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Renting v buying: Are there investment arguments for both?

11 December 2015 2736 Views
Renting v buying: Are there investment arguments for both?

When it comes to a debate between renting and buying you’d think that the investors would firmly come down on the side of buying. After all, by purchasing a property you gain an asset – one that can either bring in a regular income through rent or increase in value over time and deliver a profit when sold.

Yet economics – and indeed life – is not as simple and black and white as that. Are there, therefore, any sound business reasons for renting properties? In fact, when it comes to business, there might well be occasions during which is makes sense to rent.

Take those who, for example, regularly spend time working on projects or secondments abroad. If, at the drop of a hat, you are required to work in New York or Dubai for a couple of months then why settle for the first hotel room that is available? Not only will hotel bills be expensive to maintain over a long period but, as anyone who has stayed in one for a long period will attest, it can be an experience you grow tired of. You’ll want your own space and freedom to help you relax and focus on the task at hand.

You can log on to FT Property Listings and find the sort of five-star luxury that is offered by hotels in a property for rent. Clearly the paperwork involved in buying such a home would take too long if you have short notice about a work assignment and purchasing probably isn’t the best idea if you don’t intend to return once your short-term contract is over. Renting bypasses those issues while still giving you access to the sort of home you’d like to live in.

Think too, of the added benefits of having a high-class property to call your own during a business trip. You could easily host clients or colleagues and, if you wished, even take members of your family with you.

Even when not abroad for business it might be worth renting accommodation.
If you regularly need to travel to a key client for talks, having somewhere as a base nearby could be beneficial. This saves on the cost of hotels and means you can go into important meetings fresh, having not travelled long distances in the morning.

There is also the chance to charge rent on the flat to your company and reduce Corporation Tax. However, this rental property must clearly be a second home and any personal use at all must be paid for personally.

Clearly these circumstances are largely confined to people with particular roles in business. In a wider sense buying does still carry more advantages for an investor. Rent is often seen as ‘wasted’ money (although the interest on a mortgage might well be similar) and nothing beats having an asset that can earn you cash in the short, medium and long term.

The important thing to remember is that every time you purchase a property you must weigh up your decision properly. Don’t rule any option out and certainly don’t rush into the decision that perceived wisdom tells you will be correct. The best investment choices take into account your personal circumstances and the specific situation you are in.

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