Pros And Cons Of Buying Homes And Paying Rent

At some point of your life, you have certainly come across or will face a dilemma in deciding whether to rent a property to purchase one in any of the residential projects in India. Well, there are certain pros and cons of either of them and you need to make a careful decision regarding this while buying a new apartment in India. You need to be insightful enough to judge the merits and demerits of both and do the one that is right for you.

Property buying

While owning a dream home in upcoming properties in India or in residential projects in India might seem to be a good idea, it might not be the best idea for each and every one. Mounting rent of apartments and lower mortgage rates have incited many property-seekers to go for homeownership. Property-ownership comes with its intrinsic emotional and financial advantages.

Pros of buying a home:

• Asset base -- Well, buying a home would add up to your asset base, thus giving you greater financial strength.  

• Equity building -- Home values rise and buying a property gives you the financial independence to build equity. As long as the value of your home keeps rising, you will keep on building equity.

• Choice is yours -- If you own a home, you can take your own approach towards maintenance. Whether you would do it yourself or hire a contractor is your choice.

• Stability of home payments -- Your interest payment and the principal amount remain same while you pay back the loan.

• Engaged in a community -- If you are buying an apartment in a residential project in India, you are most likely to become more social and involved in the community.

• Creativity -- It’s your home, so you can decorate it as you wish without having to seek the owner’s permission. You can paint it as you like.

• You can generate revenue -- It’s your investment and you can rent it, sell it or stay. Your home can become a credible rental property.

Well, the advantages of buying a home are obvious, but it also has certain cons. Let’s face it.

Cons of buying a home:

• Spend on maintenance -- Every homeowner has to pay for maintenance, and is required to spend time in keeping the home in a good condition. You have to set aside resources to pay for repair, service, replacements, etc.

• Taxes -- Your expenses on property taxes can rise.

• Illiquid asset – A home is not a liquid asset and, so, if you need to relocate elsewhere, you have to search for potential sellers who can give you the best value.

• Cash investment -- Investment in home needs to be done in cash, foregoing your savings, shares, fixed deposits, etc.

Staying on rent

Now, you might think renting is better. Take a look at the advantages and disadvantages.

Pros:

• No repair or maintenance costs: As a tenant, you do not have to pay for repairs, maintenance, garbage disposal, etc.

• Relocate easily: If situation demands, you can quickly relocate anywhere.

• No taxes: You do not have to pay real estate taxes as a tenant.

• No decreasing asset value: You do have to face the brunt of lowering asset value.

• No down payment and fixed rent: You do not have to pay heavy down payment and can continue to manage your budget efficiently with fixed rent (if you agree on that with your landowner).

Cons:

• No equity building -- Renting does not give you the financial freedom to build asset.

• No creative control -- You cannot refurbish or paint it according to your preferences.

• Zero tax benefits -- Unlike home owner, a tenant can’t get tax benefits.

So, if you are caught in a predicament, have a look at the aforementioned points. The pros and cons will steer you towards making a decision.