Can You Buy An Apartment Unit Instead Of Renting It?

Last Updated on July 20, 2023 By Emma W. Thomas

Yes, you can buy an apartment unit instead of renting it. Buying an apartment gives you ownership and equity in the property while renting only offers temporary occupancy. Purchasing an apartment involves a down payment, mortgage, and additional costs like closing fees. However, it provides long-term financial benefits, such as building wealth through property appreciation. On the other hand, renting offers more flexibility and fewer upfront costs, but you won’t gain equity.

Can You Buy An Apartment Unit Instead Of Renting It?

Buying an apartment is a significant financial decision. When it comes to housing options, many individuals ponder whether it would be better to rent or buy an apartment unit. While both options have their advantages and disadvantages, buying an apartment unit can be a wise investment in the long run. Here are several key reasons why you should consider buying an apartment unit instead of renting it:

1. Investment: One of the primary advantages of buying an apartment unit is the potential for investment returns. Unlike renting, where you pay money towards someone else’s property, buying allows you to build equity and become a property owner. Over time, your investment can appreciate in value, enabling you to sell it at a profit.
2. Stability: Buying an apartment unit provides stability as opposed to the uncertainty that comes with renting. When you rent, you are subject to the terms and conditions of the lease agreement, including potential rent increases or the possibility of the landlord deciding to sell the property. When you own your apartment unit, you have control over your living situation and can enjoy stability and peace of mind.
3. Personalization: Owning an apartment unit allows you to personalize your living space according to your taste and preferences. You can undertake renovations, decor changes, or upgrades without needing the landlord’s permission. This freedom to customize your home gives you a sense of ownership and satisfaction that can be lacking in rental properties.
4. Building Equity: When you buy an apartment unit, you gradually build equity with every mortgage payment you make. Each payment reduces your loan balance, increasing the equity in your property. This equity can be used in the future for various purposes, such as refinancing, purchasing another property, or securing a line of credit.
5. Tax Benefits: Homeownership comes with several tax benefits that renting does not offer. Depending on your country’s tax laws, you may be eligible for deductions on mortgage interest, property taxes, and even some closing costs. These tax benefits can help offset the costs of homeownership and save you money in the long run.
6. Potential Rental Income: Buying an apartment unit can offer you the option of generating rental income. If you have extra space or decide to move out but want to keep the property, you can rent it out to tenants and create an additional source of income. Renting out your own apartment unit can be a smart financial move that helps cover your mortgage or contributes to your monthly cash flow.
7. Long-Term Cost Savings: While it’s true that buying an apartment unit involves upfront costs such as a down payment and closing costs, in the long run, it can bring substantial cost savings compared to renting. As you pay off your mortgage, your monthly housing expenses remain consistent, whereas rental prices tend to increase over time. Additionally, once your mortgage is fully paid off, you’ll no longer have any housing expenses, making homeownership a cost-efficient option in the long term.

Factors To Consider Before Buying An Apartment

Before deciding whether to rent or buy an apartment, you must consider some aspects to avoid making regrettable mistakes. The following factors are worth looking at;

Your Rent Vs. Buying Budget

Buying a home is sometimes more costly than renting one due to the associated costs like down payment, moving & closing costs, renovations, and maintenance charges. To see whether it is cheaper to buy than rent an apartment, you need to add up the costs involved, including the taxes and mortgage interest. There are also other charges, such as homeowner’s insurance and association fees, which make the cost of purchasing a home go higher.

But, in the long run, it is cheaper to buy than rent, and you also get a chance to build your equity. Your home may also increase in value if you intend to sell it later. 

The Period You Intend To Live In One Place.

The number of years that you plan to stay in the same place also plays a great role in deciding whether to rent or buy a home. For example, if you will live in a location for five years or more, it makes sense to purchase a property. But, if you shift from an area before five years are over, you may consider renting. When you rent an apartment, you will have the flexibility to know the different neighborhoods.    

You don’t also want the inconvenience of buying a home, then start looking for a buyer after only a few years. It could be quite costly considering the moving, closing, repairs, renovations, and other costs that would increase the house’s value, making it difficult to sell. 

Mobility Issues

Before making up your mind about purchasing a home, it is necessary to evaluate your situation and know whether you are likely to move soon. For example, if you plan to expand your family (by getting more kids), you may need a bigger home, so buying may not be the best option. 

Associated Risks

Renting and buying an apartment comes with risks worth considering before deciding. For example, if there is a downturn in your area’s real estate market, you will likely lose money. Also, if something requires you to sell your property sooner than you had intended, you may not recover the renovations and closing costs. But, buying allows you to build equity and so not a bad idea in the long run.

