Should You Rent Or Buy Property?

Buying your first property seems to be a financial milestone for most young adults. It’s almost ingrained into our cultures that purchasing your first piece of property is a sign that you’ve made it. At social events, you often hear about the latest relative or friend who just bought their first property and are so proud of it. When are you getting yours?

Personally, I’m not too hasty about getting my first property anytime soon. You always hear the arguments about how renting a place out is a waste of money. What’s the point of paying RM1,500 a month on rent when you can pay slightly more as mortgage and have something to own? That’s technically true, but people don’t consider the real costs of home ownership that a renter doesn’t experience.

Here are the 3 reasons why at this point in my life, I’d much rather rent than buy a piece of property to stay at:

1. I like staying in brand new apartments

This is a quirk of mine. In the Klang Valley, new apartments are continuously being developed, with more and more being built every year. With the readiness and expansion of Malaysia’s MRT lines, staying in apartments that are connected to these stations are extremely convenient.

For a brief period last year, I was staying at an apartment in Kg. Subang that was walking distance from the MRT station. Having never taken the MRT prior to this, I thought I’d give it a try since the station was so close by. 

It was game changing. Malls like One Utama, Ikea, and Pavilion were so easily accessible and I didn’t have to go through the painstaking experience of driving through traffic.

Back to the point, renting allows me to stay in the newest apartments in town that are made more relevant due to the rise of new infrastructure. At the fast pace of development we’re experiencing, more and more places will start opening their doors to new opportunities.

The property I decided to rent ends up being a dud? Maintenance of the building isn’t good? Or perhaps the sound of cars from a nearby highway keeps me up at night. Just as easily as I got in, I could get out of the place and move on to the next. The abundance of supply in residential properties means I wouldn’t be left hanging without a roof over my head!

Yes, the moving experience can be painful. But I haven’t started my own family and I don’t own any furniture (beds, desks, chairs) that would make moving difficult. I literally just pack up my bags and move on if I needed to find a new place. 

2. Buying feels like committing to a location

Being so new to the workforce, the opportunities out there are endless. I’m not at the point in my life where I’m set on the company I’m working at and know I’m gonna be there for the next 30 years.

In the age of digitization, cities not previously considered urban can quickly be the next hot location, meaning my options in deciding on a nice area for a home could be more plentiful in the future.

Renting gives me the flexibility to move to a new area if an opportunity arises, such as a job offer. Sure, I could technically rent out the place if I decided to buy a house near my current workplace and want to make a change. But that’s an additional step I have to take when considering offers.

I can imagine getting a good job offer at a much better company, only to be held back by the fact that you need to relocate yet still have to pay mortgage on the house you decided to buy. Kinda kills the business case for that job offer doesn’t it.

All this hassle doesn’t seem worth it to me. I’d much rather have the option of being able to move out and not give two damns about needing to find a renter or paying mortgage. Who knows, areas outside mainstream Selangor, Johor, or Penang could open its doors to large MNC’s to set up shop and provide great career opportunities.

3. I’m not a fan of having property as an investment

Yeah, this is controversial. An argument I regularly get when mentioning my first 2 points is simple; all this wouldn’t matter since houses are an investment and they always go up, right? Well, it depends. 

A lot of people don’t take into account the opportunity cost of buying property. The mortgage that you pay on a monthly basis could just as easily be put into another investment that would probably yield the same returns, or even better!

Read: StashAway & Wahed Invest — 3 Reasons To Use Robo Advisors

We regularly hear financial advice about how houses are assets and always go up in value, unlike cars and phones. Whilst that’s true, you know what else tends to always go up in value? Stocks. And I much prefer stocks to houses as an investment for a simple reason;

Stocks are WAY more liquid

One of the most important things to me when it comes to investing, liquidity. It’s so important to me that I completely rule out certain investments due to it – or more so the lack of it. It allows me to quickly sell off my investments if I feel that it’s going against me, or if I simply just need the cash.

Example

Let’s say I own 100 shares of Apple and quarter after quarter, they report declines in earnings. They no longer have the innovation they once had to propel the sales of iPhones, and the company is no longer the behemoth it once was.

What do I do? I’d call it a day and easily close my position. A stock this liquid will always have interested buyers regardless of its price, making the process of liquidating quick. The entire process would probably take 5 minutes, and I’d have quickly traded my shares for cash.

On the other hand, property investments are more tedious to dispose of. You need to get a valuation done and get agents to start listing your property. Then, it takes time for interested buyers to give an offer you’re willing to take.

The time lag in disposing of your house could cost you further if the market isn’t work in your favour. Desperate for cash? Guess you’ll have to settle for a lower amount than it’s worth. Despite being young, a property investment that backfires can have serious impacts to your retirement.

Don’t get me wrong, I’m not ruling out the idea of investing in property. If you know what you’re doing, it’s possible to make big bucks through it, and I know a lot of people who have done just that. To me though, the effort required and uncertainty doesn’t appeal to me at the moment, but its something I’d like to explore in the future.

An Alternative To Real Estate Investing

“You know what TMF, I don’t trust you. Real estate is that way to go”

We don’t bring up problems without solutions! For those who are keen to get their feet wet in real estate but don’t want the cons that come with it, there’s always Real Estate Investment Trusts (REITS).

Now this is something I’d get behind. REITS are like index funds for properties, giving you a partial ownership of income generating real estate across a range of property sectors.

For example, buying the Pavilion Reit (PAVREIT) gives you exposure to Pavilion Mall, Pavilion Tower, Damen Mall, and Intermark Mall for less than RM2 per share. The best thing about REITS is they’re generally stable in price and provide great dividends of around 5-7%. To add on, they’re publicly traded on an exchange making it easy to liquidate whenever required.

Closing Thoughts 

At this point in my life, I don’t see any reason to rush out and buy property. I could be completely wrong if property prices start to rise out of control in major cities, but the pros outweigh the cons for me on this one. Technology has made renting a much more viable option, providing the convenience of finding a place on websites such as iProperty & SpeedHome.

I’m not saying this is a straight path everyone should follow. I’d also like to point out that buying a house as a place to stay and build a family is not wrong. Not everything has to be an investment. If I was at a different stage in my life, maybe I’d have a different view on this matter.

This article was wrote up just to share my opinion on a matter that seems to be more cultural than rational. Rather than being pressured into something that isn’t financially beneficial, why don’t we take a step back and reassess?

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