Pros and cons of rent vs. buy

There are pros and cons to renting a property, just as there are to owning a home. 

Both options have their own advantages and disadvantages, for example renting allows you more expendable money in the short term, while owning a house gives one the sense of security as it is considered a long-term investment. 

Let’s look at all the pros and cons to help you make a well-informed decision of what will suit you, right now.

Advantages of buying a home

* Owning a home offers the long-term benefits of security, equity and potential growth in personal wealth
* The value of a home will appreciate over time and if you decide to sell, you can earn a profit off the sale.
* When you buy a house it becomes your legal property, which allows you greater freedom in its use without restrictions often enforced by a landlord.
* Being a home owner allows you creative control of your property. You can alter the property, including décor changes, landscaping and renovations, to suit your needs and your style.
* You have the option of buying to rent which enables a home owner to generate income from renting out the property. This income can be put towards the home loan.  
* Being a home owner who ensures repayments are made on time can improve your credit profile. Not only will you have a large investment to your name, but paying your monthly bond repayments on time increases your credit score.
* You have the option to refinance your bond amount should you wish to withdraw a large amount of money to pay for major purchases.
* There is an opportunity to save money in the long term as there are possible tax deductions related to income-generating properties. (Amended from previous erroneous statement: There is an opportunity to save money in the long term as your monthly bond repayments are tax deductible.)

Disadvantages of buying a home

* Being a home owner comes with huge financial responsibility including bond repayments and regular house maintenance.
* There are additional costs to homeownership and these usually include rates, taxes, insurance and maintenance for which the home owner is responsible.
* A home owner runs the risk of not making any profit through resale. This is often caused by economic factors such as a recession or high interest rates, or simply through a particular location becoming less desirable.
* A home owner has less mobility when it comes to being able to move home than a tenant who rents on a short-term basis. A tenant can leave a property after fulfilling the notice period, which is usually one month. However, a home owner is likely to be dependent on selling their home before being able to buy a new one, and therefore it might take longer to be able to move homes once the decision has been made to do so. 

Advantages of renting a home

* Renting a property allows more flexibility than owning a home. This is ideal for those who could be faced with sudden changes such as a job relocation. Renting requires no long-term commitment from a tenant, and is the best option if you don’t intend on staying in one place for a long time.
* As a tenant, there is the possibility of living in an area in which you could not afford to buy.
* Moving out is easier for a tenant than a home owner as there is no stress of finding someone to take over the lease, or finding a buyer to purchase the property as this is the responsibility of the homeowner or landlord.
* The only insurance required by a tenant will be to cover the contents of the home, while all maintenance work on the property is for the home owner’s account, as is home owners insurance.
* After paying rent, a tenant may have additional money which they can use to invest elsewhere, whether it is saving towards buying a house or investing in the stock market, and need not worry about putting additional funds into a home loan.

Disadvantages of renting a home

* A tenant is bound by the rules of the lease agreement, which can impact the freedom to use or renovate the property.
* You cannot make changes to a rented property without the consent of the home owner.
* When renting, you will often have to deal with a rental agent who will then be the liaison between you and the home owner. This can result in issues taking longer to resolve since there is a 3rd party involved.  
* Renting offers no wealth creation or return on investment since the property will never legally belong to the tenant, and instead, the tenant is paying towards the home owner’s home loan.
* When renting a property, you will have no control over annual rental fluctuations which are directly affected by inflation.  
* There is no guarantee that a lease will be renewed when it expires.

- Article courtesy Property24, SA's leading property portal offering houses for sale, and property to rent in South Africa.