Ask Andrew: Should I Buy Or Rent?

Today’s blog post is actually an answer to a question that was emailed to me last week by The Investor’s Lawyer blog reader, Mr Tuah Lampar from Seberang Perai, Malaysia. Mr Lampar asked me if given his circumstances, should he buy a property or just rent?

First of all, a disclaimer. The following article does not constitute legal advice, and you should not take it seriously as such. Additionally, consider the cost implications of buying vs renting which are given a thorough treatment in this IEEE journal article. If you need the full article, email me.

Ever since the financial havoc of the recent past in Malaysia (and we do expect a slowdown in the Malaysia property sector for much of 2014), many prospective buyers have been afraid to take the plunge of buying a home – particularly in the Klang Valley (think Segambut, Kajang and USJ). There’s no surprise there. After all, home ownership (particularly in Malaysia) entails huge responsibilities not to mention that you’re essentially putting your hard earned money at risk. This is also why renting has soared while buying a home has earned a bad rap – although owning a home remains one of the major aspirations of Malaysians.

Fortunately, the real estate industry in Malaysia has slowly and steadily regained its standing over the years. Reports have shown home prices falling while renting going up (in certain areas outside the Klang Valley. We do see some areas such as KLCC where selected properties may be experiencing a decline in prices. Check out the KLCC Condos Database for more information – highly recommended.). If that’s one indication, it can only mean a good time to buy for those who’ve been considering of finally realizing their dreams of home ownership. Before buying, however, here are some things to consider.

Why Buy Instead Or Rent? Some Considerations

  • Home as Investment

Jumping from renting to owning a home is a serious financial move. Not only will it affect your entire budget, but you will need to deal with maintenance, taxes and most especially mortgage. But if you think about it, buying over renting is really all about making investment in the long run. When you’re renting, it’s like throwing money down the drain month after month. Paying mortgage, on one hand, is a heavier burden but with it comes a promise of ownership in the end.

  • Benefits of Tax Breaks

Another major advantage that owners have over renters is the benefit of tax deductions. When it’s time to file your taxes with Jabatan Hasil Dalam Negeri, you can deduct mortgage interest payments as well as other eligible home expenses. Some examples include home improvements such energy-efficient installations and the like. Talk to your tax consultant on that. If you need a recommendation, email me at andrew@theinvestorslawyer.com 🙂

  • Freedom to Customize

Along with home ownership is the freedom to decorate rooms and customize space. If you own your home, sky’s the limit when it comes to designs or renovations in order to accommodate bigger rooms or additional space. There’s also no need to buy furniture from to time to time because you won’t be moving from one place to another like if you’re renter. Many Malaysians love renovating their homes (you just need to check out KLCC condos like Park Seven, Binjai Residency, Marc Residence and Kirana Residences for examples), and it’s quite understandable.

  • No Landlord to Deal With

If you’ve been renting for a long time, you know how much of a hassle it is to deal with unreasonable landlords. You are always in danger of eviction especially when the landlord decides to sell or accept a new tenant without ample prior notice. Reporting problems and waiting for them to get fixed is another pesky detail of renting. With buying a home, you won’t need to deal with these inconveniences any more. Although Malaysia real estate law highly favors the tenant, there’s still risk of getting evicted. I know some poor folks at Ridzuan Condominium in Petaling Jaya which had negative experiences with their landlords.

  • Savings in the Long Run

While there’s always the danger of foreclosure or depreciation, a good home investment will ensure that you earn good savings in the long run. For one, you can add and install energy-efficient improvements without consulting a landlord. Another perk of home ownership is being able to sell at the end of mortgage payment. If the investment was excellently picked, you may even earn huge profits minus the costs and expenses of ownership.

So all in all…

Home ownership is a dream come true for many. And if you’ve been considering buying over renting for a long while, then the list above are considerations that can help you make an informed decision. Remember, however, that buying is not for everyone. So before taking the plunge into many years of paying mortgage, you need to sit down and thoroughly examine your prospects as well as your job outlook.

I hope that answers your questions, Mr Tuah Lampar! Anyone else with questions just email questions@theinvestorslawyer.com – you’ll get an answer in future blog posts here at TheInvestorsLawyer.com 🙂

Andrew Kouvaritakis, JD