near future. There is also no guarantee that your home will increase in value over time. If you are renting, you can avoid owning a depreciating asset.

Disadvantages of Renting

Meanwhile, rent is rising in several cities. So, you may be facing an increasing rental fee in your monthly housing payment. With renting, you are not building equity or an asset that you can sell when you are ready to move. Another disadvantage is that you don’t receive tax benefits, in contrast to homeowners who can deduct their mortgage interest payments and their property taxes from their federal income tax. You also can’t paint or remodel the place that you are renting without the owner’s approval.

Advantages of Buying

While not everyone can or wants to be a homeowner, there are some financial advantages that can make becoming one enticing. Owning a house lets you build equity as homes historically increase in value. Even if your home doesn’t increase in value, you’re still building equity as you pay down your mortgage for as long as your home maintains its value.

You can also use your home as an investment, such as renting it out and generating income from it. And of course, you have the freedom to decorate your house anytime. This is one of the joys of being a homeowner.

Disadvantages of Buying

On the other hand, owning a house also has its share of disadvantages. First, you have to pay for your own maintenance fees to keep your home in good condition. Also, take note that your home is not a liquid asset. Meaning, you will not be able to sell it as quickly as possible for as much money as you want in case you decided to do so. Another thing to consider is the property tax which tends to go up, making your house less affordable. You might also use up your savings for a down payment, closing costs, and for other expenses as a homeowner.

Is Buying a House a Good Investment?

I’ve been emphasizing the fact that buying a house is better than renting one. In the article, Rent or Buy: A Guide to Finding the Right Home, the advantages, and disadvantages of the two options were explained but in my opinion buying a house is a better option.

However, you want to make a better judgment when considering buying a house. Hence, the following are reasons to back my claims that buying a house is a good investment.
1. Sometimes real estate prices increase adequately for people to make money
As in the present economic recession of Nigeria, the price tag on houses is higher although the demand is reduced. This is a good avenue for real estate investors/builders in the country to make more money.

2. House is something you can see (tangible) and people like tangible investments
I think this is self-explanatory. But let me add that investors are more likely to succumb to tangible investments like real estate than intangible investments.
3. People think they are getting enough value by living in a house, and anything they ‘make’ while selling it is an added bonus.
4. Various parties benefit every time you buy and sell a house – real estate agent, attorney, bank: hence they want you to buy and sell as often as possible.
However, the following factors determine when buying a house is a good investment:
1. The price you paid for the house

You won’t agree that purchasing a highly priced house is a good investment especially when the building is of inferior quality.
2. The rent you would have paid for the house if you rented it instead of buying it.
If the projected amount you would have paid as rent over a substantial period of time is less than the price of the house, you can conclude it’s a good investment.
3. Additional expenses that you pay, do not ignore them.
Since the price of a house is exclusive, there are hidden costs you may be overlooking but will have to settle sooner or later. Hence, the amount of such hidden cost determines how good a house purchase investment is.
4. The price at which you will be able to sell the house
From the seller’s perspective: economic conditions determine how much houses are sold just as in the case of Nigeria’s economic recession, developers are forced to sell at lower prices in other to recover the demand being stolen by the recession.
5. The transaction costs involved: buying and selling is not easy
Don’t forget the following people would need to be paid for the services rendered: real estate agent, attorney, bank offering mortgage etc.
Therefore, you would have to weigh the pros and cons of buying and selling a house to determine whether it’s really a worthy investment.