Renters are often in a dilemma as to whether it makes sense to continue renting or buy a home. Buying a home makes more sense, mainly when taking a lasting view. Yes, even in the current hot real estate market in Davao City.

Renting – Advantages

Renting can have a few advantages depending what area you are living in the Davao City. The primary advantage is your monthly rent fees may be less than an equivalent mortgage. A secondary advantage is the fact that maintenance and improvements to the property are the responsibility of the property-owner. Still, these advantages pale in comparison to the disadvantages of renting.

Renting – Disadvantages

The disadvantages of renting are significant. If you have any opportunity to purchase a home or condominium in Davao city, it almost always makes sense to do so.

The biggest disadvantage of renting is the loss of value. Assume you rent a residence for PHP 15,000 a month and you live in the residence for two years. You will have paid a total of PHP 360,000 in rent, a pure expenditure. The PHP 360,000 is simply gone and you will have nothing to show for it other than the time you spent in the home. Compare this to what your property-owner has gained.

Rent expenses are closely aligned with a landlord’s mortgage payment. Using the above example, lets assume your PHP 15,000 rent exactly equals the mortgage payment. For two years, you have indirectly paid the property-owner’s mortgage, helping them build equity in the house by paying down the loan. In addition, the property-owner has promoted from the increase of the property.

By appreciation, I simply mean the amount of increase in the value of the house. If the rental appreciated PHP 30,000 in two years, the property-owner has received a windfall. They may have seen a gain of PHP 360,000 in appreciation and payments lowering the mortgage. As a renter, you have made this all possible. The property-owner no doubt would like to thank you.

Now, what would have happened if you had purchased a similar home with similar financial figures in Davao City? You would have seen an increase in YOUR wealth of PHP 360,000, not the property-owner’s wealth. If you renting, these figures should make your teeth grind.

If you are renting, you should be out shopping for your own property. After all, isn’t it time to make your money work for you, not a property-owner?

I am here to help you out on your questions regarding investments..

Posted by Shella S. Cortes On August 2, 2016 // 0 Comments

Category : Blog