It may be cliché to say this, but – buying your own home or property is definitely one of life’s biggest milestones. The idea of investing a huge amount of money into a property asset calls for lots of determination and commitment. Add a global pandemic into the equation – you may consider extra hard on whether to buy or rent, especially when the economy is not too promising.
If you are still in a dilemma, here are 5 important factors to consider before making a decision.
Your financial position
Whether you are currently considering to buy or rent, both options require a huge financial commitment. Ask yourself, “Can I afford it?”
Home ownership comes with a handful of hidden costs. Besides the 10% downpayment (usually), there are many other upfront costs involved, such as legal fees, stamp duty charges and processing fees. Even if you can afford these upfront costs, make sure you still have ample savings after putting in these money into your new home.
And then, there is the monthly loan instalment. Can you afford to pay it monthly without fail?
Usually banks will loan you up to 30% of your gross annual income (provided you have a good credit score), so a good rule of thumb is that your monthly mortgage should not exceed 28% of your gross monthly income. This way, you will still have extra savings to deal with any emergencies if they unfortunately arise.
The price-to-rent ratio
You probably have heard the claim that renting only enriches the landlords, and the societal expectation that you should have your own property once you reach a ‘suitable’ age.
To know if buying or renting a property is the better deal, you can try to calculate the price-to-rent ratio of that property. Price-to-rent ratio basically indicates the number of years your rental fees will take to match the cost price of a property. This ratio can be calculated by dividing the annual rental sum from the average cost of listed property.
In simple terms, if you intend on staying in the same place for more than the amount of years of it takes for your rental to cover the property cost price, then buying that property might be the better deal.
That brings us to the 3rd consideration factor.
The duration of your stay
Are you looking for temporary accommodation? Or are you looking for a forever home to settle down, at least for the next 10 years? The duration of your stay is another factor that you have to consider as you make your decision on buying or renting a property.
Of course, the common sense response is that it might not be worth it to put all your money into a property if you plan to live in it for only a short period of time.
However, if you are looking to establish a forever home with your parents or kids in tow, then plan out your finances accordingly so you do not end up purchasing a property that is beyond your budget.
Your needs and preferences
When it comes to deciding on buy or rent, another factor is your lifestyle needs and preferences.
Typically, the location of a property directly influences its rental or cost price, so do take that into consideration. For example, do you wish to live nearer to your workplace or your child’s school, or are you okay with a further travelling distance by car or by various public transports?
Also, do consider if you prefer to own the roof over your head and the land beneath your feet. Buying a property gives you full ownership to renovate or decorate it to your heart’s fancy. Do you love to experiment with decorating or renovating?
If you are renting on the other hand, you might be restricted by a lot of do’s and don’ts that are subjected to the conditions on your tenancy agreement.
Can you bear the cost of being a homeowner?
When considering whether you want to rent or buy, do remember that if you are buying a property, as a homeowner, you also have to service other expenses besides the monthly mortgage.
These include:
- Quit rent (‘cukai tanah’) for landed properties
- Property assessment tax (‘cukai pintu’)
- Maintenance fees and sinking fund
If you are renting, major repair works of the property will be dealt with by the landlord.
Buying vs renting – Which is the right choice for you?
When it comes to deciding whether to buy or rent, it all comes down to individual factors. Thus, take the time to consider all the possible factors – your financial position and all the costs involved, the duration of your stay, your needs and preferences, then plan strategically.
If you wish to buy, here is a piece of insight for you – to recap our Property Market Dynamics FB LIVE show <http://bit.ly/FactorsInfluencingPropertyMarketDynamics> last Saturday (24th October 2020), it was mentioned that property interest rates in Malaysia are now at a historic low. So if you have been eyeing / planning to purchase, NOW is the time to buy.
Looking to buy? Plenitude Property’s Topaz Puchong is currently under the Home Ownership Campaign with other attractive rebates! Check it out HERE.
Looking to rent? Plenitude Property offers leasing / rental opportunities for both commercial and residential properties. Contact +607-350 8282 or email [email protected] for rental enquiries.
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This article is intended to convey general information only and is accurate at the time of publishing.
All information in this article are not intended to be a source of advice. Any interested party should seek and obtain professional advice for your specific needs and situation.
Reference:
https://www.propertyguru.com.my/property-guides/should-you-buy-or-rent-property-in-malaysia-17630