To Buy a House and Lot or to Rent a House?

Buying versus renting property: which is right for you?

Did you know that only about 40 per cent of Filipinos own their own home? This figure, from consumer banking firm Citibank, is one of the lowest in the Asia-Pacific region.

But with the price of rent increasing, buying property outright may make better financial sense. So how do you decide whether buying or renting is right for you?

Consider all the costs

Some say rent money is wasted money. Renters pay a large bill every month and, unlike with investing in property, you never recuperate any of the costs. But owning property comes with several additional fees and taxes that you need to take into account when deciding whether to buy – think closing costs, repairs, regular maintenance and interest on your mortgage.

In the Philippines, documentary stamps tax of 1.5 per cent is levied on the sales price or market value, whichever is higher. Buyers must also pay a transfer tax of between 0.5-0.75 per cent. Remember to take these into account when calculating how much your new home will cost you in the long run.

If your only concern is your budget, then there is a great measure for checking whether buying or renting makes more financial sense. Calculating the price-to-rent ratio is pretty simple:

Step 1: find two similar properties, one available to buy and one to rent.
Step 2: divide the price of the property for sale by the annual rent for the second property. This is the P/R ratio.
A P/R ratio above 20 means the cost of buying the property will likely exceed the costs of renting, according to the New York Times.

Think about your lifestyle

However, at the end of the day there is more to this decision that just money! Even if you can afford to buy property outright, you might still decide renting works better for you. One key factor is the flexibility that goes with renting. Renters can often afford to live in urban areas close to work and other amenities, while buyers are sometimes forced to choose a home further afield. And if you don’t like an area, it is also much easier to leave.

Here are a few questions to ask yourself before you buy:

Do I prefer the flexibility of renting or the stability of being a homeowner?
Do I like living in the inner city or am I most at home in the suburbs?
Is this home a good fit for the lifestyle I want?
Will I be able to relocate easily if work requires it?
Am I willing to look after all maintenance and repairs myself?

Source: Lamudi.com