Renting v buying: How does it stack up for you?

Deciding to make the plunge into home ownership can have many considering whether they’d be more secure buying or renting. There are certainly pros and cons to both.

Entry and exit costs

If you’re going to buy a property, you’re looking at paying some hefty entrance costs, and exit costs if you decide to sell. Consider stamp duty, conveyancing fees, building and pest inspections and all the other smaller costs that make up the purchasing journey and you’ll find yourself at an eye watering sum – not to mention removalist fees. When looking to rent, or move to a new rental, you’ll usually be looking at just the removalist costs, and the bond. This upfront cost can have many put off from the get-go, and certainly if you’re going to buy a property you’ll want to make sure you don’t intend to sell it again quickly.

Risk and gain

Purchasing a home can be a wise investment if undertaken wisely. Unlike those who do not own their homes, you have the potential to achieve capital gains by holding on to an asset. However, you also run the risk of the property dropping in value. While a renter is not in any debt from their home, you will be facing interest and, usually, an amount of debt for a period of time – this ensures there is a level of risk when owning a property.

Maintenance

As a renter, you don’t need to pay when things break from age or from need of upkeep. Certainly, any damage that you do will need to come from your own funds, but by and large the landlord will pay to keep things in working order. As a home owner, this becomes entirely your problem.

Despite this, you’ll find that the maintenance you undertake benefits you directly and you can get things fixed at your own convenience at your own home. As a renter, you largely rely on the accessibility of your landlord to undertake repairs and organise and fixes.

Improvements

As a tenant, you can certainly ask for, or offer to install, certain things to a property. For instance, fly screens and air conditioning are regularly asked for additions. However, the landlord doesn’t necessarily have to agree to your request. And, you may find yourself either covering the cost or seeing your rent inflated at the end of the term as a result.

As a homeowner you can make improvements whenever you want – changing paint colours at a whim, undertaking renovations, changing the garden or whatever it is you feel like. Of course, this comes at your extent, however any money wisely spent may increase the value of the property and in turn may be funds back into your pocket.

Housemates

As a home owner, you can rent out one of your rooms to another person for assistance with the mortgage repayments, much in the same way that you can share the cost of renting with someone else. As a renter, you will need to get permission from the landlord or property manager to allow another tenant into the property. As a home owner, you can do as you like.

You can also choose exactly who and when people enter your home. While tenants aren't without some choice, a property manager, with the right notice terms, does have the ability to inspect your property - and you don't get to choose the tradespeople that do the repairs or the property manager/landlord that you end up with.

Freedom

As a home owner, you can do as you like in your own space. Have pets? Want to smoke indoors? You can do as you choose. In saying this, the freedom of moving on from one property to another can become more limited as a home owner. To afford your initial property, you may find yourself needing to move from a more expensive suburb you can afford to rent in to a suburb that isn’t necessarily your first choice.

If your property drops in value, or if you find yourself unwilling to contend with the entry and exit costs, you may face a longer period than you envisioned living in the property. If, however, you are in a comfortable financial position – you may see yourself able to turn the property into an investment and return to renting, or purchasing a separate property as a home.

Alternatively, if you’re in a lease you cannot afford to pay out, you will be required to stay within the rental property until the end of the period. You may also find yourself required to move due to increasing rental costs, the investor selling or looking to put a different tenant in the property. Regardless of how diligent a tenant you have been, you can face costs.

Insurance and ongoing fees

Renters are lucky in that the costs they need to contend with can be quite low, with some landlords covering heating and water. While electricity and contents insurance, as well as other fees, fall on the shoulders of renters, other costs do not. Sewerage, rates, strata fees, building insurance – these costs must be handled by the property owner themselves. This can work out quite costly.

What pros and cons do you think first time home buyers should be thinking about?