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Renting or Homeownership: How Do You Decide?
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Renting or Homeownership: How Do You Decide?

Owning a home is a financial decision we all think about as we progress in our careers, increase our income, start a family, and age. It is one of the biggest financial decisions we will ever have to make, and we must approach it clear-headed.

Homeownership comes with its fair share of advantages. It is a long-term investment that can build up your equity but, without proper planning, can drive you to debt and potentially lead to huge losses in the event of foreclosure (seizure by a lender). 

On the other hand, there is renting. With rising building costs and interest rates; it is a cheaper option than owning a house in the short term but it puts you at the mercy of your landlord. You have no control over your house and can be evicted for breaking property laws, or even at the whim of your landlord.

So, what is the better option, and how do you decide? This article will delve into the pros and cons of renting and homeownership and the factors to consider when deciding which route to take.

What are the Pros and Cons of Renting and Homeownership? 

Pros of Renting

No Hefty Down Payment

With renting, you don't have to worry about putting a hefty upfront fee when moving into a house. With many lending institutions asking for over 5% of the house's worth as a downpayment, it can cut deep into your savings. 

With renting, you only have to pay a refundable two or three months’ security deposit. You should note that you can lose your deposit if you violate your lease terms or damage the property. 

Read Also: Outwit Rogue Landlords: Tenant Rights You Need to Know

Low Maintenance Cost

When you rent, you don't have to worry about repainting the house or fixing something you didn't break, like a leaking roof or drainage. You will call your landlord to handle it, a luxury you won't have when you are your own landlord. As your house ages, these costs will add up, and you will have to factor them into your budget. 

Freedom and Adaptability

Renting comes with unmatched flexibility; you can decide where to rent depending on your priorities. Do you prefer somewhere near your workplace or your kid's school? You can also move houses every time your priorities change. 

If you are transferred from your workplace or change jobs, you only need to pack and move to the new location, city, or country. When you own a home, you will be restricted and your options limited. Will you rent off your home or sell it to buy a new one when circumstances force you to move? 

Short-term Commitment

You aren’t stuck with a house forever when you rent. Your lease can be as short as a month long. And when you don't like a house anymore due to uncompromisable situations like a rise in insecurity, you can cancel your lease and move to a different location. 

When you own the house, getting out of such situations can be costly. You will have to increase your security or look for ways to liquidate. 

A lot of Options

There are always houses that match your budget and exact needs. You can be as picky as you'd like when house hunting to rent, but your options become limited when buying. Not only will you be constrained by budget, but you will also have to factor a lot in your home buying process from future value and insurance costs, among other considerations. 

Cons of Renting

Rent isn't Fixed

When the economy is doing well, and there is a boom in the real estate market, or when the economy is hurting and there is inflation, your landlord will raise the rent. This is also likely to happen when a long lease ends. 

Typically also, most lease agreements will have a clause that accounts for an annual rent increase or an increase that accounts for annual inflation adjustment. 

While you have the freedom to move, when your rent is increased, you will have to incur other costs that involve moving to new houses. Rent being raised unexpectedly can also affect your monthly budgeting. 

Less Control Over your Home

When you rent, you are bound by the building owner's terms. You can only make little changes to the house. You might be required to be home by certain hours if you live in a gated community, you might not be allowed to have pets, etc.

Your lease terms can also change overnight when your building comes under new management that introduces more rules to inconvenience you. Such scenarios can force you to vacate a house unprepared and send you digging into your emergency funds. 
While there are tenancy laws that are supposed to protect you from arbitrary changes in lease terms, in Kenya the enforcement is generally low and the tenant will typically have to bear the responsibility - which may be time-consuming and potentially costly. 

Most tenants opt to either give in to unfair demands by their landlords or move altogether rather than fight in court. 

No returns

Paying rent has no direct returns. It might improve your productivity, e.g., you can live near your workplace and reduce commuting time. But at the end of the day, You will be spending up to 30% of your income on something that will never generate income nor increase your worth.

Pros of Homeownership 

Emotional Security and Stability

Homeownership cuts off the stress of having to think about meeting rent deadlines. While you might be paying your mortgage, you will be paying towards owning the house. 

The sense of permanence and stability it brings you and your family can't be underestimated either. Your kids can focus on school without having to move often, and you can focus on accomplishing your other financial goals.

Read Also: Can You Own a Home in Your 30s?

