Is it better to rent or buy a property in 2023?
Find out if renting or buying a property is right for you in 2023
When it comes to finding a place to call home, the age-old question of whether to rent or buy occupies each of our heads. Both options have pros and cons, but deciding which choice is right for you depends on a variety of individual and external factors. In this article, we will explore the most important issues that everyone should consider before making this life-changing decision.
Renting a property in 2023
The several past years have had its ups and downs. The pandemic, cost-of-living crisis, soaring energy bills and The War in Europe are all huge contributors to UK’s housing market and the economic climate overall. Despite that renting a property is still a great option for people with specific requirements.
Pros of renting:
- Flexibility – tenants are more flexible than house owners. They can move at relatively short notice.
- Lower upfront costs – if you’re renting a property, most likely you won’t need to get a mortgage, which might come in costly as the first deposits towards the loan go as far as at least 5%, plus all the other costs involved.
- Less responsibility – when renting you are not responsible for any repairs and maintenance, which would also come out of your pocket otherwise. Of course, you have the responsibility to look after your place and report any issues that might occur, but what are a few calls against the headache of hiring a handyman or attempting to fix any issues yourself?
- You have more options – It is possible when renting to rent out in areas where you couldn’t afford to buy. So, if you have a desire to live in a more luxurious area, but don’t have enough capital to buy, renting might be the option for you.
- No risk – when renting out a property you have no risks involved. You don’t need to worry if the property you live in depreciates in value or appreciates.
Cons of renting:
- No saving – the money that goes towards your mortgage repayments essentially works as sort of a piggy bank, whereas when you’re renting, most likely that money goes towards your landlord’s piggy bank.
- Insecurity and instability – you never know, the landlord might increase your rent or want to terminate your contract and ask you to abandon the property.
5 things to consider while renting a property:
- Location – it may be the nicest place to live on the entire earth, but if it adds 1 hour to your commute is it worth it? The places that are more remote might have more public transport delays, less frequent schedules, and a lot of other problems that you might want to consider before renting a place to live.
- What’s your budget – you need to decide what your budget is. Regardless of if you’re on a monthly or weekly payment, you need to know you have enough left over for other costs such as food, health, gym, and whatever other services you have obligations to.
- What are the extra charges? It might involve costs such as renewal fees, sometimes the utilities and council tax might not be included with rent.
- Decide how long you want to rent. You might only need a place for a year, or maybe 5. Decide how long you want to stay in the new place.
- Evaluate if your future home really has everything you need. Especially if you’re a long-term tenant you don’t want to end up on a lengthy contract with something missing. Make sure that all the utilities, home appliances, parking space, elevator and anything else that might make your life more comfortable are available to you.
Buying a property in 2023
Buying a property can be the right choice for you if you have capital and looking for ways to preserve it. Buying a property allows you to build equity and brings stability over time. Nonetheless, it’s important to note that property purchases come with their own set of risks, so it’s important to do your due diligence before making major financial decisions.
Pros of buying:
- Long-term value appreciation – if we consider UKs historical property values, they have always increased, therefore you could expect a good long-term return on your investment.
- Passive income – when you buy a property, if you have a free room you can rent it out and generate additional income that would help you pay off your mortgage.
- Full control over your property. Do what you want, decorate, enhance and modify however you want, you are your own boss.
- A great hedging tool against inflation. Property prices are usually rising with inflation, thus protecting your money against inflationary pressures.
- Works as a piggy bank: when you buy your property and make initial mortgage payments, that money adds up as equity that later you can get back when you sell, whereas if you’re a tenant you don’t get anything back except your safety deposit. If of course there were no damages to the property.
Cons of buying:
- Purchasing a property comes with high upfront costs. The costs include the deposit towards the mortgage, legal fees, estate agent fees and any other associated costs.
- Property upkeep. – As a property owner you are responsible for your property. You need to maintain and repair the wear-offs or any other unexpected damages and issues that might come a bit expensive and time-consuming.
- Limited flexibility – even though the property is yours and you could in theory keep it while you move around, however it might be difficult to afford to keep it if you’re on a limited budget. There are options to mitigate the costs, but they need to be calculated.
- There are risks involved – The value of your property might be changing during the market weather storms, which might hurt your investment.
- If you have a mortgage you have to look out for interest rate changes. If you have taken a mortgage on low-interest rates, you might experience financial troubles if the rates increase as you need to pay back more money.
5 things to consider while renting a property:
- Decide on the right property size. If you’re settling in for the long haul, try to foresee the potential growth of your family. Decide how much land you might want and how many rooms should be inside your house.
- Consider the age of the property. The older properties might require more repairs or even major renovations. This can significantly impact the price of the property.
- Consider the potential resale value of your property. This can be important if you’re not planning a lifetime settlement.
- Consider all the financing options. Look into all of the available financing options which could help you get mortgages and loans. Consult with different lenders to see which would be the right one for you. See if there are any government schemes available to help you buy a house.
- If the property belongs to the homeowner’s association, review the rules and regulations to see if they are acceptable to you.
So how to decide if it’s better for you to buy or to rent?
Before you decide, please make sure to consider your future plans, goals and your potential. Here are a few questions to answer yourself:
- Ask yourself where you are planning to be in the next 5 to 10 years. Are you going to need to change your location? Consider if your current workplace location remains the same.
- Do you prefer stability and security or flexibility?
- Are you comfortable taking on financial risk?
- Decide what option might make more sense in your location. You can do that by applying 5% rule.
- Take the price of the property and multiply that figure by 5%. Divide the number by 12 and it will give you a break-even figure. If in your area rents cheaper than that figure it might make more sense to rent. If the rent is higher, then probably it makes more sense to buy.
Looking to buy or rent a property?
As you can see, there are many complicated things to consider. There is no right choice as it strongly depends on your personal situation, future and present goals and your potential. However, if you’re still considering contact us now and we can discuss which option is best for you.
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