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In order to decide whether you should
buy or rent your property, there are a number of factors you must
firstly consider. The following passage evaluates pros and cons of
renting and buying.
Renting a Property
Renting a property permits a certain level of flexibility (subject to
your contract terms). At the same time, renting simplifies life by
removing numerous liabilities which you take on by buying a property,
for example quite often there will be supplied furniture or repair
costs will be landlord's responsibility. The cost of moving into a
rented property is often much lower and can be broken down into two
distinct categories: initial and reoccurring costs. Initial costs
include deposit, agency fee, hire of transport vehicle, land-line
telephone connection, etc. Reoccurring costs are rent (usually the
most expensive single element), utility bills, and other living costs.
The contractual agreement can sometimes be as short as one month
(however six or twelve months are most frequent); this gives you a
high degree of mobility in case there is a sudden need to relocate.
Furthermore, the contractual agreement often includes a
"break-clause", which enables you to end your occupancy early without
having to pay full remaining rent liability.
It is often the case that repairs are landlord's responsibility;
therefore this reduces the risk of sudden financial demands on your
income. Finally, renting permits a relatively inexpensive method to
move into an unfamiliar neighbourhood; therefore, you can take your
time to understand the advantages and disadvantages of living in that
area, before making a significant financial commitment (purchase of a
property).
Buying a Property
It is fair to say that the earlier you take your first step up the
property ladder, the faster you would be able to climb it. However,
this is often constrained by your financial ability to do so. The
costs arise from a number of factors, including the initial deposit on
property, surveyors' and solicitors' fees and ongoing loan payments.
In comparison to renting, you should expect higher move-in costs, such
as furnishings, repairs and house insurance.
However, repayment of loans does make financial sense, as opposed to
paying rental charges (which you will never gain any returns from).
Purchase of property is an important investment decision, which
enables you to gain a valuable asset. However, acquisition of such
asset also brings with it a number of financial liabilities, which you
must consider and evaluate. The questions you need to ask are - how
capable are you to meet the relatively higher ongoing costs? And will
you be able to overcome any unforeseen circumstances, such as urgent
repair work?
Summary
At the end of the day, it all comes back
to risk and return - the two most important components of any
investment decision. Renting a property involves a much lower level of
risk and financial demand. However, it is only by purchasing a
property and by paying off the loan, will you be able to acquire an
asset with significant and relatively stable value.
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