Asn 8

Renting vs. Owning

Similarities

· Agents

· Applications

· Monthly payments

· Contracts

Differences

· Ownership

· Maintenance

· Appreciation

· Insurance

· Commitment

· Taxes

Thesis

Renting and owning are similar in that property is involved and different in regard to the various terms involved in each case.

Similarities

First, renting and owning are similar in that they all involve agents. When one wants to own a home, he or she is obliged to get in touch with the agents that deal with home ownership. On the other hand, one is obliged to get in touch with rental agents to secure a home of his or her choice. The agents make the work easier in both cases, where they connect the buyers to the sellers. In both cases, the agents make all the work easier.

Renting and owning are also similar in that applications are involved. In renting, one applies to the landlord to have a house that he will be paying for at the end of every month, or based on the terms to be agreed upon (Lawson et al, 2016). On the other hand, owning involves applications in which case a person is required to fill up the mortgage forms to start the process of getting home. The applications form part of the financial history for the applicants.

Owning and renting attract monthly payments. In the renting aspect, the renter pays monthly rent to the landlord through the agreed channel. This is a condition that must be met for the tenant to remain in the house. Owning also involves the monthly payments of the mortgage to the financial institutions. Most of the people take up mortgages to build up their homes. They, therefore, are obliged to repay the amount at the end of every month.

Owning and renting involves contracts. In renting, the tenant and the landlord enter into an agreement and sign the lease agreement document. This marks the beginning of a contractual relationship between the two parties, which is enforceable by law. The homeowner and the mortgage provider also come into an agreement. They sign an agreement that the homeowner will be making some payments to repay the mortgage at the end of every month. The homeowner also engages the seller of the land into a sale contract, where they exchange money for the value of the land.

Differences

Apart from the various similarities between renting and owning, there are several differences between the two. The first difference is that seen in the ownership of the property under consideration. In owning, one becomes the real and legal owner of the property. Therefore he gains all the rights to do modifications of the house. On the other hand, a tenant remains to be the occupier of the house and not the real owner. A tenant is therefore not allowed to use the house as he may wish, as this goes against the lease agreement signed at the beginning of the stay.

Another difference is the aspect of appreciation. In this case, owning enhances the appreciation of property from time to time, and as one makes the due payments. On the other hand, paying rent does not increase the value of the house that one occupies. Appreciation is directly attached to ownership.

In owning, one is fully committed to the property under consideration, for instance, a house. The commitment indicates that one takes all the risks coming with owning the house as well as the benefits. On the other hand, a tenant is not fully committed to the house he occupies. The risk of a rented house is taken by the landlord as well as the benefits accruing from it.

Insurance creates a major difference between renting and owning. In owning, the owner pays more on the insurance cover to cater for the house as well as the property (Lawson et al, 2016). On the other hand, renting allows the tenant to insure what is legally his, and therefore covers the property inside the house. Insurance is, therefore, more expensive in owning than in renting.

Payment of taxes also creates some difference between owning and renting. In owning, one gets a 100% tax deduction on the payment of the mortgage installments each month. This lowers the amount of tax that one is expected to pay to the government. On the other hand, renting does not attract any form of tax deduction whatsoever. One makes the full payment of the rent as well as the income tax.

Maintenance is also a major difference between owning and renting. The owner of a house has the role and obligation to make the necessary adjustments from time to time. He has all the rights to make the modification that he feels are useful. On the other hand, it is the role of the landlord to maintain the house. The tenant has no rights to make adjustments on the physical building.

References

Lawson, S. J., Gleim, M. R., Perren, R., & Hwang, J. (2016). Freedom from ownership: An exploration of access-based consumption. Journal of Business Research, 69(8), 2615-2623.