This is a very common question asked by many and is not an easy question to answer as it depends on many factors and situations.

The answer is very much based on the due diligence and homework that is needed in determining the pros and cons of both renting and buying.

Pre-qualification of a home loan

Before you consider the options, it is best that you determine whether you would qualify for a home loan in the first place. There are many bond originator firms that can handle your application for this.

Once you have received pre-approval for a home loan, you are then able to pursue the question of whether you should rent or buy.

Of course, if you don’t receive a pre-approval then your only option would be to rent a property and your property investment journey will need to be placed on hold until your financial situation improves.

1. What are the Advantages of renting a Property?
   1. Flexibility
      Renting a property allows you to be more flexible. In other words, renting allows you time to decide on where you want to buy a property.

      Renting is highly advisable if you have recently relocated to another province or region and you are unsure as to where the best areas are. Renting allows you to become familiar with the surrounding areas before you take the plunge in buying a property.

      Similarly, if you need to move quickly, renting enables you to do that while selling a house may take some time.

   2. Renting costs are limited
      When you rent a property, your financial obligation is the rental, water & electricity. There are no additional costs such as rates and taxes, insurance, levies, and repairs where the repairs are related to plumbing or electrical issues.
      
   3. No maintenance burden
      With renting a property, the burden of maintenance lies with the landlord, although you as a tenant will have a responsibility for the day-to-day of the property for example, keeping gutters clear of leaves and debris, cutting the grass and not being reckless with fixtures and fittings.The maintenance burden can be extensive so not having to be financially bound to this is probably the biggest advantage to renting a property versus buying a property.
2. What are the Disadvantages of renting a Property?
   1. Lost money
      Arguably the biggest con to renting a property is that you are paying for an asset that you don’t own. You are basically helping someone else pay off their home loan.
   2. Bound by Agreement
      Lease agreements for rental properties are often rigid and biased toward the landlord. You as the tenant are bound by rules and regulations that may severely limit your enjoyment of the property, for example not being able to make changes to the property.
   3. Sudden Sale of Property
      Although a lease term will exist in the lease agreement, there is often a clause that allows the landlord to provide you with a notice to vacate. This is especially the case whereby the landlord wants to sell the property.Receiving such a notice can create chaos, especially if you have settled into the area and you are now forced to suddenly find another place to live.
3. What are the Advantages of buying a Property?
   1. The Property becomes yours
      Buying a property vs renting a property, will save you having to pay another Property owner rental.Monthly payments to YOUR bond contribute to your own well-being and will ultimately result in the property becoming yours upon settlement of the bond.You also create equity you can enjoy when you sell your property.
   2. The Property is an investment
      A property will accumulate value in the long term and therefore create long-term wealth. Once you have settled your bond, the house and its full value is yours to enjoy.Your property can be left to your heirs in the event of your passing away.
   3. Having your own space
      You can make changes to the property you own to suit what you like and create the space that best suits you and your family’s needs while renting a property you aren’t able to do this.
   4. Ability to raise collateral
      Owning a home offers the ability to raise further collateral if you have an access bond, should you wish to renovate or enhance your property.
   5. Rental Income
      Buying a property enables you to create a passive income by renting it out and therefore receiving rental income. The tenant paying the rental effectively helps you to pay your bond and/or cover your costs.
   6. Surety
      Owning your property provides surety versus renting. With renting a property, your length of stay is never guaranteed, and you can never really settle in a rented property.
   7. Credit score
      Buying a property builds your credit record and enables you to seek further credit as you now have an asset to serve as collateral for the banks.
4. What are the Disadvantages of buying a property?
   1. Down payment
      In most instances, especially if you are a first-time home buyer, it is unlikely that the banks are going to grant you a 100% bond.You are likely to have to commit to a 10% or more down payment or deposit in other words in securing your bond with your bank.If you are starting out in life and haven’t accumulated savings, it will be unlikely that you will be able to buy a home without a deposit.
   2. Interest rate increases
      Increases in interest rates are out of your control and can have a significant impact on your monthly repayment that you initially budgeted for. This we have especially seen in the last few years since COVID-19, where the interest rates have reached 14-year highs.When buying a property, you shouldn’t just budget on paying monthly payments at the rate at which you secured your bond but at a slightly higher percentage to accommodate interest rate increases.Too many homebuyers don’t budget for a change in interest rates and can become severely financially burdened as a result, with some homeowners having to sell their property for less than what they bought it for.
   3. Additional costs
      Apart from the costs to acquire a property, there are many additional costs that you will need to pay when owning a property:- Insurance
      – Rates
      – Levies paid when you buy a Sectional Title Property
      – Maintenance costsIt is therefore critically important when buying a property to calculate expected costs, especially repairs and maintenance costs.Not budgeting properly when buying a property can place you under huge financial stress when you are suddenly hit with expenses that you cannot afford.
   4. Long-Term Investment
      Buying a property is a long-term investment. You are not going to make money in the short term.When buying a property, you must have the mindset to hold your property for at least 5 to 7 years to cover your initial acquisition costs.
   5. Selling costs
      Selling your property will usually cost between 4 to 8% of the selling price, depending on what rate you negotiate with the estate agent for marketing and selling your property.
   6. Limits the ability to have an emergency fund in place
      It is good financial practice to have an emergency fund or savings in place in the event of an emergency. Emergencies would be, for example, interest rate hikes or losing your job.Buying a property may limit your ability to have an Emergency Fund in place especially if you have used all available savings for the initial cost and deposit when acquiring the property.
   7. Less Flexibility
      Owning a property has far less flexibility and freedom as opposed to renting. If you want to relocate or a situation arises where you are forced to move, you can’t just pack up and go.Selling a house can be a time-consuming process, especially in a quiet market.
   8. Returns are not guaranteed
      Owning a house doesn’t come with guaranteed returns.

All of the above should be considered carefully when deciding whether to RENT or BUY a property.