Renting Space versus Renting Money

Amar Pandit , CFA , CFP

June 5, 2020 | 1 Minute Read

There is often a debate on Home ownership versus Living on Rent. We have heard this since generations “You must buy a house” and I have seen too many people following this diligently. I have also seen far too many people living in their own houses and being Asset Rich (but low on income and liquidity). I will not get into the details of which is better in this Nano Learning (Hint: I Live on Rent), but I wanted to explain a simple concept.

When you Rent a House, you are Renting Space. Here you pay a Rent.

When you Buy a House, you are Renting Money (Loan from a Bank). Here you pay an EMI.

I am not even including things such as Down Payment, Stamp Duty, Monthly Maintenance Bills and other expenses.

95%+ people buy their house with a loan. This is nothing but Renting Money.

Think about it.

 

P.S. By the way, Renting Money is 5-7 times more expensive than Renting Space (This is excluding down payment. Stamp Duty and other costs). I will address this some other day…