With varying articles and opinions shouting the merits of renting over buying, it's tempting to believe it's true without a shred of doubt. But really, how much better is renting compared to buying, or is it really better?
The deal about Renting > Buying
The main argument supporting the idea of renting over buying is getting more 'bang for your buck'. Instead of having more capital locked up in a property, a renter is expected to generate far more income from the capital and thus build more wealth over time compared to the property's appreciation. This is even when taking into consideration the cost associated with renting.
This seems doable in theory, but how true is it for most of us?
Aaron sincerely believes in this for most of us: That you should buy a property rather than renting.
Investment Abilities
Today, if you are very confident in your investments and very good at guaranteeing returns, then why not. By all means, choose to rent rather than buy. By being able to invest and earn enough money to exceed the value of a house of your own, fantastic.
Such investment abilities and results do not come easily for everyone, so note this especially if you are thinking of borrowing with leverage to buy your stocks, REITS or crypto even.
Issues with Renting
For renting a property, it's usually for a 1 year or 2 years period. There is hardly any rental contract that goes beyond 2 years for residential rentals. After the end of each rental period, the owner can then decide if they want to increase prices. There is only maintaining the same rental price or increasing, never a fall in prices. At least, it has not been seen by us before.
For price increases, it's true that a $50 rise per month would not be that significant anyway. However, other issues that arise with rental include things like restrictions on furnishing, furniture, design ideas and more. You would not be able to buy your own furniture if the landlord already has furniture in the house, other restrictions include paintwork, dealing with the landlord/owner's demands and rules.
With rented houses, tenants would not take care of the property as well as if they were owners. With that, after several rounds of tenants, the house condition will likely have deteriorated.
One last consideration for renting is the constant need to adapt with house shifting being a relative constant. After settling down in a 'new home', it's not long before the rental period ends and you end up thinking about your next move.
These are some drawbacks that tend to be omitted when talking about renting over buying.
Calculated Risk
After all, there is no real 'right' vs 'wrong' in the debate of buying over renting or renting over buying. There are always risks included with any form of financial investment decision. For Aaron, property represents a way to calculating in a transparent way and thus buying is an easier risk to take, upon calculation.
Watch the video before as Aaron dissects the debate between buying and renting!
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