When it comes to buy vs rent a property, two category of considerations comes into play. One is financial and another one is non financial. Read our sell my house colorado springs site.
Usually financial considerations are more influential as these are tangible so we will discuss the financial considerations while buying house (flat, villa, apartment, condo etc) for self use.
- Financial Considerations to Buy House
Before putting any thoughts or making assumptions, lets do a small homework. Find some data on two similar or almost similar properties in same locality out of these one should be available on rent and another one should be available to sell. This will give you an idea on rental cost as well as cost to buy. Now calculate the purchase price vs rental cost (P/R). If your P/R ratio is less than 20, it makes sense to purchase the house rather than take it on rent.
- Investment that can beat Inflation
The bank interest is never a positive return. If you get 1% interest rate and inflation is 4%; it means you are getting 3 negative returns i.e. you will need 104 AED to buy but you will have 101 AED only. Housing is an investment, which not only beat the inflation but also give you positive returns. So your wealth will be appreciated in invested in real estate.
- Capital Appreciation
Buying a house will not only give you relief from paying rent every month but also adds capital appreciation every month or every year. The rent saved can be used to pay mortgage payback.
- Rent Stabilization
When you take the property on rent, rent increases every year while if you buy the house, the installment to repay your mortgage is same. So may be after 5 years when rent is doubled, you still pay the same installment as 5 years back.
- Non Financial Considerations to Buy House
The finding a suitable house is always a nightmare irrespective of the fact that you are searching it for rent or to buy. Buying a house will get rid of searching a new house every time your rental contract is completed.
Owning a house gives you better credibility in the society as you are considered as more stable neighbor that tenants.You can customize your house interior as you wish as nobody stopping you to do so. However its always restricted through tenancy agreement and also it does not make sense to invest in rental house.
To maximize the benefits in your buying decision, you can time the buying decision at a time when real estate market is in slowdown phase so that you buy at the lowest price which means lower mortgage repayment installments for years.