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Why Buy When You Can Rent?

Readers may be horrified when they read the headline.  Who is this writer, is the writer out of his/her mind?

Generally Asians love investing in property as it is deemed to be solid investment, landed and tangible.  This is true especially with the baby boomers and generations before.  Back then, unit trust, Exchanged-Traded Funds (ETFs), bonds were not common investment vehicles and definitely not easily accessible to the man-on-the-street.

This mindset is so ingrained, so much so that it is handed down from generation to generation.  However, there is another group, albeit small in number, who thinks otherwise.  This is true in the corporate world as well.  What makes them think otherwise?

One individual I know shared with me.  “Linnet, I am single, with no commitment.  I want a simple life.  I don’t even own a car as taxis, now Uber, Grab, MRT, LRT and monorail is so easy.  I save on insurance, road tax and escalating car repair, especially when the car gets on in age”, said SL.

SL had a point.  As for his residence, he has a similar outlook.  He is a consultant and works mostly at home and when he is not, he is based at his client’s premises. Hence his preference to rent rather than commit to a residential property and pay instalment. He prefers fully furnished condominium with swimming pool and / or gym facilities and good security.  Service apartment, if you please.

“If the management of the condominium goes down the drain, I just move. I am not stuck with a property that depreciates because the type of residents or management deteriorate.

That way, I just pack up and move. In the meantime my excess cash can go into investments and I just monitor them”.

SL did not cherish the thought of renting out properties as investment, as it requires dealing with tenants who can be difficult and leave your property in a shambles when they leave. SL told me of his friend’s experience, whereby the tenant removed all the fixtures and moved out with them in the middle of the night. The owner had to replace ceiling fans, washing machine, curtains and light fittings.  Even the mirror in the bathroom vanished!

There was another incident that made SL glad that he chose to rent.  The condominium he was staying was really well located, with easy access to public transport, yet within a decent neighbourhood.  Several years after that, someone in his block decided to commit suicide by jumping down from the highest floor.  SL decided to move elsewhere.  His neighbours who bought the units around claimed that they sometimes sees things at night. Some are contemplating on selling their units and moving out.

Another friend’s tenant was angry that he was vacated because of back rental. He poured cement into the toilet bowls and the friend had to spend a bomb to remove the cement and replace the toilet bowls.

In all fairness, there are some decent tenants too.  There are tenants who will repaint the walls at their cost because they prefer to live in a unit with a certain ‘feng shui’ colour.  Bring their own furniture and furnishings so that they feel more at home.  This is quite common with expatriate who is located here for a year or so.  

In the corporate world, there are companies who prefer to rent for a similar reason.  the owner of AXB Pte Ltd decided to rent for several reasons; one is the same as SL, the ability to move should the management and condition of the office runs down – they have the opiton to rent a newer and better equipped venue.

Further more, being a subsidiary of a parent company based overseas, there is a possibility of the HQ closing overseas operations.  The company then, does not have the burden of selling off its properties to move.  Also, in case a civil unrest or commotion breaks out, the organisation needs not worry about leaving property behind or that it may be vandalised during a commotion.

The last reason for preference to rent is that in the event of natural disasters, some insurances does not cover the damage unless you pay extra premium for the extended coverage.  Remember Highland Towers in Ulu Klang, Ampang?  There was a dispute over compensation as the insurers insisted that the landslide was due to ‘Act of God’.

Joining the likes of SL and AXB Pte Ltd are young adults fresh out of university and just started working.  As they have not built their financial reserves yet, they are the third group most likely to rent, especially if they are from out-of-town.  By careful budgeting, you can rent a residential property within your means and put aside savings to buy your own later.

As can be seen from this article, there are different stroke for different folks.  This is another way to put a roof over your head based on your personal preference. 

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