What is Better? Renting or Buying?
Buying a house is the ultimate dream for every individual in this world. However, dreaming of buying a house does not make it more lucrative in the financial sense than renting a property. While purchasing a home and designing it into your dream home can be your ultimate fascination, skyrocketing prices of property in the country, especially in the metro cities like Gurgaon, can lead to people preferring to rent a house than buying their dream home.
Some people can easily afford to purchase a home even with the rising prices. Nevertheless, they do face the difficult decision between buying or renting a house in the city. In Indian metro cities, it has been observed that most people who can easily afford to buy their dream house place a higher value on owning their home, considering renting a house a compromise. Both the options to have a roof over your head have their distinct benefits and drawbacks. This article focuses on highlighting the aspects of renting a home and buying it. If you have been contemplating between both options, read on to make the right decision for you and your family.
Difference between Buying and Renting a Home
“Ownership” is the most obvious and fundamental difference between buying and renting a house. It is easy to understand that buying a property means you own it and the same doesn’t happen when you rent a house. However, ownership as the fundamental difference is not the only thing to consider while deciding between buying or renting a property.
Here are the most crucial factors that can help you analyse and determine your choice.
– The ratio of the price of the property to the yearly rent of the property i.e., the rent ratio. Renting a house will make more sense if the price of the house is equal to the cost of the house that you’ll pay as monthly rent for a year. For example, if the worth of the property is 20 times more than the annual rent, it is advisable to purchase the property rather than renting it.
– Experts suggest that buying a house makes more sense if the rental yield of the property is over 5%. Rental yield is the measure of the price your house can generate every year as a percentage of the value of your property.
– In case you decide to take a loan to purchase a property, you must do your math and consider the repayment expenses while deciding the profitability of the property. The rule of thumb while purchasing a property should be: if the EMI of the property is more than 30% of the monthly income that you generate, you shouldn’t purchase the property.
Advantages of buying a house:
Increased Security
Buying a house gives you a significant advantage of security. Once you buy a property of your choice you own it and you also have the right to decide how long you wish to stay in the same house. You can also freely make any number of modifications as per your requirements or even choose to sell the house whenever you wish.
Greatest Investment
Buying a house is the greatest investment. When you buy your house as an asset, its value increases over time. Hence, you can treat buying a property as a way of investment that will give you the freedom to sell the house and make a profit when you want. You can even rent it out to generate a regular income.
How to decide whether to buy or rent a house?
The decision to buy or rent a house can be determined by analysing and measuring a couple of factors.
– Financial stability is a crucial point to consider while buying a property
– Buying a house requires you to think of the right location to be sure that you don’t have to move to another location anytime soon
– Buying a property gives you a relaxed lifestyle and it allows flexibility to modify and make changes in the house. If you wish to lead a relaxed lifestyle, renting isn’t your style.
– Buying a house have a lot of tax benefits on home loans
Buying versus renting a house is a never-ending debate.
Now that you have a good idea of the advantages and disadvantages of both options, you will be able to make a sound decision based on your requirements.
