Today we’re going to talk about what is
Is it better to Rent or Buy a PROPERTY? The FIVE FACTORS that affect your decision whether to BUY or RENT first
Today, we’re gonna talk about should you rent or should you buy a property?
We’re excited to bring you this topic because this is always a perennial debate whether one should buy a property or rent a property. What are really the advantages? I’ve actually met some people who never believed in buying a property because as you know, nothing’s permanent. You just stay on earth, live your life and then that’s it, then you leave. So, you don’t really own anything. So, that goes against every single facts of buying, right? But in terms or income, long-term investing and planning, and recovering your money, there could be some advantages when you’re buying a property instead of renting.
Is the decision really just as simple as ‘if you cannot afford to buy you rent first’? Is it really just that or does it entail some more critical questions that you need to answer before you decide?
Today, we’re gonna talk about some of these factors and some of these questions that can probably help you decide better which route to take, because there are so many options. Life is great. But when you get to this level when you’re starting a family, you wanna buy a property, you wanna settle down, you probably, you know, you wanna make a decision on these things. You could actually move it later or change it later if it’s gonna fit your plan.
So, I’m going to give you a few tips and tricks on how to make the most of this situation in your life.
#1 PRICE
First is the price. Buying a property versus renting a property could really, really have a vast difference. Say for example, you wanna rent a few bedroom and a condominium unit. It could really cost you roughly around 20, 20 million nowadays. If you wanna rent the same apartment, it’s gonna probably cost your around a hundred thousand. So, 100,000 times 12, that’s only 1,200,000, versus 20,000,000 which is a huge, huge difference. Now if you don’t have the 20,000,000 right away, it’s probably, of course it’s gonna make sense if you need to live in the area, to probably lease, versus to buy a condo.
Normally, the lease rate is a percentage probably 2, 3, probably 6, 7% depending on the rate at the time that you’re renting. It’s only a small percentage compared to when you buy it. But one of the major considerations of course is definitely the price.
#2 PERMANENCY
The second more important question you should be asking yourself is ‘will you be there in the area permanently?’ Are you gonna be staying there for a year or two? If that’s so, probably it will even make more sense to just rent. If you’re gonna be staying there for a longer amount of time, say for example, 10 years, 15 years. If you’re gonna be staying in a place longer, maybe it’s a better idea to buy. Now, it all comes down to your lifestyle. What do you wanna choose? Now, I know that rental after that month, it’s gone. You don’t really own it. But you’ve really used it. You’ve lived in the space and you were able to use it on a day to day basis. So, it’s not really exactly wasted. But if you have the money to buy and you wanna preserve the capital so that you can probably upgrade later on then buying a property could also be a good option.
#3 IS IT YOUR DREAM PROPERTY?
Number three. Is it the property or location of your dreams? Nowadays, given the price range of the properties, most especially the ones in the city and even in the suburbs, it’s really starting to get more expensive as we go forward in time.
You have to ask yourself before you buy a property, ‘Do you really want it?’ ‘Is it the house of your dreams?’ Is it the location of your dreams? Do you really wanna settle there for the longest time or does it really work with your lifestyle? If you see yourself living there for a long time, and it’s something you’ve always wanted, then probably the best choice is to buy.
But if you feel like it’s temporary and you wanna still look around or you’re not kind of sure, maybe it’s also a good idea to try out the place first. Check the traffic. Check the travel time. Check the schools. Check the neighbourhood if you will really like it. Probably it’s best to just try it out for a year or two. Then you decide from there, to buy a property or just continue renting there. Or probably transfer to someone else.
#4 INCOME and CASH FLOW
Number four. This is in correlation with the price but this has more to do with the income. Are you ready with the financial capacity to spend using your extra unneeded money?
Normally, buying a property is one of the biggest purchases of your life. That’s why I know you’re watching this video. You wanna get more ideas, how to actually manage your finances properly when it comes to these kinds of decision.
What I would advice is if you wanna buy a property, I know you love your kids, family, you wanna provide the best home. But, you need to be at a spot where you can actually probably have at least 20, 30 or maybe tops 40% extra income that you can allocate for the monthly amortization of your home. Because that way at least you’re able to manage the family’s expenses.
Savings first, investment, expenses and then extra.
That’s how you should prioritize your expenses. Now, this extra, the last portion if you have that excess for a home since you will be sitting on it, you will be living in it rent-free. But it’s not gonna be giving in cash flow right away.
I think it’s important to consider that it should be a manageable portion of your income. So that you don’t get to be on a rat race, working just to pay off a loan. It should be something manageable, of course, ideally. But if you feel like that particular amount should only be on the rental, it would only afford you a rental, then that could also probably work. But if you feel like that amount is gonna be wasted, because you want to be there permanently, on a longer terms basis, then probably it’s best to buy a property instead. Because later on you can also sell it, earn from it, then move forward and upgrade to the next property.
#5 THE LONG-TERM and SHORT-TERM PLAN
Next and I think the most important portion of deciding, whether to rent or buy, is ‘What really is your plan?’ Are you planning to stay there permanently? Are you gonna be working there? Is there a possibility of relocation where you work? Is there a possibility of transferring the kids to another school? If they have better prospects of studying somewhere else.
You know, all of these things have to be taken into consideration. What’s your plan? Gone are days that you just buy it and you live off it and then that’s it. And then it becomes the home where you all grew up. That’s fine at all. There’s nothing wrong with that.
But in your life as your career grows, as your income grows, as your lifestyle grows, and the quality of life grows, it could really work for you if you’re able to leverage this. For example, you got married, there’s only two of you, you’re deciding where to live. You buy a property which is good enough for you and a little kid. And as the income grows, the property value hopefully also grows in the area. And if you’re able to sell it, you have that extra income because the property value has also grown, grown over the past few years. You can use that to purchase the next one. And then now you have a bigger property, a lawn, probably a 3-bedroom now. And then you have some more garage space. And then if you feel like the family’s getting bigger, you get a promotion, you can also use the increase in property value and upgrade to another one. I’ve seen it happen. There are some clients who, you know, as they move forward in life they upgraded. And they’ve used the proceeds of the sale of the previous property to buy the new one. Until such time that they’re already living in the property of their dreams.
So it could also work for you. I’ve also seen some families, they rented first, it cost much less. And they saved up so that come time to buy the property of their dreams, they were able to buy it right off the bat.
So, what did we learn today? Today we learned that buying and renting, even though they are opposite, one is not exactly better than the other. But as far as we’re concerned, it’s about your plan, it’s about your life. You have to choose which one will best fit your lifestyle. And where you wanna be in the next few years. It’s very important to take a look at it from a bird’s eye view perspective rather than too close. And you’re just looking at one factor whether it’s money, its space needs, its location, its plan, you have to take a look at all of these factors for it to be probably the best decision for you and your family.