Solid Asset that Appreciates

If you buy a house in a prime area, its value will always rise as that happens, you will be building up your equity and wealth. The maintenance cost you incur will only increase the value, and if you ever decide to sell, you can recoup all your investments - most probably at a profit. 

A home can also be solid collateral. You can borrow against it and take business loans or emergency loans. 

You should note that a home can also decrease in value when neglected or other factors like a rise in crime in your neighborhood, urban blight, natural disasters, etc. 

Read Also: Should I Buy A House? 5 Signs That You Are Ready

Tax Benefits

If you take out a loan to buy a house or renovate it, you are entitled to tax deductions of up to Ksh300,000 per year of interest paid. This tax relief can help homeowners cut the interest they pay on their mortgage. 


In most cases, when you buy a home, you don't have to worry about snooping neighbors or your landlord making an out-of-the-blue appearance to inspect their property. You will also not need to fight over shared spaces like parking and laundry areas with fellow tenants; you will ensure you get access to all this before buying a house. 

You can Pass it on to Heirs

Homeownership is the easiest way to build long-lasting equity and generational wealth for your family. With proper maintenance, a home can be a long-term investment that will stand the test of time. 

When you pass it on to your children after your demise, they won't have to think about paying rent and could use their money to invest and generate more wealth. This gives them a headstart in life. 

Read Also: 5 Things to Consider Before Passing an Inheritance to Your Children

Cons of Homeownership 

High Financial Demands 

The recurring financial demands that come with homeownership include paying home and mortgage insurance, land rates, utilities, security, and maintenance. All this can add up over time, and without proper planning, you will be spending more than when renting. 

You should also know the capital gain tax you must pay when transferring property ownership. You are exempted from paying capital gains tax if you transfer to a spouse or an immigrating  family member.

Read Also: New Taxes Kick In as KRA Granted More Powers - Money Weekly July 7, 2022

Dead Capital

If you have no plan of selling your house at a profit or renting out some rooms to generate income, your house becomes a dead investment. Investing so much capital and generating no profit is not always the best financial move.

This is a controversial con especially due to the emotions homeownership attracts so the jury is definitely still out.

The ‘dead capital’ argument is typically applied to the tradition of building a ‘retirement home’ or generally building a permanent home upcountry and sti=ll paying rent in the city for decades with the home being occupied barely two weeks every year. 


While homeownership is viewed by many as a solid investment, unlike other investments such as interest- and dividend-bearing investments, it is hard to liquidate it when you need money urgently. It might take weeks or even months to dispose of a house at market value, and after that, you still have to pay taxes. 

Before selling, you will also have to incur new costs like renovating it, ensuring it is appealing to potential buyers and paying real estate agents or brokers a percentage of the selling price. 

Factors to Consider When Renting or Buying a Home 

Affordability and Financial Health: Are you ready to handle all the financial obligations that come with homeownership? Before buying, you should know the effects of defaulting on your mortgage payments, have a solid emergency fund, and have your debt under control

Your Future Plans: Are you certain of your future? Consider your career projections and your family needs. Before purchasing a house, you should assess everything in your future, including retirement. Do you plan to stay in that location for a long time or forever? 

The Real Estate Market: Is it a better time to buy or rent? Look at your local real estate market and see the housing price trends. Are prices going up or down? You should make a decision depending on the current and historical market trends. 

The intention of Purchasing: Are you buying a house for investment purposes or to have a roof over your head? While buying a house can be a good financial move as you plan to retire, could the money generate more income if put in other investment vehicles such as Unit Trust Funds? You have to ask yourself the questions on return on investment when evaluating your options and take the route that best guarantees the highest returns. 

When to Buy a House

Buying a house is a great financial accomplishment and one you should undertake when you are financially ready. Here are some green lights to help you know when you are ready: 

1. You can afford the down payment without erasing all your savings.

2. You have a healthy cash flow and debt under control.

3. The cost of rent is rising, and paying a mortgage seems cheaper.

4. You have a stable and predictable income; hence no fear of defaulting on your mortgage, and you can handle all the costs homeownership brings. 

Read Also: Should I Buy A House? 5 Signs That You Are Ready


When it comes to renting and homeownership, there are no black and white answers. Every option comes with its fair share of advantages and disadvantages. 

Before making a decision, it is important that you weigh all the options carefully and settle on the path that is beneficial for you and your family now and in the long run.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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