When renting makes more sense than buying a new home
Some of the most difficult decisions an adult has to make revolve around property. Specifically, ‘do I rent or buy a place?’. The popular myth right now is that buying property is more of an investment in the long-term, whereas renting is just a waste of money.
But that’s all it is – a myth.
The reality is that typically, property barely keeps pace with inflation at large. And aside from the original loan you’ll have to pay off with time, the additional costs that go into the upkeep and customisation of a home mean that it’s unlikely to give you a profit value over what you put into it.
You have to look at a primary home as a good purchase, not as a good investment. Being a homeowner may not be the smartest of choices in today’s market if you’re looking at your home as the latter, instead of the former.
Even after seeing the myth for what it is, you might still be on the fence about renting when reading that in 2015 a one-bedroom apartment in Malta costs up to €605 a month – no small amount, by any standard – and prices don’t seem to be going down any time soon.
You’ll be asking yourself, ‘If it’s going to cost me up to € 7,260 a year to rent out a place, I might as well just save up my money and buy my own property, right?’
No, not always right.
The danger of the rent vs. buy argument is to oversimplify the individual factors that go into making such a decision, or worse yet to lean towards extremism and go for an all-out approach for either of the two options.
For example, here are just three of the pros to renting instead of buying:
A rented place means no hidden costs in maintenance, repairs, and other issues.
The opportunity cost of the taxes and loans you’d have with a purchased property can instead be invested in high-interest savings accounts, or in stocks which will have big financial pay-offs in the future.
Renting = flexibility of movement should you suddenly need to up and change your location.
The bottom line is that there is no all-encompassing answer to the ‘rent or buy’ question. Rather, the only conclusion is that ‘it depends’.
It depends on your unique situation right now in life, which itself arises from many other factors like job security, financial success, personal preferences, social needs and so on.
The ‘it depends’ conclusion is all well and good, but it doesn’t help much. That’s why we’ve compiled a few questions you should ask yourself before making any big decisions:
How long do you plan on living in one place?
If you’re planning on staying put for a long while, say fifteen years or more, then it makes sense to buy a property. But, if you think that by then you’d be in a better financial situation and might want a better property, or you think you’d want to try some new scenery, then renting makes more sense by far.
How secure are you in your job?
Buying a property means you’ll probably have to take out a loan with your bank, which means you’ll have to pay it back in instalments. Consider a situation where you or your partner are out of a job – would you still be able to pay-off the instalments then?
Are you prepared for the responsibility?
Being a home-owner comes with a lot of responsibility, not just to the house itself in terms of insurance and loans, but also to the community you’re living in. If you don’t think you’ll have the time or patience for that – then just rent a place and leave it to your landlord instead.
It all comes down to what your personally consider affordable. You have to sit down, crunch some numbers, do some hard thinking about your current situation and where you see yourself in the future. But don’t make the fatal mistake of automatically assuming that buying is best – you never know, renting can truly be the best option for you.
Having said that... if you are sure of where you want to live and are prepared to settle down, financially it always makes sense to purchase in the long run! ;)