Is It Better To Buy Or Rent?

There is always this argument – To Buy or To Rent. For long term, it is always make more sense to buy a property than to rent due to capital appreciation. Renting will only make your landlord richer! If you are financially able, it is always a good move to own a property.

Renting – Advantages

Renting is not always bad. Renting can have a few advantages depending on the part of the country you live in. The primary advantage is your monthly rent payment may be less than an equivalent mortgage. For example, a property in Selayang cost RM500,000 and the monthly mortgage repayment is about RM2,300. But the rental market in Selayang is only upto RM1,500 top. For this instance, it is better to rent than buy a property. Another advantage is the fact that any maintenance and improvements to the property are the responsibility of the landlord.

Renting – Disadvantages

Just like I mentioned above, if you have any opportunity to purchase a landed property or condominium, it almost always makes sense to do so.

The biggest disadvantage of renting is the loss of value. Assume you rent a residence for RM1,500 a month and you live in the property for five years. You will have paid a total of RM90,000 in rent. The RM90,000 is simply gone and you will have nothing to show for it other than the time you spent in the home. Compare this to what your landlord has gained.

Rent payments are closely aligned with a landlord’s mortgage payment. Using the above example, lets assume your RM1,500 rent exactly equals the mortgage payment. For five years, you have indirectly paid the landlord’s mortgage, helping them build equity in the house by paying down the loan. In addition, the landlord has benefited from the appreciation of the property.

Capital appreciation, means the amount of increase in the value of the house. In other words — equity. If the rental appreciated RM30,000 in five years, the landlord has received a bonus. They may have seen a gain of RM90,000 in appreciation and payments lowering the mortgage. As long as you are renting, the rental will increase sooner or later and the landlord has once again become richer.

Now, what would have happened if you had purchased a similar home with similar financial figures? You would have seen an increase in your wealth of RM90,000, not the landlord’s wealth.

If you are renting, you should be out shopping for your own property. In fact, there are many projects initiated by the government to build more affordable housing such as RUMAWIP in Kuala Lumpur and PR1MA. And of course, if you could afford middle and higher range property but never thought of owning one yourself, perhaps it is time to change your mindset.

Take advantage of current economic situation:-

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful — Warren Buffet.

By | 2016-05-16T22:33:46+00:00 May 18th, 2016|Blog & Article|0 Comments

About the Author:

Danny has experience in various industries from banking, insurance to property development. For the past two years, Danny has been actively involve in property industry and sees a great opportunity ahead.

Leave A Comment

Rapid Property Connect uses cookies to deliver superior functionality and to enhance your experience of our websites. Read about how we use cookies and how you can control them here. Continued use of this site indicates that you accept this policy.