Choosing to buy or rent, is an important decision that affects your financial well-being, lifestyle, and personal goals. Whichever option you choose depends entirely on your lifestyle and financial situation. Both require a regular income and may also require a certain degree of effort to maintain.
There are several differences that make renting and owning property distinctly different. Renting a property doesn’t come with all the responsibilities associated with homeownership and you have more flexibility, as you aren’t necessarily tied down to your property.
Owning your home gives you a sizable investment, but it does come at a big cost—both upfront and over the long run. Personally, I go by the “rent where you live and lease out what you own philosophy”.
Here is an example.
Most people want to live in a safe suburb that’s close to amenities such as schools, shopping centers etc. Such as the very popular Kleine Kuppe suburb in Windhoek. A decent 3 or 4-bedroom house, with a pool and entertainment area, modern finishes etc will cost an average of N$3 million.
A N$3 million bond at a 10% interest rate over a 20-year period is a +/- N$30 000.00 monthly installment. If you add other fixed costs such as rates and taxes, insurance etc that totals to about N$36 000.00 per month. However, one could rent the same property in that same area for +/- N$20 000.00 maybe even a little less. A homeowner will then pay around N$16 000.00 pm more compared to a tenant. Even though the tenant gets to enjoy the same benefits from living in that area that the buyer enjoys.
So now let’s assume this same tenant who is leasing the N$3 million house in Kleine Kuppe has an investment property in Khomasdal Ext 16. A 3-bedroom house with a 2-bedroom flat, that cost him +/- N$2.1million. That is a monthly installment of about N$21 000.00 pm. This individual can earn a N$20 000.00 pm (N$12 000.00 main house, N$4 000 for each flat) rental income on his investment property, which he can use to settle the monthly mortgage installment from the bank.
This individual gets to enjoy the benefits of being a tenant: such as flexibility, little to no property maintenance responsibility and living in an upper market neighborhood. But at the same time, also enjoy the benefits of being a homeowner in a cheaper neighborhood. He makes a rental income which covers about 90% of the expenses for his investment property. Talk about a good Return-on-Investment. That is a win-win.
In my humble opinion, the best housing strategy should be one where you aim to get the best accommodation at the least possible cost, if that can be achieved through purchasing a property then take that route. But don’t discount renting as it has its merits. There is no one-size-fits-all solution, but there is definitely always a solution that is a best fit for your circumstances.
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