Owning a Property: Key Advantages

Capital Growth: If you rent a property for 25 years, you will end up with nothing. If you buy the property on a 25-year mortgage, at the end of the mortgage term you will own it outright. The opportunity to achieve a capital gain in this way is, for many home owners, the single most important factor behind their decision to buy their own property.

Renting a Property: Key Advantages

Staying Flexible: The most important advantage of rented property is its flexibility. Most tenancies are of six or 12 months duration. At the end of this period you can walk away without any further cost or obligation. If your future plans are uncertain, you may find that renting a property is a much better bet.

Moving Fast: It is usually possible to move into a rented property within a few days of seeing it. Buying a property usually takes three to four months. If you are in a hurry to move, a rented property might be a useful stopgap.

Convenience: Repairs and maintenance are usually the responsibility of the landlord. This could be important if you work very long hours or don't have the inclination to undertake or supervise repairs. It also makes it easier to plan your budget accurately.

Assessing Cost: In the long term buying a property will probably cost less than renting one. Most landlords will be aiming to achieve a gross yield of around 10% from their investment. This means that the owner of a property worth €350,000 will be hoping to achieve an annual rental of €350,000 × 10 per cent ie €35,000 per annum. Out of this the landlord will have to pay for repairs and maintenance and also, in most cases, a fee to the managing agents (not to mention tax on that income).

If you were to borrow money at, say, 5.2% to buy a similar property your mortgage would be €350,000 × 5.2% ie €21,735 per annum. (Due to the way that mortgage interest payments are calculated the true annual percentage rate of the loan may be higher than 5.2% and the payments increased accordingly.) This gives a gross saving of €13,265 per annum out of which the cost of repairs and maintenance will have to be met.

However, this is not always the case as average yields do vary significantly from property to property and from area to area. Landlords of cheaper properties generally expect to achieve higher yields than landlords of larger and/or more expensive properties.)

Another factor to take into account is the costs associated with buying and reselling a property. If you expect to stay in the property for less than two years it would probably be cheaper to rent than to buy.

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