Conversely, renting has its downside, like you lose the opportunity to build equity. You also risk paying more if the rental charges go up, and the property owner may ask you to move out before the time you intend to live in that area lapses. Renting means that you will also have to bear maintenance costs, increasing your monthly expenditure. 

Your Financial Situation

Before you can settle on buying or renting a home, it is necessary to evaluate your financial situation. You don’t want to initiate a process and then give up because you cannot afford it.

 Security Features

Your security and that of your family is of paramount importance when looking for an apartment to purchase. The building needs to be in a secure location where crime is not an issue, and it also needs to have security personnel guarding it all the time. There should be firefighting equipment on sight, safety evacuation plans, and restricted access as additional security measures. 

What Are The Benefits Of Buying An Apartment As Opposed To Renting?

Purchasing an apartment instead of renting has several benefits, including;

It Helps You Build Equity

It is easy to build equity when you buy a house, unlike renting. You gain equity when your home appreciates in value and as you continue repaying your loan. Building equity has advantages since you can borrow against it, get cash out, or refinance your mortgage. 

You Can Do What You Desire.

Renting a home limits you on your improvements compared to having your apartment.  You can also not choose the color of your walls or appliances, which is not the case when you buy a condo. You will also not be forced to fix damages unless you are willing to do that. 

Buying A Home Potentially Minimizes Your Tax Burden

When you are paying a mortgage, it is possible to subtract the payable interests from income tax. You can also deduct closing costs related to the advance payment of interest. If you decide to use your home as a workplace, you will likely take exemptions. But, you need to consult a tax advisor to know what best suits your situation. 

Freedom To Choose A Suitable Location

Buying your home gives you the freedom to choose a suitable place to live in. To find the best, you can compare different regions and neighborhoods, including rural areas. 

Privacy

Owning a home assures you of privacy, unlike when you rent. You will not have to worry about nosy neighbors who may want to interfere with your personal life. 

What Are Some Benefits Of Renting As Opposed To Buying An Apartment?

Renting an apartment also has some benefits as compared to buying one. The following table compares some aspects of renting Vs. purchasing

Renting An Apartment	Buying An Apartment
Freedom to relocate or move after the expiry of the lease	You don’t have the freedom to relocate since it may take time to sell your home if need be. You may also not be free to take a job in a different location.
Flexible credit requirements	Strict and sometimes complex credit requirements
Minimal maintenance costs (mostly the charges are on the property owner)	You will shoulder all repair and maintenance costs such as leaking taps, non-functioning toilets, flickering lights, and more.
Proximity to essential services such as cities, restaurants, stores, and other attraction sites	Your home may be far from essential services.

What Are Some Costs Associated With Buying An Apartment?

It is necessary to know the costs of buying a home so you can organize yourself properly. Some of the expenses include:

Initial Payment

Home sellers always ask for a down payment from buyers, which is normally a certain percentage of the selling price. This amount could be as little as 3%, meaning you will also pay for mortgage insurance. Some sellers may also require you to pay a minimum of 20% as an initial payment, but this will exempt you from paying mortgage insurance. 

Mortgage Installments

When you buy a home through a mortgage, you will make some monthly payments towards the balance. Some mortgages have fixed rates, while others are not fixed. It is necessary to choose the best arrangement to make long-term budget plans. 

Repairs And Maintenance

Before buying a home, you need to factor in repair and maintenance costs. It would help if you thought of unforeseen expenditures should anything go wrong and also periodic maintenance such as landscaping, lawn mowing, painting, and others. 

Related Costs

There are some costs related to purchasing a home, such as legal fees, appraisal, inspection, loan origination, and title fees, among others. Ensure that the seller or the agent discloses to you everything required from you before initiating the buying/selling process. 

Homeownership Taxes

Depending on your home’s value, you will be required to pay property taxes annually. These costs go towards supporting services for the community where your home is based. 

Utility Costs

As a homeowner, you will also be required to pay for utilities such as sewer, gas, water, electricity, and garbage. You may also have to pay for Homeowner Association fees in some cases. 

Property Insurance

A homeowner must insure their property against damages such as fire, weather, and vandalism. Therefore, you will need to budget for such costs when deciding on buying an apartment. 

Wrapping Up 

You can buy an apartment instead of renting one. But, it would help if you did due diligence to get the best property that suits your family and you. Before buying a home, you need to consider several factors like the duration of time you need to be in the same place, whether you intend to sell it in the future or not, and your financial ability, among other factors.

Once you are certain about buying a home, you can look for properties in your desired areas and the type you want.

References:

https://www.redfin.com/blog/can-you-buy-an-apartment/
https://btibd.com/the-pros-and-cons-of-buying-an-apartment-vs-renting/