I have finally finished paying my student loans, after many years of hard work and endless budgeting! To celebrate the big burden off my chest (and off my financial records) I went to a short vacation in Liverpool. You know just for a change of scenery and some good old food and views.
After the vacation, I ask myself, what is my next project? Now that a huge bulk of my monthly earnings became available for a different investment, I am thinking of directing these into something long term.
As a young professional, I watched tons of videos explaining that real estate investment is a good way to invest my hard earned money in. I mean, I do not see why not? The value doubles or triples in a generation, and to some people it is better than banks or stocks or other financial instruments.
Looking at my finances, I spend a considerable amount of money for my monthly rent, that is a given. I actually listed some pros and cons when it makes sense to rent vs buy a house in the UK.
Here are my points when renting is better:
1. When you are a single person earning a single income.
Let’s face it, single life is probably one the best parts in our existence. We only tend to ourselves, focus on our growth and career prospects. There is not much to be worried about except making sure you provide for yourself. Since you are single and currently earning a salary enough for yourself, it makes more sense to rent. This is due to the fact that you do not have enough financial buffer to anticipate the costs of having your own house. Renting is the way to go!
2. When you couldn’t be bothered with the upkeep.
Even if you are married and live in a double income household, renting gives you so much flexibility that buying a house can’t give you. One is the maintenance of your house. In renting, you just pay the monthly upkeep and let the landlord do all the repairs/repainting/refurbishing and what not. Stress free as they say!
3. When you have no deposit/capacity to pay for mortgage
Renting is just giving one to two months deposit. You will not be burdened to produce a significant chunk of the cost of buying a house. You have no 100000 pounds lying around as a deposit? Then stick to renting.
Here are my points when buying is better:
1. When you are thinking of starting a family
There is what we call economies of scale. In having a family, the cost per person decreases, meaning in the long run it is better to buy a home that would house you and your partner and your future children, since it is cheaper to actually own one!
2. When you have the means to pay for the upkeep.
One of the reasons many people decide to rent is they can not pay for the upkeep. If you have a budget to fix some leaky pipes, repair the roof or pave the garden, then owning a house is better for you in the long run. Look at it as a side project!
3. When your monthly mortgage is lower than renting
Yes, honestly there are times when paying the mortgage for your home is cheaper than renting. For example, I am paying 2500 GBP just for my flat’s rent. Using Mortgage Calculator, I saw that I would be paying only 2330 GBP monthly if I buy the house of my dreams! Crazy? Not exactly, I trust the math in these things.
There you have it. We all have different circumstances in life, thus what applies to me may not be applied to you. Whether you decide to pursue buying a property or renting, it is best to exert an effort in doing your research and doing some calculations.