Financial Services
    19 August 2019

    Michaela Stehr

    Is it better to rent or buy?

    Both renting and buying a property have pros and cons. We break them down to help you make an informed decision.

    Both renting and buying a property carry advantages and disadvantages, depending on your lifestyle. We break down both options to help you make an informed choice on what suits you best.

    One of the benefits of renting is that it allows you the freedom to move

    Pros of renting

    • Renting allows flexibility. If you are unsure of job stability or where you want to be based, renting offers the opportunity to move around freely without a long-term commitment. Generally, it's also easier to find a new tenant to take over your lease than to sell your house if you have to move.
    • Renting can be more affordable than buying in certain areas. And while you're renting, you can save so that if a bargain comes up in the area in which you wish to live, you can make an offer immediately.
    • There's less responsibility involved. All repairs and general maintenance are usually the homeowner's responsibility.

    Cons of renting

    • Limitations. Tenants are bound by terms dictated in a lease agreement, which may restrict your freedom to modify, renovate or use the property.
    • No wealth creation. There is no return on investment when renting as you are actually contributing to the owner's home loan.
    • Lack of stability. There is no guarantee your lease will be renewed. You also have no control over rental markets or inflation, which may mean your rent could become unaffordable.

    One of the benefits of buying is that it can be financially rewarding

    Pros of buying

    • Security. Investing in a property offers long-term physical and financial security.
    • Potential for wealth creation. Home values appreciate over time, which means you may make a profit on a sale. However, note that external economic factors could result in you selling at a loss, so you have to carefully weigh up when to sell. You can also rent out your property and generate additional income. If you have an access bond, you can also refinance your bond if you need emergency cash – a real emergency, such as needing to pay school fees or fix a broken geyser.
    • Freedom to make it your own. In most cases, owning a home provides you with the scope to make it your own with renovations and decorating. There are no restrictions enforced by a landlord (although heritage buildings and sectional title homes may come with limitations).
    • Improved credit score. Monthly payments show you can handle large amounts of debt.

    Cons of buying

    • Responsibility. Buying a house is a big financial responsibility. Not only will you have to pay off a bond, but you'll also have to maintain the property.
    • Limited freedom. Owning a home can tie you to one spot, making it difficult to move for a new work opportunity or relationship or family matter.
    • Additional expenses. When calculating whether you can afford to buy a specific property, you must also consider extra costs such as taxes, maintenance, rates and insurance.

    If you do decide to buy a house and you need insurance to cover the bond in case you're unable to (in the event of your death or if you're injured and can't work, for example), check out Vodacom Life Cover. Premiums start from as little as R92 per month, no medical tests are necessary, and it's super easy to sign up online!

    Header photo by Tierra Mallorca on Unsplash

    Michaela Stehr