To buy, or to rent, that is the question.

Published: March 28, 2015 at 2:17 pm

Last Updated on December 18, 2021 at 10:41 pm

When should I buy a house? Should I buy it as soon as possible, or should I wait for property prices to ease? Should I invest and then buy with it after some years? How important is it to have a property that we can call our own? Why can’t I stay in rent forever?

A look at some of these issues sourced out of my comments from a thread at Facebook group Asan Ideas for Wealth.

I have received suggestions to make a rent vs. buy calculator.  I believe such calculations are problematic  since the only input that makes a difference is the rate at which property prices appreciate.

When I want to make a rent vs. buy calculation, I will always assume rate at which prices appreciate is higher than the rate at which rents appreciate (this is of course backed by history). So buying as early as possible will always win.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Besides there are too many factors that cannot be put on an Excel sheet – logistics, for instance: (drainage, water, location, proximity to work, schools etc)

So what do I do? Should I buy as early as possible? Or invest and buy later? Or stay in rent forever?

It all depends on your families present income and expenses and the rate at which they are likely to appreciate.

To buy or to rent?
The Thinker. Photo Credit: Brian Hillegas (Flickr)

Buy asap!

If my income is decent, that is an EMI would be constitute only 30-40% of the post-tax salary, with expenses constituting 30-40% and the remaining 30-10% available for investment (10% buffer for emergencies),


if my income will appreciate at a decent rate, say 10% or more and my foreseeable expenses (as of now) will appreciate only in step with inflation,

I think it makes sense for me to buy a home today. I will keep my EMI going and focus on investments and perhaps prepay it in chunks.

There is a danger that because of the EMI, I cannot invest enough for the first few to several years.  However, since I own the house, I can use it as an asset if I do not have enough for retirement. I can sell it and buy a smaller place and use the difference for sourcing  a part of retirement expenses.

Of course, I may grow to love the house too much but that is a bridge I have to cross in the future.

Invest and buy later!

I can choose to do this either because I want to(!) or because my income is not expected to grow at a good pace. If I choose to buy now, the EMI will be 50-60% of my post-tax salary, which would be stifling.

Question is, will I be able to invest enough for the house? If I do this, what about retirement?

If I can only invest enough for the house, I am ignoring retirement planning. Even if that is okay (this would be the case in the ‘buy’ option too), when will I be able to buy?

With something like equity, one can never tell and may have to wait 5+ years. What if property prices soar and the future EMI is pretty much the same as my present one, in terms of how it eats into post-tax salary?

There are absolutely no guarantees that the future EMI outgo will be lower than the current one.  The only way to ensure that it will be lower is to invest more. To do this, one needs higher income again!

If I can reasonably expect my salary to grow at a good pace, I think it makes sense to buy asap and focus on investments rather than invest and buy later.

There are uncertainties associated with both approaches. I would rather take a chance with known uncertainties (my skill sets, qualifications, job security, ability to get another job) than with unknowns ones (market risk, inflation, property price movements etc.)

Of course, the uncertainties are linked, but we need to draw the line somewhere.

Rent forever!

There are many who believe owning a house is overrated. I agree, but with the proviso that it depends on ones life stage. If I was unmarried or married without kids, I won’t mind renting. If I was old with the kids staying elsewhere, I won’t mind renting.

If I had young kids to parent, then I would prefer a house of my own with as much space as I can afford. Kids need space to think and play the way they want. If you walk about in my house barefoot, your feet will turn blackish blue. My kid draws all over our floors and walls with crayons, sketch pens, you name it.  I can’t do such things if I was in rented accommodation.

If I choose to stay on rent forever, I must consider that as an expense while planning for retirement. This means that the monthly investment required would be high. Can I afford to do this?

Of course, I can invest and buy a retirement villa upon retirement. This is not a bad idea at all. This means coping with landlords, which is down to dumb luck.

Today, I can afford the rent for a 3 or even 4 bedroom apartment in Mylapore. However, I cannot afford the emi for the same apartment if I choose to buy it.  That says something about rental yields (from the point of view of the landlord) does it not?

So yes, renting makes a lot of sense. Especially when we can get a good deal in a decent locality.

If one has the mental frame to stay in rent for an indefinite amount of time (max. up to retirement) then it makes a lot of sense. One can then invest  and wait. If there is an opportunity to  buy a ‘good’ house without sacrificing comforts, then one can. This will work best when there are no expectations of when this purchase will be made.

If no such opportunity presents itself (a good, but unaffordable house now, remains unaffordable forever!), the investment sum can be used to buy a retirement villa or perhaps fund the rent post-retirement.

The trouble begins when I set myself deadlines: I will buy after 3Y, 5Y, etc.  This can swing either way.

The EMI outgo could remain the same or you could even buy the place without a loan!

So I think open-mindedness with a plan for the worst case scenario will work the best. Like everything else in life, expectations can let you down.

Each option has its pros and cons. Whichever option I choose, I realise that it is important to invest in productive assets.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)