To Own or To Rent- One Man’s Perspective

Omid Abbasi
Nov 1 · 4 min read

Traditionally, owning a home is taught as a smarter financial move than renting one. But is that still the case?

I have always been skeptical about three industries that are pretty much involved in our everyday lives. Banks, Real State and Insurance companies. For some reasons, I can’t trust them enough to believe whatever they offer us. Especially the idea of OWNING A HOUSE!

I have been dueling with the idea of owning a house for the past good couple of years. The question is whether it’s worth buying or should continue renting till… EVER!?

Being skeptic towards these industries and believing that the “DREAM of OWNING A HOUSE” is something that MEDIA fed us with, made me take a step back and look at data and not let feeling get involved in my decision making, let the numbers speak.

As always, the first step is to ask uncle google, look up for a couple of post about “To Buy or To Rent” and check what other people think. Most of the articles are politically correct, talking about the Upside (pros) and Downside (cons) of each options and end the article with “ Choose what’s right for you!”

Fine! Choose what’s right for you, BUT it’s better to run the numbers and let them be the guide. For the sake of this article, let’s say Sally wants to buy a house that’s RM600k, she is able to put 20% down payment (RM120k) and repay the loan within 30 years with 4.5% interest (conservative).

First stop, we go to a home loan calculator, apparently Sally needs to pay RM2432/monthly for the mortgage.

I checked the rentals for the similar unit, same building. It’s currently RM1700 avg. for a basic unit. Right off the bat, it looks more appealing to me to RENT instead of OWNing that unit, but let’s not jump into the conclusion and run the numbers first.

SO, I went to RENT vs BUY calculator on this property expert website.

Looking at the numbers, it tells me a different story! (Conservatively assuming we pay RM200 management fee, RM300 Maintenance and insurance, 4% buying and 6% selling cost)

Hmm.. Apparently we will breakeven after 18 years, and you’ll be RM 160k on the positive side in 30yrs if the house value goes up on a 3% a year with 4% inflation rate. Sounds fair so far. What’s not calculated and often missed out is the OPPORTUNITY COST of buying a house! and that’s the catch~

Let’s take the earlier example of the RM600k house. If we rent the same house, we will keep the down payment and we will pay RM600 (RM7200 per year) less. Meaning we could invest that amount else were. Again, I love using online calculators! I run the numbers through my favorite compound interest calculator. And I was shocked! You get to put the money in an account that could potentially grow 4% p.a (in FD) or 7% p.a. (balanced portfolio) and compound it over 30yrs, you could grow it to RM810k and RM1.66m!

I feel we should look at buying a house as a Purchase rather than investment. Given the amount one could gain overtime by investing + FLEXIBILITY of being able to move anytime to anywhere + lesser responsibility will make me think IT’S BETTER TO RENT THAN OWN. What do you think?

PS: To rent or to own a house would generally depends on the location, price of the house or 101 other factors. In some areas itcould be more expensive to own a home, or could be about the same or cheaper. Here was an interesting pic to show how it differs in US! (couldn’t find a pic for Malaysia)

 by the author.

Omid Abbasi

Written by

Every Little details that we learn in life is just stepping stone. I’m passionate about Personal Finance, Growth, Lifestyle, Health and Books~ :)

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