Do you rent or do you buy real estate?

The property rental and property purchase markets differ enormously around the world and indeed we have seen some major trend changes over the last 20 years or so. To give you an example, the US has until very recently been a property rental market as opposed to individuals looking to buy a property outright, although the tide is now beginning to turn. The situation in the UK has gone the other way with property prices pushing beyond the financial limits of many first-time buyers forcing more and more people to rent property.

So, if you need to decide whether to rent or buy what do you do? We will now take a look at some of the aspects you need to take into consideration when looking at a specific property.

Finances

It makes sense that you need to have your finances in place before even looking to acquire a property or in reality looking to rent a property. If you can’t afford the mortgage repayments or you can’t afford the rent in the longer term then you may well have to look at alternative arrangements in the short to medium term.

Quote from PropertyForum.com : “While there is advice aplenty for those looking to buy properties around the world nothing beats good old-fashioned experience. Have you been there, done it and worn the T-shirt? What advice would you give to others looking to buy property, whether experienced or perhaps a first timer.”

In a perfect world the vast majority of us would rather purchase our own properties and own our own home. If finances are relatively tight in the short term, but perhaps there are long-term possibilities for increased income, then it may well be worth looking at a purchase. It is also worth noting that in many areas of the world the cost of renting property is actually higher than the cost of financing a property purchase because of the relative commitment required.

The situation with regards to financing a property purchase or indeed a rental property has been complicated even more over the last couple of years due to the exceptionally low base rates around the world. You may well be able to afford the variable rate mortgage, or perhaps a short-term fixed-rate mortgage, on offer at this point in time but what will happen if base rates went back to “normal” levels. Would you be able to cope in the event that your mortgage repayments increased dramatically? Would you want do have a problem of increasing your mortgage repayments while perhaps your rent remained more constant?

Long-term commitment

The purchase of a property is potentially a very long-term commitment and sometimes this may not tie in with your personal life or indeed your working life. More and more people are now looking towards short-term rental arrangements when taking on new employment opportunities to see whether they are financially viable and indeed there is long-term security. Some of these individuals then go on to acquire property and put down their roots for the long-term in the knowledge that any increase in property values will fall into their pocket.

Long-term rental arrangements are perhaps more commonplace than you might expect because many people start with a short-term arrangement and slowly but surely it gets longer and longer. We have seen many instances of tenants living in rented accommodation for 10 years or more and then looking back and wondering, if only we had bought the property when we first moved in. It is easy to look back with hindsight and unfortunately the situation for many people is made even more unbearable by the increase in property values.

By not being able to look longer term this may price many people out of the market in the future and they will likely remain under the rental umbrella for some time to come. It is difficult to make a decision whether to buy or whether to rent and in many cases it is even more difficult to move from rented accommodation to an outright purchase – which brings an array of other financial pressures and stresses.

Conclusion

The simple fact is that you need to take into account your finances, your personal life and indeed whether you have a long-term commitment to one particular area in relation to employment. We are all very different, we all have very different lives and there is no one strategy fits all in relation to property. As a consequence it may well be worthwhile taking professional financial advice at the earliest opportunity to ensure that you make the right decision or at worst you are fully aware of the consequences of a potential wrong decision.