{UAH} This home ownership or rent debate ignored the grey area that exists between the two extremes.
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8:36 AM |
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By Daniel Tumwine
This home ownership or rent debate ignored the grey area that exists between the two extremes.
In pure numbers, renting is the better economic option -hands down.
Assuming there are two 30 years olds. One decides to build, and another decides to rent; assume they will live to be 70 years...
The one renting will pay 480,000,000 (assuming an average of 800k a month) and the one building will probably build and spend around 680,000,000 including land purchase, repairs etc over these 40 years. (People forget that home ownership includes so many more costs than just building).
All these figures are averages with many in-built assumptions.
The grey areas include;
-Where you build or rent (in a flood prone swamp? Off the road? Near a market? Type of neighbourhood? Gated? Farm?
-Inflation. How much building and repair materials will cost. How quickly rent will go up. What income you will be earning and its purchasing power over the years..
-Lifestyle. Are you flamboyant and want to show off? Are you comfortable in a two bedroom house? Must the type of house you own be basic or extravagant?
-Ego/cultural pressure. Is a house a sign of status? Are you a "man" only after you own a house?
-Emotional attachment. Must your children/family own a house just for just?
-Opportinity cost.... this is the most important; Would you have invested in something else eg a business, other assets that will "pay your rent" or "build your house" for you during this time?
Now, many people think its a waste of money to rent or to build.
It is flawed thinking to assume that renting is a waste of money. You get shelter. You are paying for a service. Just like you use a taxi instead of your own car. The car comes with costs. The taxi comes as a service.
Alternatively, when you build you also get an investment. And like all investments, it is bound by market forces as to whether it was a good idea or not.
You can be thrown out a rental when your income dries up. You can also be thrown out of your house when by the bank or relatives when your income dries up or parents die.
Your kids can be starving in a house you left them or they can sell the house, rent and start a successful business. Or you can just leave them a business or life insurance in equivalent of three times the value of a house...
The house can be run down....
WE JUST DON'T KNOW ....
TOO MUCH GREY!!!!
That's why each to their own.
--
-- This home ownership or rent debate ignored the grey area that exists between the two extremes.
In pure numbers, renting is the better economic option -hands down.
Assuming there are two 30 years olds. One decides to build, and another decides to rent; assume they will live to be 70 years...
The one renting will pay 480,000,000 (assuming an average of 800k a month) and the one building will probably build and spend around 680,000,000 including land purchase, repairs etc over these 40 years. (People forget that home ownership includes so many more costs than just building).
All these figures are averages with many in-built assumptions.
The grey areas include;
-Where you build or rent (in a flood prone swamp? Off the road? Near a market? Type of neighbourhood? Gated? Farm?
-Inflation. How much building and repair materials will cost. How quickly rent will go up. What income you will be earning and its purchasing power over the years..
-Lifestyle. Are you flamboyant and want to show off? Are you comfortable in a two bedroom house? Must the type of house you own be basic or extravagant?
-Ego/cultural pressure. Is a house a sign of status? Are you a "man" only after you own a house?
-Emotional attachment. Must your children/family own a house just for just?
-Opportinity cost.... this is the most important; Would you have invested in something else eg a business, other assets that will "pay your rent" or "build your house" for you during this time?
Now, many people think its a waste of money to rent or to build.
It is flawed thinking to assume that renting is a waste of money. You get shelter. You are paying for a service. Just like you use a taxi instead of your own car. The car comes with costs. The taxi comes as a service.
Alternatively, when you build you also get an investment. And like all investments, it is bound by market forces as to whether it was a good idea or not.
You can be thrown out a rental when your income dries up. You can also be thrown out of your house when by the bank or relatives when your income dries up or parents die.
Your kids can be starving in a house you left them or they can sell the house, rent and start a successful business. Or you can just leave them a business or life insurance in equivalent of three times the value of a house...
The house can be run down....
WE JUST DON'T KNOW ....
TOO MUCH GREY!!!!
That's why each to their own.
--
"When a man is stung by a bee, he doesn't set off to destroy all beehives"
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