To buy or not to buy, that is the question. Purchasing a property is not an easy decision to make as it requires long-term financial commitment upon acquiring the property.
The process involves a significant amount of money, effort, and time upfront – from preparing the necessary documentation to paying for legal costs, stamp duty, property insurance and taxes, and the list goes on.
It begs the question: are you ready to be a property owner? Let’s weigh the benefits and drawbacks of owning property as well as other alternatives that you may consider apart from the former.
Benefits of Owning Property
High Likelihood for Profit
As mentioned above, purchasing a property requires a lot of financial commitment throughout the purchasing process. However, the temptation to own property is always there, thanks to the fact that properties appreciate over time. It means that you are quite likely to gain profit years down the road.
It is particularly true if your property is situated in a strategic location with easy access to facilities like public transportation hubs, the highway, shopping malls, and the like.
Freedom to Call the Shots
Since you are the owner of the property, you have the freedom to renovate and redecorate accordingly. By owning property, it is also easier to host guests and family members during gatherings, festivals, and celebrations as you will not need to worry about offending your landlord or fellow tenants.
Moreover, you have full ownership and can also choose what to do with the property – turn it into an office for your business or rent out vacant rooms to tenants; you are in charge.
Good Investment Venture
Property investment has always been known as one of the best options available today as it is less volatile and has a high return on investment (ROI).
Therefore, if you are looking to invest in something less risky, the properties are the way to go. Either by renting it out at a higher price than your monthly instalment, or selling it when the property’s value has increased in the market.
Either way, you are getting a good return in the long run. It is also an excellent strategy to shield yourself against economic inflation as you will benefit from the capital appreciation.
Downsides of Owning Property
Despite the benefits of owning a property, there are also several drawbacks that might make you reconsider whether you should get a property, or at the very least, delay the process.
High Cost
It should be quite apparent by now that a considerable sum of money is needed to purchase a property. Banks are getting increasingly stringent with mortgage loans approval and few banks today offer 100% loan coverage.
Hence, you’ll need to save up a minimum of 20% for down payments to stay on the safe side.
Moreover, this is only a handful of what you need to pay. There are also taxes, insurance, stamp duties, renovation costs that will consume a large chunk of your savings.
Risk of Not Profiting Upon Resale
Although there is a high likelihood that you’ll be able to gain a handsome profit upon selling your property, you might also run the risk of not profiting through resale.
It might happen due to economic factors such as recession and high-interest rates or when the location of your property becomes less desirable. Hence, you should make sure that you identify the risk factor of your property.
Less Mobility
As a homeowner, you will have less mobility compared to someone who rents on a short-term basis. If you need to move about often for work, it is advisable not to own a home.
A tenant can usually leave a property after adequately fulfilling the notice period while a homeowner might need to sell off their home before being able to settle in a new location.
Other Alternatives
Thankfully, there are some alternatives that you can consider to either reduce the financial strain on yourself or if you are not prepared to purchase a property for the time being.
Rent Instead of Buy
First off, renting a home is less costly compared to owning one because you don’t need to worry about down payments, real-estate taxes, etc. The rent usually includes utility bills as well, which means additional savings.
Moreover, unlike a homeowner, your landlord is the one who is responsible for nearly all maintenance and repair expenses on the property. By renting a home, you might even have a chance to live in a house that you might not be able to afford if you were to buy it.
Go for Second-hand Property
Instead of buying a brand-new home, you can opt for a previously-owned property instead as resale units tend to be cheaper than new ones. Since they used to be owned by someone else, they can be partially or fully furnished when sold, which can help you save on renovation costs.
Stay with Parents or Family Members
Despite being the least glamorous of the three alternatives, staying with parents, family members, or relatives is undeniably one of the most cost-effective options. All the costs of owning a home are no longer part of the picture, and you might even save on food and living expenses as well!
Of course, you can still volunteer to pay for the utilities or weekly groceries, but it will still be much more affordable compared to owning your own home.
The Verdict
Ultimately, there is no right or wrong answer. The decision of owning a home depends on your financial situation, and whether you are willing to commit long-term to own a home, you can call your own.
Do make sure to take extra care and research before signing on the dotted line to save yourself unnecessary trouble in the future.
