Many people struggle when making financial decisions: should they rent or buy?
When it comes to buying vs. renting a condo or house, the answer to this question can be less clear-cut, and each option comes with its own set of advantages and disadvantages.
In this blog post we take an in-depth look into both options so you can make an informed decision regarding which is the better fit.
So, if you’re trying to decide between buying vs. renting a condo, just keep reading.
Buying vs. Renting a Condo: Which is Best?
Renting offers you flexibility, which is one of its biggest advantages.
You don’t have to sell the property or take on long-term financial responsibilities, making this an excellent solution for people who prefer flexibility over commitment.
Maintenance on rental properties
One of the other major benefits of renting is that it can be advantageous when something goes wrong in terms of maintenance.
Your landlord is in charge of repairs or replacement costs and thus no further worry or stress needs to be placed on you.
Costs of renting
Renting is generally less costly than owning, with no large mortgage amounts but in some cases you might have to put down an upfront deposit, which can equate to a month or more of rent upfront.
However, with the often smaller rent amount you need to pay per month, it does make budgeting your monthly expenses simpler.
If you aren’t having to spend a tonne of your income on rent payments, you could even consider a more aggressive budget such as the 60 30 10 budget, which focuses on saving 60% of what you make for the future.
Security of a fixed term
As part of your rental lease agreement, it’s common to sign a fixed-term lease.
This gives you some security during that period because the landlord won’t be able to increase your rent.
Something to be mindful of though, is that when your lease ends the landlord can choose whether or not to renew it, as well as whether to increase the amount of rent they charge.
Disadvantages of renting vs. buying
While renting offers a lot of benefits, it can also have its drawbacks.
For example, equity won’t build and tax benefits won’t accrue to you as quickly if you don’t own your home.
Furthermore, since it isn’t yours, you can’t change or modify it whenever or however you want.
When you decide to buy property, you become the owner and can make changes without consulting anyone else.
In addition to that, buying allows for building equity in the property which could provide financial security in the future.
There are also various tax advantages if you own property, such as deducting mortgage interest or property taxes from your taxes.
Renovate how you like
When you buy your own property, you have complete and total freedom.
You can change what you want: build, paint, mix things up inside – just make sure that all your permits are in order!
When you own your property, you have no worries about anything coming off your deposit, and if you do something that increases the home value – score for you!
Costs of buying
Owning can be more expensive than renting.
When signing the purchase agreement, be sure to factor in closing costs, down payments and any additional expenses such as interest charges – use Mortgage Quotes as a comparison tool and you could find your ideal rate!
You should also be mindful about whether your property will become an asset or a liability.
I talk about this concept more in my review of Rich Dad Poor Dad by Robert Kiyosaki, but essentially, it is important to understand the difference between assets and liabilities when it comes to finances.
To use buying vs. renting a condo as an example, many people believe that owning property is the best asset they can have, but if you can’t actually afford the upkeep of that property, it ceases to be an asset and instead becomes a liability.
Bills, taxes, renovations and repairs are all things that cost money, and if a large portion of your income is being sucked up by your property every month, then your asset is draining your wealth rather than working for you, which is what an asset is supposed to do.
Maintenance of owned properties
As we just touched upon, when you are the owner of a property, you are ultimately responsible for its upkeep and maintenance.
This is an expense which may vary based on the condition of the property when you bought it, upgrades that you want to do and any repairs that must be made over time.
When renting, this is the landlord’s problem.
Owning a property can give you peace of mind
There’s no doubt that the biggest benefit of buying vs. renting property, is that unless you default on your mortgage, no one can put you out of your home!
There is no worry about whether your lease will be renewed or if you will be able to afford increased rent amounts, as well as unreasonable landlords.
Knowing that you will always have a roof over your head will really provide you with a great peace of mind!
Buying vs. Renting a Condo | Final Thoughts
Overall, your decision when it comes to buying vs. renting a condo or house is ultimately determined by your individual financial situation and lifestyle preferences.
Careful consideration must be given to all aspects before making any definitive decisions, but no matter which option is selected, it’s always wise to have an emergency fund just in case unexpected costs arise.
That’s about it for today, but as always, if you have any questions then don’t hesitate to reach out in the comments section below.
Until next time,