Media Coverage
Property Renting vs. Buying
26/08/2008
Whether it’s the commercial or domestic property market you are interested in, the decision between buying and renting can mean the difference between a financial golden goose and a financial burden.
One of the main advantages of buying as opposed to renting property is the sense of ownership one is rewarded with upon signing on the dotted line – no fear of rising rent or eviction. A piece of land on which to lay down roots is one of the most basic human needs, but is also one the biggest investment decisions most of us will have to make within our lifetimes.
Property can be a worthwhile investment, either yielding massive potential returns or creating a resale loss depending on the market at purchase and sale. It is essential to monitor the market to ensure that you buy or sell at the perfect time to minimise risk and maximise returns.
The Advantages and Disadvantages of Renting Property
Renting property is often regarded as a financial mistake – but sometimes it makes more sense to rent than to buy property. Many believe renting to be a waste, as your hard earned money goes straight into a land lord’s pocket instead of going towards an investment you are trying to pay off. However, many people know the advantages of strategic property rental. Renting may be a good mid-term decision.
Unstable or fluctuating markets can be ridden to success. Buying, selling or renting at the perfect time can save you, or make you a lot of money. During periods of market uncertainty, leasing temporary premises may give you the grace you need until it is time to make your next move count – bide your time rather than rush into a deal.
Another instance in which it may be feasible to lease property for a set period of time would be when constructing new premises. Many home and office owners fork out much more than required on temporary space during construction, when a mid-term solution would suffice.
As most people will tell you, it’s more fulfilling making monthly payments on a finite mortgage towards a so called ‘bigger picture’ investment, as opposed to monthly rental payments to a landlord, which are simply monthly rental payments with no visible end.
But is paying a mortgage always the way to go? Although mortgage payments don’t last forever, paying a landlord for property rental will most likely be significantly cheaper than a monthly mortgage.
Calculate your potential mortgage based on your available resources such as monthly salary and any lump sums which you may have available. If you know the regional value of the property you are interested in, calculate how much the monthly mortgage for that price range will be and compare it to how much you are currently able to afford.
Consider all the hidden costs and legal fees, pre-payment costs, taxes (such as transfer duties), insurance, utilities and any third party expenses you may accrue along the way – and always read the fine print!
Contact a representative from your bank, or a property market specialist in your area, and ask for help setting up figure forecast estimates so that you’re not blindsided or crippled by an incorrect or incomprehensive budget.
Purchasing property with the intention to lease it out to tenants has many lucrative benefits. Although you as the land owner will have to consider the maintenance and upkeep as well as legal fees and taxes, leasing out a secondary property can bring in a large amount of money every month – money which could help with a mortgage. Once the mortgage is paid off, the monthly payments from the tenants can be used towards maintenance or other property leasing projects.
Property24 is South Africa's biggest online property listing. Whether you're looking to buy or rent a house or flat and even farms and commercial property - Property24 is your non-stop portal to the largest collection of local property market listings.
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