Renting vs. Buying: Which One is For You?

Here we go, the ancient question of the century. Should you rent or buy a house? Which one is smarter? Where do you draw the line and realize if you're making a financially wise decision or the other way around? Is it better to rent or buy a house? The list is endless. For me, there's only one right answer to this debate — it truly is up to you. If you choose to rent or buy a house, you will end up with similar financial frustrations. Everything has its pros and cons.

Why is buying a house more common?

Particularly for Malaysians, a lot of people believe that owning a property is always the best decision and this is the end all be all. I like to think that this has something to do with the fact that people often associate having or buying their own house as one of the measures of success in adults. 

Homeownership may be a lifelong dream for some, but it's not the right fit for many. It's so darn expensive and taxing to own a property, especially with covid. In uncertain times like these, I think it's extremely important to look at the data of what has happened in the past in this market. Just a little heads up, in 2022, the housing market just got even wilder.

Why is renting always gets a bad rep?

Both lifestyles afford their fair share of pros and cons. I can't stress this enough. It's no surprise that some aspects of renting are less glamorous, you have no sense of belonging, you are essentially nomads, but it's not all bad. When you rent, you only pay for the rent. You pay for utilities and if something breaks or doesn't work, you call the maintenance guy, and it's probably fixed in a day. 

Let's look at some more pros of renting a house:

1. Fixed and predictable monthly housing costs and expenses
2. Flexibility — it's easier to pick up and move when you feel like it
3. You don't have to spend money on property taxes
4. Easier access to amenities
5. You don't have to worry about decreasing property value

Put simply, renting a property means you are only living in a certain house for a short amount of time. Everything is secondary to you. You want the freedom to move around and you like having fixed living costs. 

So, is it better to rent or buy?

When it comes to this renting vs. buying dilemma, there's really no one answer to which one is better. The decision you make is very personal to you and requires the consideration of many factors that would affect you such as:

your financial situation

I think this is the biggest factor you need to consider when renting or especially buying a house. You need to take a hard look at your spending because I have had cousins who bought their first house, they used up pretty much everything they had saved on the down payment, and when their roof started leaking, they realized they hadn't budgeted for roof repair service. They didn't have to deal with these in a rental. 

Analyze your finances first before getting too serious about house hunting. Evaluate your debt service ratio, assets and savings. 

"So, can I afford my own house now?"

You still have to think beyond how many housing expenses there are and one of them is the credit score. The health of your credit plays an important role in getting approved for a mortgage. Your mortgage lenders want to see that you have been a responsible borrower and have a strong track record of paying back debt. After all, the better the interest rate you can get from your lender, the less pricey your mortgage payment going to be. 

a stable income

This could fall under the point above, but I thought it can stand on its own too and let's just face it I do have quite a lot to talk about. Say you want to have your own home, you want to be the boss of your own house, do you have a stable and reliable income? A steady income will definitely help you to get a better idea of what type of home you can afford. 

If your income isn't stable or if you're like me (hello, fellow freelancers!), homeownership is probably not for you, yet. Wait until you are comfortable and stable in your career before you commit to the huge responsibility of owning a home.

the risks you need to bear

As a renter, there's always a chance that your landlord could increase the rental prices or your landlord wants you out of their premise ASAP because they have decided to stop renting it out. In that case, you need to find a new place. You may lose your security deposit and you have to start over. That's about it. 

Once you move into a house, you will accumulate things. It's different when you're just renting. It makes every moving process harder if you decide to find a new place. And let's say you can't pay your mortgage, you could default on the loan and lose it to the bank. That's a lot of money gone in a blink of an eye. 

your lifestyle

Think about where you want to be at least five years from now. If you don't know where your career is going and think you might want to move to a new city, you might not be ready to buy a house. But who am I to stop you? It's totally up to you, I am just saying it's better to consider what type of lifestyle you want to have in general. Do you like the idea of DIYing and upkeeping the house during weekends? Or would you rather have predictable monthly expenses?

One thing you need to realize is you don't have to pressure yourself to buy a house. You don't need to get caught in the idea that right now is the perfect time to buy a house because you have reached a certain age and if you don't buy a house now, you are failing in life. After all is said and done, it all boils down to how you choose to live your life and not let others dictate your life decisions.

So which one is for you? :)