Sanofi Session Staff asked 3 years ago

What is good whether renting a house and owning ?

buying home with home loan, saving rent and claiming income tax benefit for almost 20 years and property value may multiply 2-3 times. Do you think it is good option

1 Answers
Hansi Staff answered 3 years ago

There is no standard answer to the renting vs buying question. It depends on a number of factors including house valuations, borrowing cost, tax benefits, transaction costs and most importantly, non-financial factors.
I believe we should err on the side of renting if valuations look expensive and borrowing costs are high. If valuations and borrowing costs look reasonable, and you think you will live there for a long time to counter the transaction costs, then you could buy. But all the numbers into a spreadsheet, if possible, including maintenance costs, property tax, insurance etc.
One big assumption everyone makes is that there will be capital appreciation. This is a mistake. Property prices DO NOT always go up. Like any other asset, real estate prices are subject to demand and supply. If valuations have already gone up quite a bit (and hence rental yields are low), then prices can go sideways for many years, or even fall. In fact, real estate tends to be have a low single-digit capital growth, if you measure over the long term.
So please don’t assume 2-3x blindly.
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