Owning a Home vs Renting a Home

Before buying or renting your home, you need to consider the restrictions and freedoms both offer. For example, you should scout the area to ensure it fits your needs and lifestyle before purchasing a house. Imagine buying into an area that is mixed-use: pig or cow rearing, or other foul smells are emitted by your neighbours, or they plan to start similar businesses later.

Conversely, renting benefits from reduced responsibility for wear-and-tear repairs. That said, this advantage has its limits, particularly in cases involving minor wear and tear, damage caused by the tenant, and accidents such as fires and floods (in some contracts), if the landlord takes the necessary precautions. Therefore, your house might have faded paintings and old pipes if wear and tear does not compromise safety or the tenants’ health.

Hasty decisions are among the biggest drawbacks for renters and homeowners. Do you understand that renting a home is cash flowing out without equity? Also, do you understand the hidden charges in home ownership? 

Read on to understand what works best for you. 

Owning A Home

Imagine spending the majority of your earnings servicing debt? You need to assess whether your job is stable, the years you will be paying off your debt and decide if owning a home is worth it. 

Advantages of owning a Home

1. Builds equity

This refers to owning the home and its increasing monetary value. The house serves as collateral, and you can sell it later. Additionally, your property value appreciates when there is development, such as the urban spillover or new infrastructure.

Tip: Buy smart by purchasing properties in upcoming areas before prices soar. Also, negotiate for a good deal by buying below the market value. 

         2. Flexible

You have more control by choosing the colour of your paint, house design, and the house rules. Rentals have restrictions, such as having house rules. 

Home ownership offers more freedom, unless that freedom becomes a nuisance to your neighbours. 

Remember: Freedom is not absolute. House owners are limited to the law, neighbourhood by-laws and conventions. For example, Karen & Langata District Association (KLDA) restricts certain areas as residential areas, where the area is low-density, with tree planting and building permits required. 

Read more: Best places to live in Nairobi

           3. Predictable payments

Unlike rent, which fluctuates, mortgage fees are consistent. This helps you predict your payment.

           4. Tax Advantage

If you rent houses, the Kenya Revenue Authority (KRA) taxes you, but you may make certain deductions. They include:

• Maintenance and repairs

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• Agent fees

• Insurance premiums

• Loan interests on the property

If you charge 20,000 for rent and the deductible expenses accrue to 5,000, your taxable rental income is 15,000. 

            5. Security

What happens when a landlord does not renew your lease?

Owning your home gives you the security of being rooted in a community. 

Disadvantages of Owning a Home

1. Maintenance fees

Remodeling and repair costs are borne by the owner. Low-income homeowners may thereby prioritise essential repairs to their safety and living conditions over routine repairs. Therefore, modest homeowners spend the least on home maintenance and improvements. 

Requires a huge financial investment

The large financial down payment you should pay invites debates on whether owning a home is an asset or a liability. You may use this money to fund other investments that give off higher returns. 

          2. Limits your movement

Home ownership restricts you to a particular place. You cannot move to other places unless you rent them out.

          3. Requires you to pay taxes annually or monthly.

Renting a Home

Is the true cost of home ownership higher than that of renting? Doing the math, most people debate whether they should own a home, especially given the lifelong costs.

Advantages of Renting

I recommend living in different areas before purchasing a home. You get to understand the dynamics of different places and pick up the intricacies the most observant eye would miss. 

1. Flexibility

A young professional may live near job hubs while a family may live somewhere quieter, near schools or near hospitals.

If you move into neighbourhoods with pollution, noise, floods or with bad neighbours, you can easily move.

Lastly, living in different neighbourhoods helps you observe nuances, such as community vibe, opportunities, and traffic patterns. 

         2. Lower Upfront cost

Renting gives you breathing room to save and carry out other ventures. All you need is a deposit, rent fees and viewing fees for some houses. 

This differs from the huge costs required when purchasing a home, such as:

• Down payment, which is about 10-20%

• Legal fees

• Tax, v
• aluation and registration fees
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Remember: Read the contract to better understand your rights and responsibilities. Some contracts may oblige you to make minor plumbing repairs, maintain your compound and handle minor fixes. Moreover, the tenant is responsible for the damages they cause, such as a broken window, which is deducted from their salary.

Disadvantages of Renting a Home

1. Absence of property stake

A tenant lacks ownership of the property and doesn’t benefit when it grows in value. Tenants, therefore, miss an opportunity to own property they can convey, sell, or rent.

This is a continuous outflow with no investment.

          2. Limitations

Your lifestyle must align with the landlord’s rules. Read the house rules before signing a lease agreement. The restrictions may include:

•No pets allowed

•Noise restrictions at night

•Limits on subletting

•Lease renewal is not guaranteed

•Rent can increase periodically

Furthermore, repairs are subject to the landlord’s timing, which can affect your comfort.

Is owning a home an asset or a liability? 

Some people argue it is a personal asset if you live in it and an investment asset if you rent it out. Your home, one of the most expensive purchases, requires you to balance the security a home offers long-term with the mortgage payment that accumulates over time. 

The first thing that comes to mind for most people when they lose their jobs is, “How am I going to pay my rent?”

This fear is silenced by being a homeowner. On the downside, home ownership means money constantly leaking into home repairs, taxes, and an exponential mortgage payment by the time you are done. 

My verdict: Patience before buying a home. Renting a home might be the best option when you have unpatched financial holes. In this case, you can choose from a variety of places to live, either middle-income or low-income, before committing to a home.

Paying a mortgage for a personal home is financially strenuous.

FAQS

• What are service costs?

They are fees that homeowners and tenants(limited) pay to maintain shared spaces and services. They include security and garbage collection. Some areas have higher service costs due to their enhanced lifestyle.

• What happens when you fail to pay your mortgage?

It is important to factor in job loss, inflation and emergencies before taking a mortgage. Missed payments attract penalties and accrue interest. After 90 days, the bank declares you in default and repossesses your house if you fail to resolve the issue.