Should I rent? Or should I buy?

A home purchase.
The biggest financial investment you’ll probably make in your life.
…Which, if not careful, may also turn into your biggest financial liability.
Man isn’t that a dark way to start this article.
As a younger home-hunter, I used to ask myself this all the time –
“Is it really worth committing my entire future to paying for this house that might not even belong to my family 99 years from now?”
In fact those were just one of many concerns. What if I was unable to pay off my mortgage? What if I didn’t generate positive returns on my eventual unit sale…or worse, have to cash in on a depreciating home?
The questions and concerns kept piling up. And naturally, I began to dig for an alternative.
It wasn’t long before I began to seriously consider looking into permanent rentals. Afterall, it meant that I could change up the living scene every once in a while, and honestly, I just didn’t want any of that commitment at such a young age! (sound familiar?)
That said, renting didn’t necessarily come without its fair share of cons.
For most (myself included), the biggest concern would be the amount of cash you’d have to cough out during the ‘rental phase’ of your life. Sums that might seem futilely spent if you did eventually decide to purchase your own flat – amongst a number of other things.
And so “Should I Buy? Or Should I Rent?”
That’s a question I hope to help you answer today.
To make things more straightforward, I’ve condensed the pros and cons of both methods into bite-sized pointers. I’ll elaborate as we go along.
Cliched/unconvincing as it might sound, the correct answer to this question is: It really depends.
In the end, there are 3 – often interchangeable ways you can utilise your home:
To stay in, to rent out (either single rooms or the whole unit) or to ‘flip’ (ie. buy low, sell high and repeat).
As for renting, there’s no rocket science to it. I believe that most of us would rent a home to well…stay in it. (Yes, there are other sketchy alternatives I can think of, but let’s not get into that today).
Personally, I’ve always adopted Grant Cardone’s approach. “Live where you rent, and rent what you own”.
In other words, rent out what you own (assets), and rent the place you want to stay.
Why? Because freedom.
I’m not tied down to my unit. Anytime I feel like I want a change of pace/scenery, all I have to do is wait till my loan tenure ends and poof I’m on to the next house. It just makes life all the more colourful.
Once again, this is personal preference – not everyone will/can relate to this.
At the end of the day, there’s no one-size-fits-all approach to this. It will eventually come down to your individual needs and capacities for financial risk – so be sure to conduct a proper evaluation of these things before making a life-long decision.
That said, I’ve also added some tips and key considerations to meet the various needs/intentions of buyers and renters alike.
As mentioned previously, we all have different needs and purposes for buying our homes. If you are set on buying a home to stay for the long-term, here are some pointers:
If you are a young couple just starting out, BTOs are a great choice for acquiring your first HDB home. Not only do you stand a better chance in the bidding process, you’ll also be eligible for a number of subsidies, which could lower your housing costs significantly.
Same goes If you’re single and above 35. You can apply under the Single Singapore Citizens Scheme or the Joint Singles Scheme.
Once you move into the completed flat, bear in mind that you have to fulfill the Minimum Occupancy Period (MOP) before you can sell or sublet (renting out a portion of your unit while residing in it.
Thorough financial planning is the key to a stable and structured financial balance sheet that can weather future unforeseen circumstances.
Before you decide to make the jump, be sure to account for every single one of the costs involved (ABSD, Property tax, Maintenance fees, Monthly mortgage payments, Interest costs, etc), as well as the initial down payment fees required. As some of us already know, it can turn out to be quite the shocker !
In the end, the last thing any home-owner wants is a pile of serious debt from a lack of financial planning.
Put simply, it’s often a question of long or short term stay.
Should you prefer a home to stay in for the long term, you may want to prioritise comfort/convenience (especially if you have little ones on the way).
If it’s for the short term, consider prioritising short to mid-term potential appreciation trends and rental yield figures. All this, without compromising too much on the comfort aspect. Begin with an exit point in mind, while always remembering that these points can sometimes take an unexpected turn based on future economic/personal circumstances.
Finally. Let’s dive into the rental spectrum.
Once again, financial planning is key.
In Singapore, renting a 1-bedder unit in a condo or HDB flat generally costs you between $600 to $3k.
Take all the time you need to list out extra costs, from the initial rental deposit and payments, to the utility/refurnishing fees for those looking to settle in for some time (also dependent on the terms of your rental contract).
Sadly, some might find that their landlords simply refuse to return their rental deposits.
Maybe your lease has expired and you’d like to move on. Or your landlord is a complete lunatic claiming that you’re responsible for the cracks in the ceiling and the random 2am noises your neighbours complain about.
Either way, things like that do happen. And when they do, it’s always best to have a plan of action. Learn more about what you can do in these scenarios.
Location of the rented property is important, but it varies based on your personal needs. If you’re an expat, your preferences for location may be very different from a citizen’s. For example, it might be more community or work-centric.
To help with that, we have a little Rent-in-Singapore guide detailing the best districts to find rental at – regardless of whether you’re an expat or local.
Here’s the thing. Not everyone who wants to stay in rented property would be able to afford an entire condo unit. Truth be told, when I was just starting out, I could barely afford a room, save the entire unit.
Now if you simply prefer a room in a HDB flat, here’s another 2-part guide (Part 1, Part 2) for HDB room-hunting, detailing average rental prices for each estate, and more considerations for room rental.
I’ll be the first to admit that these main pointers barely scratch the surface on the steps to analyse when choosing between ‘buying’ and ‘renting’.
For those of us who often ponder over the entire “Buy or Rent” saga, it’s truly a crossroad that garners so many different opinions and views.
Here’s what really works for me.
I like to break my situation down into 3 aspects:
My individual (and now family) needs, my capacity for financial risk (ie. what happens if I lose my job down the road), And finally, is this an option that will give me and my family enjoyment down the road.
At the end of the day, a home is both a source of safety/comfort as well as a financial asset/liability.
And in my humble opinion, it’s always better to come out winning on both sides.
This article was first published in Stackedhomes.