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Renting vs Buying


Renting is the process of making a contract between the owner of the property and the tenant to stay in the place of the owner for the possession on agreed terms & conditions and sum to be paid by the tenant at regular intervals as rent to the owner.

Buying, on the other hand, is the process of acquiring the property permanently in exchange for money.

Reasons for Renting:

  • When the buyer is unable to purchase due to lack of funds i.e. called as "rent by necessity".

  • When the need of the buyer is temporarily then he/she goes for renting.

  • Renting does not involve any trouble regarding lifespan and maintenance.

  • Renting can generate profit for the owner.

  • Renting also becomes an alternative option of revenue for the owner.

Reasons for Buying:

  • When a person can afford to buy then he/she creates a pride of ownership and a sense of stability.

  • Buying an apartment/flat gives the benefit of the amenities lifts, car parking, water supply, electricity supply, power back-up, security, etc rather than an individual house.

  • Buying an apartment helps to build a valuable asset i.e. worth more than a place to live.

  • Buying sometimes becomes mandatory for the buyer due to any emergency.

  • Buying can deduct the interest i.e. paid on the mortgage from the taxable income.

Benefits of Renting:

1. Fewer costs: Renting does not involve any maintenance, repairs, and renovation costs.

2.No, down payment: Renting does not deal with a down payment it includes a security deposit which is less than the monthly rent to be paid by the tenant.

3.No, responsibility for maintenance: There is very little or no responsibility for the maintenance by the tenant. The owner is responsible for all the repairs and maintenance.

4. No, long-term commitment: The contract of lease is usually not more than 24 months and sometimes just 12 months.

5.Less Insurance: The insurance of the owner is more expensive than the insurance of the tenant.

Benefits of Buying:

1.Having a permanent roof over your head: Buying an apartment permanently will give you a sense of peace and security as you do not have to live according to the rules and regulations of the owner.

2.No uncertainty and compromise: You can meet all of your expectations by buying a home and also there will be no fear and anxiety for termination of the lease agreement by the owner.

3.Tax Advantage: The owners can deduct mortgage interest on their federal income taxes and can also deduct some closing fees and property taxes.

4.Making your asset: Renting involves payment of rent every month which is considered an expenditure for the tenant but buying involves payment of EMI(Equated Monthly Installment) through which the equity of the home goes up.

5.Design your own home: Buying your own home gives you enormous freedom to design it in your way like changes to the floor, carpeting, paint, etc without seeking permission from the landlord.

Drawbacks of Renting:

1.Rent can be increased by the landlord at any time.

2.Renting a property does not involve any tax benefits.

3.Renting a property neither build equity nor asset.

4.No, changes can be made in the apartment without the landlord's approval.

5.The tenant can be evicted by the landlord at any time and can put the property for sale for revenue generation.

6.The tenant is bound by the rules and regulations of the lease agreement.

Drawbacks of Buying:

1.Responsibility for home repairs and maintenance can affect savings quickly.

2.Rents are lower than the Equated Monthly Installments(EMIs) for apartments.

3.Less flexibility as selling a home can be a long-term process.

4. A homeowner is expected to pay property taxes and other regular fees.

5.Less mobility as a tenant can leave after fulfilling the notice period of one month rather than being able to move home.

6.The homeowners have to pay utility bills and also cannot deduct utilities on their tax returns.

Key Takeaways:

1.Renting versus buying a home is a personal decision that depends on an individual's present and future state of affairs.

2. Financially, renting versus buying rely upon the affordability of a person in maintaining a home.

3. Renting versus buying decision not only depends on the person's current income but also future income.

4.Renting provides flexibility and liquidity while buying offers stability and tax benefits.

Special Considerations: The decision of renting or buying is not at all simple. One has to consider various factors such as investment goals, family needs, lifestyle, financial resources, etc. Furthermore, research has to be done and a piece of expert advice is also necessary for assistance in the decision-making process. A study on home loan tools is also crucial to check the affordability to borrow and also how much repayments would be.

The 5% Rule of Renting Vs Buying: Take the value of the home that has been considered, multiply it by 5%, and divide by 12 months. If the rent is less than that, renting then will be a sensible financial decision.

Conclusion: The real estate sector is one of the most globally recognized sectors. In India, real estate is the second largest employer after agriculture. Most people think that they can afford to rent a house as they do not need to worry about the furnishing, maintenance, and repairing as it is already done by the owner. However, renting a house is a costly affair as much as buying a new one. It is better to buy a house as if the person will take into consideration the loan and all the expenses of one year to spend on a rented house then he/she will realize that it is not at all worth it. Buying a home is not just about possessing a place, it is both for investment as well as for emotional reasons that will give you abundant returns throughout your life.

Ultimately, Renting a house will involve fewer costs, no responsibility for maintenance, no long-term commitment, no down-payment, and less insurance. On the other hand, Buying will involve a permanent roof over your head, no uncertainty and compromise, and various other tax advantages.


By Team Sunita Developers,

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