08
Dec
2008
BUYING PRIVATE PROPERTY VS RENTING PROPERTY

The South African property market is busy with what is called a correction while world markets are in recession. This sounds fancy, but for the average Joe it means that although property prices aren't increasing, it's still very difficult to buy property because of high interest rates.

When MyRoof.co.za launched its Property Rental section last month it proved to be very popular, mostly because listing rental property is free but also because the whole process is done online and takes less than 5 minutes... well, that and the fact that many people own multiple properties that they don't want to sell during the property correction but find hard renting out.

This gave me the perfect excuse to examine the differences between owning property and renting, as shown in the table below:

Buy Property

Rent Property

If you own property you can pretty much do with and to it what you please, making sure you're not breaking any laws off course. You must also obey rules and regulations set out by your body corporate if you live in an estate or complex. When renting you'll have to ask the owner for permission to make any changes pertaining to anything not specified in the lease agreement.
You are responsible for repaying the installments of your home loan (if you have one), which is mostly subject to the interest rate and which might increase or decrease over time. You are responsible for paying your monthly rent to the owner as stipulated in your lease agreement. There is usually a yearly increase in such agreements.
You need to pay the government rates and taxes. If your property is in a estate or if you own property in a complex you'll also be responsible for levies. When renting you'll normally not pay rates and taxes but will pay for the usage of all other services such as water and electricity.
If you need to borrow money from the bank you can use your property as security to get the finance you require. As you don't own rental property, you can't use it as security for anything.
After buying a property, your money will be tied into the property and will take some effort and time to get hold of, especially in our current property situation where selling a home is not easy. As you are the owner, you decide if and when you want to sell your property. If you rent property you'll have access to your funds and will most probably (depending on your lease agreement) be able to move a lot easier. Most lease agreements are for 6 months after which you or the owner can give 1 or 2 months written notice.
If you have a home loan your bank will require you to take out life and disability cover. This ensures that the actual owner of the property, who is the bank at this stage, will receive payment for the property if something happens to you. You can take out insurance at your own prerogative.
Although property prices did not increase a lot this year and although there were months when property prices actually decreased in certain segments, property has proven over many years to be a sound investment. Renting property in South Africa is at this stage a lot cheaper than buying if you compare the bond repayment amount to the monthly rental amount, giving you the opportunity to invest your money elsewhere, noting that you do not own any asset by renting.
If you require a home loan when buying property you will need to pay a large deposit because of the current financial situation. Read more about your home loan deposit or apply for your home loan. Depending on your lease agreement you'll need to pay one or two months rent in advance as deposit which you will get back when you leave on condition that you did not damage the property you're renting.
The owner is responsible to maintain his own property (paint, geyser, electrical issues etc) The owner you rent from is responsible to maintain his property (paint, geyser, electrical issues etc) which means if the property has any problems because of bad building quality etc, it's not your problem.

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