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| Image credit: James Thompson/Flickr |
If you had a
million bucks to spend on property, will you choose to buy or lease?
I'm sure you
will agree with me that making that choice between buying or leasing a property
can sometimes get you thrown off balance. Even when you've got the money to buy, some
voice deep down within you keeps asking “why don’t you just lease? it’s a lot
cheaper ...”.
Advocates of the
idea of owning a home will argue that owning a home gives you more security,
coupled with the fact that when it’s yours, you can do whatever you please with
your home, like painting it your favourite colour, attaching a garden, or giving
it a revamp when you get tired of the old look. And if it’s yours, you also
have something to pass on to your kids for inheritance.
But just before
you jump at the idea of buying, you may be interested to know that leasing also
has certain benefits attached to it and here are some;
#1: Cheaper financing
Since leasing
typically requires no initial down payment (as a lump sum), you are likely to
save a great deal leasing. Also, if you invest what you have been able to save,
you can almost be sure of generating your next rent with great ease.
#2: Reduced risk of Obsolescence
At the end of
the lease, the asset is returned to the owner and you can choose to lease a
newer, bigger or cosier home. You may not even need to wait till the end of the
lease to do this. You can up and move whenever you please. Buying doesn't allow
such flexibility plus you are left to do all the maintenance on your home,
including renovations, and believe me, this isn't cheap.
#3: Reduced loss in times of disaster
In the event of
a disaster, your loss, no matter how huge, won't be as much as that of a
home owner.
I have now laid
out before you the good, the bad and the ugly of owning a home, and now I'm
sure you can at least feel less frustrated when deciding if buying or leasing
is better for you.
instructive, especially when getting land title is almost as complicated. A leased property takes care of that.
ReplyDeleteBut I'd like to know the benefits of renting over leasing. Also, with plans to privatise the Federal Mortgage Bank of Nigeria and the set up of Mortgage Refinance Company, will owning your house be better than leasing?
I disagree with u. Did u consider d embarrasment if u fail to pay rent in d next year. The landlord may decide to throw u out anytime by giving u d stipulated statutory notice etc.
DeleteAs for buying once one crosses d initial hurdle, one won't experience all d urgle experience associated with lease. As for incidence of fire outbreak, it is advisable for all house owners to insure their houses.
It is cheaper to buy than rent. Remember that lease is anothers' property, as such a form of investment. So may decide to buy and lease the property and over time use the money actualized over time for other investment. Leasing is short term while buying is a long term investment.
Most people think the terms, rent and lease are synonyms. While they both require the use of someone’s property in exchange for a promise to make a series of payments, the difference is primarily in the terms of the arrangement.
DeleteA lease is a contract for a fixed term to be paid over a fixed duration. The property owner cannot raise the rent until the duration lapses. Therefore leases provide some kind of Lock-in-effect.
Rents however are arrangements that may be for a shorter time period and have no Lock-in-effect. The property owner may not have an obligation to leave the rent at the same amount over the period.
The benefits of renting over leasing lie in the Lock-in-effect. You can decide to rent another property if the rent is raised. In a lease contract however, once you agree to the terms, you can’t just break the lease and decide to lease another property because it’s cheaper (you are locked in). If the lessee is to break the lease however, he is obliged to make all the remaining future payments according to the terms of the contract.