The Pros And Cons Of Buying Vs Renting A Home

Many feel that purchasing a home is a better long-term investment than renting. How long you plan to stay in an area is a key factor in deciding between buying vs renting a home.

If you've lived in a place for a while, it might be better to buy. But there are other factors to consider, such as the state's economy, your financial responsibilities, and the ongoing cost of living. Which of these two options is preferable for you in your current stage of life? It’s a big decision, so we’ve put together some information to help you.

Buying a Home

The pros:

1. Freedom to modify and renovate your property: When you own a home, you can paint, remodel and landscape without needing to ask your landlord or breaking a rental agreement.
2. Wealth creation: Depending on the market, your house may appreciate faster than inflation. Examine all location factors that may affect a property's worth before buying to establish if it’s a good investment.
3. Financial and personal security: Renting is riskier than buying. Owning a home means you won't have to move due to an expired lease or high rent. Home ownership might also be important in retirement.

The cons:

1. Foreclosure risk: If you don't pay your mortgage, you risk foreclosure and repossession. A lender forecloses when a homeowner stops making mortgage payments.
2. Large upfront costs: Saving for a housing deposit can be tough. The required housing deposit varies with some loans requiring a 20% deposit on the property's worth.
3. Ongoing costs: Homeowners must pay for things like upkeep, repairs, and property taxes. There may be additional fees if your home is located in a body corporate community. When you add everything up, these costs can quickly become unmanageable.

Renting a Home

The pros:

1. A greater potential for financial savings: Depending on the location and type of property, renting can free up cash to invest or save. This can reduce financial stress while starting a business or a family.
2. Diversify your investments: Renting may seem like dead money, but it might help you explore other investment alternatives. Renting may not guarantee long-term gains, but it doesn't risk negative equity like real estate.
3. Maintenance isn't your problem: Council rates, home insurance, general maintenance and repair fees are usually handled by your landlord, unless you cause the damage.

The cons:

1. No investment potential: Some homeowners pay off their mortgages, but rent is permanent. Rent contributes to someone else's mortgage or investment income, unlike loan repayments.
2. Inadequate privacy and security: Changing markets and landlord whims make renting unpredictable. Moving is unpleasant and expensive if your landlord sells.
3. Limited freedom: Renting gives greater location and housing choice flexibility, but a landlord may limit your capacity to decorate. Your landlord may also prohibit aesthetic changes and pets.

Conclusion

Renting offers an ideal lifestyle, independence and flexibility, but buying a home is the great Australian dream. What's best? For some, buying a home is a major accomplishment, while others prefer the flexibility of renting. Have a think about what you value most and determine which option aligns best with your goals and lifestyle.

If you’re still unsure and tossing between buying vs renting a home, get in touch with your nearest PRD office and have a chat to our friendly staff for more advice.

Disclaimer: The information provided is for guidance only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. PRD will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.