Minggu, 13 Januari 2008

To Rent or To Buy ???" That Is The Question

by Altaf Sahibzada

There seems to be no end to this debate. There are critics on both sides of this question. Most of the debate revolves round the financial aspects of purchasing a house. The usual factors affecting a decision are the price, the carrying costs, availability of loan, affordability of mortgage and prospects of appreciation.

In addition to the monetary side of a housing project, there is a personal thing involved as well in a private decision. Many a times people purchase houses not because of the financial considerations, but due to aesthetic reasons. It is understandable that any house which is not purchased primarily for investment purposes has to come up to the expectations of the buyers. This should meet their requirements as regards space, tastes, features, location and of course the affordability.

If someone is buying a house for investment purposes only, monetary criteria are important and the overall benefit-cost analysis has to be positive in order to justify this type of investment. However, when a house is bought essentially for living purposes, one cannot put a dollar value of each aspect of a house. It may not only be hard but also improper to measure every feature associated with house in monetary terms.

Many other considerations matter in the purchase of a house. This includes the convenience and location of a house, the comforts, the psychological factor, the pride of ownership, a feeling of belonging, privacy and security, environmental aspects, private swimming and sauna facilities, gardening possibilities, friendly neighborhood and the like. Most of these are non-monetary factors.

However, the negative factors are need for time to look after the maintenance of the house, recurring repairs, hassles of dealing with so many utility companies, arrangements for private security or security alarms, basement leakages, increasing carrying costs and property taxes, changing neighborhoods etc.

On the monetary side, one big aspect is the building of equity in the house. As the time goes by, people tend to accumulate equity in houses which ultimately becomes a retirement nest for many people. If a house has many positive features, a house may bring him a large fortune to any owner over time due to appreciation etc.

One thing is there. Historically over a long period of time very rarely can any one lose money on a house. There are cycles over which the prices of housing properties vary. There may be periods of high prices as we are seeing now or slumps. However, a history of the housing prices over the past century or half a century has shown a constant price increase. There is just an upward trend in housing prices. So if one wants to buy a house at any time and is hoping to keep it for a long time, it is very likely that that house would appreciate, speaking historically.

On the other hand while renting, one is free from a large number of hassles associated with the ownership f a house.

There has also been a debate between the votaries of equity investment and real estate investment. Many equity analysts show that over a longer period of time investments in stock markets have realized greater returns than any investment in housing. Stocks are also highly liquid than property.

Ultimately any decision in buying a house is an individual decision. It has to match the tastes, circumstances and situations of each individual separately. What may be good for one person any not at all be suitable for another?

About the Author

The author has background in business, economics and finance. He is presently researching in finding ways to make money, work at home opportunities and much more. He is developing the following website and blogs:

http://makemoneyplans.blogspot.com/ http://www.businesses-jobs-careers.com http://www.ReviewAnythingOnline.blogspot.com

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