You’re getting a great return for your cash, you don’t have to pay any interest, and the relative saving on monthly utilities is far outstripped by the return that you earn on the house. In other words, the monthly total cost over the life of the occupation when buying (everything), vs the rent and therefore the difference between the two is what you need to save on a per month basis in order to capture the benefit of renting (if in the particular case there is a benefit). Once you’ve done this, you can compare the estimated costs of buying and renting. Look – it’s technically quite possible to get that kind of an answer. I want to compare this over 5 years period. What does this mean for South Africans? Note: The “Years to Hold” (whichever number of years you choose) is considered the year that the property would be sold. Before investing in a rental property, there are a number of key factors to take into account explains Craig Hutchison, CEO of Engel & Völkers Southern Africa. The study stated that, "Despite the constant news of property booms and million-dollar sales in suburbs not known for being expensive, owners and renters over the last 60 years ended up in roughly the same place”. I was wondering how the calculations would change if one were to consider buying-to-let property? For many people, that's easier said than done. Thank you for the tool. Perhaps I’m missing something? I thought this was compulsory in the US, but not here. So if we work out all the home loan repayments and extra living costs and the lost income that you could have earned on those costs (and the initial deposit), and then deduct the gain that you make on the property itself, then we can work out the maximum rent that you should be willing to pay before it would make more sense to just buy the house. Or, download to excel with File -> Download as (or directly from the about page -- click here) Initial monthly rent: $2,100: House purchase Price With our calculator, you can choose from three of the most popular equipment lease types to calculate your payments. R550.00 Add to wishlist. Casio. In addition, you might need to do some renovations when you first move in. The rent vs. buy calculator will help you work out which options can potentially be better for you. In fact, the only way for it to be worthwhile not to buy the place would be for someone to pay you to stay there. This calculator provides a rough comparison between buying and renting, from a financial perspective. In contrast, the JSE All Share Index (Alsi) has produced a real return (calculated for inflation) of 11% per annum over the last 30 years, and up to 15% return over the last 10 years. For the latest on Covid-19 please visit www.sacoronavirus.co.za, Staying Sane During Household Renovations, Amended Lockdown Level 3: XtraSpace policies, Furniture Storage in Johannesburg: What We Offer, 15 Ideas for the Best-Ever, Low-Cost Christmas in SA, Moving a Family Member into Care: Ways to Ease the Transition (for Both of You), How to Store Leather Bags, Belts and Shoes, E-commerce Storage and Warehousing: 11 Tips for Maximum Effectiveness, Durban North Storage and Office Space: What XtraSpace Offers. Seems this could be useful for the Landlord to determine whether his rental is “in the ballpark” or not. We looked at it, but it’s not really something that has a dramatic effect on the final outcome. Does this mean that you should forget the white, picket-fence ideal so coveted by the middle class? This is one of the coolest calculators I’ve seen, thanks, and well done! It seems to be working on my side – what are you seeing that has you concerned? Yes – we agree. I am of the opinion that Homeownership will lead to the optimal tenure decision in vast majority of scenarios. Gross rental yields for Johannesburg apartments, i.e., the gross rental return on a property if fully rented out, are good, ranging from 6.5% to 9.3%. Is it better to rent or buy property in South Africa at the moment, especially given the country’s current political and economic climate? But there is a caveat here: we're assuming that if you did rent, then you'd actually go and save these extra costs, and invest the deposit. Of course, it could also be an issue with the current formula (we’re already aware of one issue with the mortgage period vs the period of occupation, which we’re correcting). If there are cost savings, the next step is to determine the potential or likely earnings on a 20-year investment, in shares for example. These are the cheapest cars for sale in South Africa right now. – Firefly Consulting Services. It’s been a huge help in my decision-making process. Thank you for your response. I’ll see what I can do. Buy or rent? But do bear in mind that this is just a tool, not a rule. Looks like there is a problem with total Bond payments when you say you will live in the house 20 years. I have done my masters on this topic in SA and enjoyed the availability of your tool for inputs. Renewable Energy News. As in: money that you get back at the end of the rental period, assuming that you make sure that your rental contract includes a reasonable rate of interest, has a really minimal impact on the final numbers. We help you rent, sell, or buy houses & real estate in Johannesburg, Cape Town and many more places around South Africa. So if you wanted to see the impact of a change in the size of your downpayment, you can! Owning and paying the mortgage on a home can boost your credit rating and give you the means to borrow more money if necessary. Hey there! To calculate the cost of renting a comparable property, calculate the advertised monthly rental over the same period. But would be good for it to be more explicit. There are many factors to consider and if you don’t assess your property value correctly you could end up over- or undercharging and neither are a situation you want to be in. Rent vs Sell Calculator, Should I Sell My House? The seller (the landlord) and the potential buyer (the tenant) agree to an arrangement whereby the purchaser/tenant pays a deposit to the seller/landlord, and both parties sign a lease agreement for a specified term at the end of which, the tenant will be able to elect whether or not to purchase. Buy online (8) In store only (4) Shop by price. Rent or Buy: The Four Axioms – Rolling Alpha, Should You Buy or Rent Your House? Similar outcome can by achieved by changing the interest rate (essentially the income is offsetting the interest cost). Once you've estimated the return, you can make a reasonably objective decision – or at least an informed guess – about whether buying or renting is the best long-term investment. For example a R1mil house, 10% deposit, 10.5% interest over 20 year homeloan: “Then there are the running costs of home ownership. Necessitating those tweaks. If you're planning to get some help from the bank, we need to take that into account. In case you’re worried about the ‘R0’ (some people have pointed it out) – just remember that there’s quite a large CGT exclusion for a primary residence (which I’ve taken into account in the calculation). Affordability calculator. I agree with several of your inputs. As a property investor, when it comes to the extraction of cash from the investment, I would love a similar calculator comparing the extraction of funds from an access bond from a rental property vs paying it off and extracting the rental income. The longer the loan period, the more you'll pay the bank. The buy or rent debate was highlighted recently in an online research survey conducted by Columinate on behalf of Private Property.Of the 400 people polled, 202 respondents were asked questions about John, a fictitious 35-year-old male who owned the property that he and his family lived in. Not necessarily; buying has pros too, not least of which is leverage. So because we're comparing buying and renting, we'll need some estimates for all of those. I am definitely going to look into that, and have it changed. Our credit downgrade to ‘junk status’ earlier this year certainly didn’t do much for consumer confidence, so it’s not surprising if prospective homebuyers are still feeling uncertain about what to do next. And maybe some fixing up and/or bathroom renovations? The breakdown: R8,985 But I did notice that there is a problem when you plan to stay in the house longer than the duration of your home loan. This is the RollingAlpha.com Rent or Buy Calculator. The average annual inflation rate between these periods was 7.55%. Buying is better, even if you could rent for free. Thanks Mark. In a 2015 study, for example, the Reserve Bank of Australia noted that since 1955, “there hasn’t been much difference between renting and buying." Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha. Both options have their own advantages and disadvantages. Many people see rent money as lost money, and would prefer to buy a home instead of paying off someone else’s bond. If you can pay a lot less rent than that, then rent! And we hope this helps. Repairs and Renovation in preparation of sale. But if you rented, you'd just need to pay for some utilities and some insurance, If you can rent a similar home for less than. Especially on smaller apartments of renting or selling your house will bring you buying renting. South African homebuyer, you can pay a lot less rent than that, the. 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