Most of us rent accommodation because we need a place to live. The other option involves buying property. At some point, all of us weigh the pros and cons of renting a home.
Understanding the pitfalls of renting helps you make an informed decision regarding your finances. Most finance experts suggest that buying a home is about 45% cheaper than renting one in the long run.
Here are some reasons you won’t get rich by renting:
Lack of Stability
Tenants may be (and often are) asked to leave by the landlord because they are unable to afford raised rental payments. The landlord may have decided to sell the property and is legally allowed to ask his tenants to vacate. Most rental agreements require one month’s notice to leave the premises.
Moving home is usually a costly affair. You may have to pay a removal company to help move your goods plus you may have to pay deposits on utility bills for your new place. Your landlord may also insist on repairs or painting in the old home. Overall, the instability of rental accommodations makes you, the tenant, vulnerable to sudden expenses.
No Long-term Investment
The truth is that instead of paying rent every month, you can choose to pay mortgage payments. Even if you rent an apartment for say 8 years, you do not own any part of it. On the other hand, if you had paid up mortgage payments every month for 8 years, you could be halfway towards owning your own home. Renting a home does not add to your equity asset; it doesn’t count as an investment or saving. In short, paying rent does not contribute to wealth building.
Unpredictable Rises in Rent
With inflation impacting every area of our lives, rent is no exception. Your landlord or estate agent may announce a sudden rise in rent and all the tenants are obliged to pay it. This may result in a depleted household budget and may leave you with less to spend on other things.
With mortgage payments, the rates are more stable. Mortgage payments are usually protected from fluctuations in economic rates.
Tax Benefits and Incentives
Mortgage payments towards owning a home can attract tax incentives and credits while renting does not qualify for any such deductions. Mortgages are seen as a key step towards owning an asset.
If your ultimate aim is to build wealth, renting will not help you get rich. Do you agree or disagree? Share your views in the comments below.