The Pros and Cons of Renting or Leasing Your Home
When you buy an apartment or build a home you have the added advantage of being able to rent it or lease it out when you are in need , which cannot be done when you have an empty site, other than , when you rent out the site for commercial purposes. When we talk about renting or leasing a property it means that we are planning to earn through it by letting it out to others . In effect rent and lease mean the same thing but with a few minor differences.
The difference between renting and leasing a property
1, Normally , the term lease implies a longer period of time such as a year or two or even longer whereas, as per the existing rules most home owners rent out their properties for a period of 11 months and enter into a new agreement after that period if it is mutually satisfactory. Lease according to definition is a contract renting land, buildings, etc., to another- a contract or instrument conveying property to another for a specified period that is pre determined and cannot be broken without breaking the lease.
2, You normally take a deposit of a higher sum of amount when it is a question of leasing out your property- you may lease out the property for 2 years and three years with no monthly rent being paid. At the end of the lease period you need to return the entire amount to the tentant or draw up another agreement !
3, Other than that many people do not bother to go through a registered rental agreement whereas when they lease out their apartment or a site they make sure that they enter a proper notarised agreement that takes into consideration the interests of both the parties involved since it involves a larger sum of money.
Renting out your property – advantages and disadvantages
We see people owning an apartment and a house and renting out one of them to earn a steady income and many a times saving on the tax as well, although it may not be possible to do so for a long period of time. Renting obviously has its pros and cons and is best suited to those who are not sure about their future.
If for example the couple have a transferable job but have bought an apartment or house in a metro city, it is the only option available to them other than sell the place which is definitely not advisable since it is not easy to buy another house.
Advantages of renting out your house
1, Most people these days prefer buying a house of their own and forced to take loan to do so. If you have a housing loan, the rental income can be used towards paying the interest towards the loan. Of course you need a place to stay as well !
2, Either way you are getting an additional income by renting out your home which can be saved for future use if you have no other commitment and can afford to do so..
3, If you are living in an apartment, you have to pay a monthly maintenance charge to the housing society , which can be quite steep depending on the kind of facilities available , whereas when you rent out your property, this is normally taken care of by the tenant.
4,The apartment or house has a lived in look when there are people living within its four walls, which is very essential for any building otherwise it takes on a neglected look and crumbles down with time. Everything works well when it is used regularly.
Disadvantages of renting out a house
1, Renting out can sometimes be risky. There have been innumerable number of litigations that have favored the tenant who happened to have lived in an apartment for many years. This was partly because there were no legal papers drawn at the time of renting out or even if they were, probably they were not correctly worded and did not favor the owner.So it is very essential to have proper legal documents drawn up while either renting out or leasing out your property so that there are no complications later.
2, Tenants may stop paying rent or delay paying the rent on the specified date and even if you take the legal recourse justice may not come soon, since it takes at least a few months or even a year to get all your dues. Since our judiciary is one of the slowest in the world, one cannot depend on it entirely.
3, If you are living in a different city, the tenants may take advantage of this fact and sub let the place thereby earning through your property. You may never come to know about this and even if you do you may not be able to take any action against this.
When you are living in a rented property
Now let us look it from the point of view of those who prefer to rent out a property rather than buy one. They may have their own reasons for doing so. However, there are some advantages and disadvantages as well in renting out or leasing out properties just like the owner has some!
Advantages of renting a home
1, It is definitely cheaper to rent a house or a property than buy it. Renting also involves much lower initial costs since all that is required is draw up the agreement, pay the initial deposit of 4 – 6 months rent which is a security deposit for the owner and you are ready to move in. If you are renting out a fully furnished house or apartment, you don't even need to buy furniture or any other stuff that is needed except your personal belongings.
2, You have more flexibility especially since these days one has an unlimited choice of rental properties. You can enter into short term or longer term leases or rentals whereas when you decide to buy a property , you ha You also have to go through a lot of paper work and other legal hassles before owning a property. So, you have considerably more mobility as a renter.
3, Your financial risk is much lower than when you are deciding to own a property. You may at the most run the risk of losing your security deposit or having to pay higher rental costs. However, as an owner of a house you have to bear the brunt of property market fluctuations which can go either way !
4, Your monthly outgoings are fixed for the period of the lease period or rental agreement whereas if you have taken a loan to buy a property , your loan repayments could go up if interest rates go up , if you are not covered for it.
5, Since you don’t have to worry about spending your income on your property , which can be more than the rental amount , you can invest or spend any savings as you wish. This could include travel or investing in assets other than property
6, Normally all repairs and maintenance costs are landlord's responsibility - when you rent out a place you are only liable for rent and utility costs like gas, electricity and telephone. Your landlord is also responsible for rates and taxes unless you have agreed to pay the maintenance costs if you are living in an apartment.
Disadvantages of renting your home
1, The major disadvantage of not owning a property but renting out one is that you won't get any equity gains in the property you're renting. Your money is simply not earning you anything in return unlike when it does when you are paying back a housing loan. Even though you're paying for a service your rent money is basically dead money. The real and only beneficiary is the landlord from whom you have rented out your property who earns a steady income and probably has his/ her debt paid off by you.
2, You may be unfortunate in that you get a bad landlord. Not all landlords are nice people and there are cases where they can turn nasty at the slightest given chance. There are some who are difficult to deal with or unwilling to keep to their end of the contract thereby putting you into a lot of difficulties.
3, If you are not able to renew your lease or rental agreement on the same or similar terms and conditions, you may be forced to look for another place to live in which may be even more expensive. So it is in the best interest for both the parties to draw up an agreement so that you are aware of an increase in the rental after the contract period which is normally 6-8% .
4, You'll of course be unable to renovate or make changes to the property to suit your needs even if you are willing to pay a portion of the expenditure. Even if you do so, the owner ultimately gains.
5, You can have problems if you have pets, since many home owners do not allow people to have pets within their home while renting it out.
6, Relocation is expensive and can be a very tiresome process. And, each time you relocate for whatever reason, either through choice or need, there will be an additional cost incurred towards moving, security deposit, mail redirection , cooking gas connection, cable connection etc , which is not an easy thing to do year after year.
So all things considered renting or leasing a property no doubt has some advantages but probably more disadvantages which in the end don't seem to balance out. When you think of all the money that you have spent on rentals and nothing to show in the way of assets you will want to put the same amount into better use , on taking a housing loan and paying it back. However, one has to consider carefully before deciding on whether to buy , rent or lease a place to stay. You also need to weigh up the pros and cons discussed above and look at it from your own perspective.
Since affordability plays a big part in determining your options, you also need to think about what's right for you now and in the near future and also your life style before deciding whether you're ready for the long-term financial commitment of buying a home of your own. For many working couple renting or leasing out a house or an apartment seems to be the best choice since it gives them flexibility and freedom of movement especially so when they have transferable jobs and also can think of renting out a place close to their work spots.
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