Should I rent or buy a house?

June 7th, 2020

The thought of owning a piece of the rock in the Bahamas or anywhere in the world has been a dream come true for many! However despite our best efforts that dream never comes to fruition or worst that dream sours and many former home owners do join the repossessed line. Why give up something you spent so much energy and resources to obtain? These are questions worth considering although I do believe if our parents, teachers and governmental officials were committed to improving the financial literacy of all, people would make better financial choices. Better financial literacy training would discourage people from seeing a mortgage as success and renting for the next 20 or 30 years as failure without first evaluating the pros and cons of choosing one over the next. Unfortunately, we make financial decisions based on the values and opinions of our parents, friends and a larger extent the American Media.

On the other side of a mortgage are huge sacrifices and interest fees. I worked two jobs for five years and did not travel for three years consecutively to qualify myself. Besides this, I have already paid Royal bank of The Bahamas, 110,000 dollars in interest fees. And yet the bank still claims that I still have another 113,000 owed to them. Keep in mind that the initial loan was only 142,000.And what is most disturbing, if at some point I am unable to continue the payment the house would be resold and all that I would have invested would be null and void. Banks would rather a house sit empty, let the weeds overtake the home and before they would reduce the cost or simply disregard exorbitant, outstanding interest fees.

Should I buy a house or just rent for the next 30 years? Of course, you should rent?

How many people do you know have 10-20,000 dollars just sitting there on their bank account? . Instead of the 5-10,000 down payment the typical lending institution will require to begin the mortgage process, all you will need is a minimum cash injection of $700-1,000 and you can enjoy all of the amenities that a homeowner would. A recent statistic revealed that the average Bahamian has less than 1,000 dollars in savings. Smaller savings means renting is your best bet.

Advantages of Renting

Renting an apartment or house is actually considerably cheaper than buying one. Unlike when you are homeowner, the tenant for the most part can expect the landlord to maintain the yard, paint, tile, furnish the place and insure the place. A lot of the expenses associated with maintaining the rental property, is the responsibility of the landlord unless of course you have the misfortune of renting from a landlord who does not do a good upkeep of the place. Unfortunately, there seems to be more bad landlords then there are good ones so before you pay the first, last, and security deposit make sure the space you are renting is being kept at a high standard. If not do not move in, keep looking for a rental space that does meet your standards.

Are you living the life you want?

Since most rental apartments are relatively small, be prepared to live in a relatively small space for the duration of your working life. If you take a minimalist approach to things, renting is the more frugal way to go. A smaller living space means, you will resist the urge to buy and buy and buy- things you don’t really need; for there will be no place to put them in a smaller living space. The upside of this is, now that same cash is available for doing fun things like travelling, or buying a truck or starting a new business. keeping your purchases to a minimum will benefit you, since there is generally minimal chance that your landlord will allow you to do renovations to that rental place.

If you decide to rent as apposed to buy a home, a major consideration should be how do I sustain rental charges at retirement? I recommend an aggressive pension or savings plan with one of the credit unions or taking out an annuity with one of the local financial institutions. If we look at the average life span of a human being today, a life expectancy of 70-90 years is a norm. Retiring at sixty or sixty-five means, the renter will need to account for 15-20 years of rental life after retirement. In essence, the person who chooses to rent a house or apartment in contrast to buying one, would need come 168,000 dollars of savings to sustain a life expectancy of at least 80 years. It is true that things like Social Security and N.I.B are other sources of income however, we believe those returns will only allow the renter to live a substandard life at retirement. Especially when we consider the likelihood of illness or the need for medication is typical of those who fall in the senior citizen category. So if you plan to rent, we recommend a good savings plan.

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