To Rent or Buy: Which Is Better


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Suppose you are a doctor and accepted as a surgical consultant in Dubai. You are assured of a good income, definitely more than you made at home, and your prospects are good.

You will also likely stay in Dubai for at least ten years, if not more. While the chances of becoming a UAE citizen is slim, the UAE government’s golden visa provisions and the nature of your occupation means you’re probably staying in Dubai for a long, long time.

Now, you have been looking at an apartment for rent in Marsa Plaza. You love this development’s location in a master-planned community. You particularly appreciate its proximity to a large, world-class mall and its marvellous creek and city skyline views.

However, you also have the option to buy a flat in the same apartment tower. It’s the exact location and amenities, but you can own the property outright. Given the choice of buying or renting an apartment, which option should you choose?

Renting Versus Buying

Conventional wisdom dictates that renting is a waste of moneyIt’s pouring resources into a bottomless hole because, unlike mortgage payments, you don’t accumulate equity with rental payments. As such, renting an apartment is often touted as a mere second option, something you do until you can buy your own home.

A study by Fannie Mae conducted among young renters confirms this. Over three-quarters of the surveyed renters believe homeownership is the superior financial option in the survey. Essentially, they are renting only because they have no choice, given their bad credit history and means to pay the required down payment.

But there are clear advantages to renting, and these advantages may be just enough to trump the perceived benefits of buying. It all depends on your specific circumstances.

The Pros of Renting

The prevalent view that renting is a poor financial option can change drastically with a little shift in perspective. Specifically, consider rent as the cost of having a comfortable place to live. Add to that the following advantages of renting, and such a viewpoint ought to make paying rent easier.

  • Predictable Monthly Payments

When you rent an apartment, you typically sign a lease for at least one year, and the agreement will detail how much you need to pay in rent every month. Thus, at least for the period of your lease, you know exactly how much you need to pay in rental expenses every month.

One can argue that when you’re paying for homeownership – especially if you have one of those fixed-rate mortgages – you also know how much you need to pay every month. It should not be much different.

There can be a significant difference, however. For instance, your mortgage payments are likely to be more expensive. Even if the rent and monthly mortgage payments are comparable, a rented apartment likely offers greater value for the money because of better amenities, furnishings and perhaps even location.

There are also incidental costs to homeownership that can jack up your monthly expenses, bringing the discussion to renting’s a second significant advantage.

  • No or Low Maintenance Costs

You will need to fork out the money for significant repairs when you own your home. If the roof leaks, you would have to replace it or spend a considerable amount of money to plug the leak. If the floors or walls crack, you need to get a structural engineer to look at the cracks. Then you would need to find the money to pay for the repairs if required.

These maintenance costs can suddenly jack up your monthly homeownership dues, and this can make homeownership costs unpredictable from month to month.

However, you don’t need to spend money on major repairs and maintenance when renting. Yes, you may have to spring for a burnt-out light bulb or a leaky shower head. However, no landlord expects their tenants to repair a leaky roof or cracked walls.

  • Superior Amenities for a Fraction of the Cost of Ownership

Apartments for rent can be exceptionally finished, lavishly furnished and come with superior amenities. The bathroom can be magnificent, and it can have a high-ceiling living room with majestic waterfront views, an office and a fully equipped kitchen. It may also come with access to a swimming pool, a sports and fitness club, and many more premium facilities.

In short, renting an apartment can let you enjoy first-rate amenities for a fraction of what it would cost to own them. Properly finishing and furnishing an apartment you own can be pricey. While you may be able to afford them anyway, why would you need to do so if you don’t have to do so? This brings the discussion to the final point.

  • No Hefty Upfront Costs and Interest Payments

You don’t need to pay a down payment to move into the apartment when you rent. Most renters only need to pay a security deposit. Furthermore, renting does not come with interest payments since renting, unlike buying, does not come with a loan.

  • Flexibility of Arrangements

When you rent, you enjoy great flexibility. If you don’t like your current location, it is easier to move. As long as your lease is up, surrender the apartment and move to a better place.

Renting does not come with a long-term commitment. Well, you could sign a long-term lease if you prefer, but renting still doesn’t come with the permanence of homeownership. Therefore, renters are better positioned to move and relocate when needed.

The Cons of Renting

Naturally, there are cons to renting as well. While your monthly expenses remain relatively predictable because of a fixed rent, you do face the risk of your landlord increasing your rent when your lease ends. You cannot also have the assurance that the apartment you’re living in now will remain yours in the future. Your landlord can choose to sell it or rent it to someone else.

But most of the perceived disadvantages to renting are psychological. When you rent, you do not gain that intangible benefit – that feeling of satisfaction and accomplishment that comes with going through the rite of passage people call homeownership.

To Rent or Not to Rent – That Is the Question

Should you rent or buy? The short answer is, it depends.

If you can afford to buy and are determined to do so, that’s your prerogative. However, if you want to buy just because you subscribe to the conventional wisdom that buying is always better, then reconsider.

There are advantages to renting. It is primarily the better option if you’re uncertain about your next steps. For instance, while you try out your new life in a new place – say, in the process of finding out if Dubai is the right place for you – renting is the logical choice.

 

Ref : THSI-2657 ZD. 23799

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