How do you live: rent or own house?

 

How do you live: rent or own your own home? We live in a culture of property, but, nevertheless, renting is an option accepted by Romanians. For some Romanians, the acquisition of a property does not represent a “profitable business”. The existence of fluctuations in the labor market, as well as opportunities, determines a paradigm shift and offers a different, Western nuance regarding the culture of property.

There are young people who, most of the time, think about which is better: to purchase a property or to rent. If we ask the two “camps”, some will say that renting is the most profitable, others that purchasing your own home is the optimal way; each coming with its advantages. Let’s listen to them:

How do you live: rent or own your own home?

Rent

Advantages of renting:

• The possibility of moving if you don’t like the area or the office moves (freedom of movement if it’s not a good area: if construction is being done in that area and you can’t stand the noise, dust, if you have noisy neighbors, etc.)
• The possibility of having a space to live in without having to commit to it for decades (as in the first option, talking about flexibility, freedom of movement)

• The possibility of cash flow to increase your standard of living and, at the same time, for investment (this means that you can find advantageous rents and, thus, you can invest more money in opportunities that arise in life your)
• Low expenses (speaking about the lack of costs for: home insurance, property tax, apartment building restorations and inspections)
• Protection against seismic risk, since the property does not belong to you (here aiming at lowering the price of the property to a different classification depending on the risk class)
• Your protection against the owner regarding possible damages that do not belong to you by insuring the owner against the tenant (the owner assumes the risk of damages caused by his negligence to restore what may deteriorate throughout the tenant’s stay in his property)
• Income instability, which determines in the event of a decrease in income to give up the rent or the property in question and look for another less expensive rental or “return home”
• Reducing the cost through the possibility of sharing the rent with other people (which allows for financial ease; a financial and psychological peace of mind, at the same time)

Psychological advantage:

• Freedom of movement. Depending on your preferences and interests, you can change the area over time.

How do you live: rent or own your own home?

Purchase

Advantages of purchase:

• Stability of the place where you can raise your child (since there is only one place, you can choose a kindergarten/school, an environment in which the child grows up and is familiar)
• The right of ownership over the property (even if it is a right that returns, in full, after a few decades, however, there is the possibility that that property will enter your possession completely.)
• A greater financial advantage due to the right of full ownership later (after paying off the loan), because in renting you will never become the owner, but after paying all the installments associated with the property, you remain in possession of a good.

Psychological advantage:

• Stability of a home for children, for their upbringing.

I invite you to see, now, the disadvantages associated with each option, because each “camp” comes with the disadvantages of the other solution. Let’s find out their point of view!

Rent

Disadvantages of rent:

• Average annual increase of 3%. (Rents increase by an average of 3% in the same area, type of property, which makes a property more advantageous)
• Instability due to the owner’s desire to sell or rent at a higher price.

Psychological disadvantage:

• Instability. Children grow up in a property that will never become “their home”. Renting involves instability due to the interests of the owner who can always choose to sell his property.

• Purchase

Disadvantages of purchase:

• Lack of financial planning and lack of down payment
• Risk of losing the property (through loss of health or job if there is no income to support the installments)
• Additional costs in terms of paying property taxes, home insurance, etc.
• Paying interest in addition to paying the loan amount
• Not having a large down payment to allow for a smaller loan amount
• Interest rate fluctuations, which produce long-term financial instability.

Psychological disadvantage:

• Double payment for the property due to the interest associated with the loan.

As you can see, everyone has their “right”. For everyone it is good from one point of view and less from another. The important thing is for each person to identify what is right for them.

What do financial planning specialists say?

Financial planning specialists recommend having a savings plan. This helps both with your own home and with private housing: rent.

For those who want to purchase their own home, the advice is to set up a considerable down payment and an emergency fund. You may have to wait longer, of course, until you purchase the home, but at least the amount borrowed will be lower and the rate will be easy to bear over a long period.

In the rental option, it is good to have two emergency funds: one for unforeseen situations: 2-3,000 lei (burst pipe, medical problems, accident or various: damage to an asset) and a financial security fund that covers 3-6-12 months in case of job loss, eliminating the risk to the personal family.

It is good to have reserves regardless of the housing situation.

https://laurentiumihai.ro/care-este-casa-pe-care-mi-o-permit/

Before, these reserves were called: “white money for bad days”. This money represents your financial security. Whether you are alone or have a family to support. It is never recommended to run out of money. If too many people gather, you can take a vacation, buy a good that you covet; anyway, money never hurts anyone. If you have money, you have the freedom to choose and the relaxation that whatever you choose, you will be free from the worry of money.

Money produces joy when you have it and unhappiness and worries if you don’t have it. The same happens with financial planning. It brings joy, fulfillment when you achieve it and you are calm that you can have all your proposed goals. On the other hand, if it is missing, then it produces anxiety and worry about how you will cope with the situation. Planning gives security to achieve short-term goals, as well as long-term ones. I invite you to a free financial planning discussion. Apply here: https://www.e-learning.psihologiabanilor.ro/planificare-financiara/

Write in the comments section which “camp” you belong to and what are the advantages and disadvantages of your choice.

Success in becoming aware of money and the choices in your life!