Property Investment 101: Do you enjoy more as a home owner or a tenant?

Property Investment 101: Do you enjoy more as a home owner or a tenant?

Sorry, the answer is not ONLY the home owner. In fact you will soon see why home owner does not necessarily enjoy more when they are compared to the tenant. As usual, these are my views as both a home owner and also a tenant since my college days all the way to my working days. In fact, I told my wife that maybe we could become a tenant again after we retire! Haha. Truth is, when we are 60 etc, there is really no need to stay at one place and that one place only. Just my thoughts. We could move a bit more.

#1 Higher Risks

Tenant pays probably RM2,000 per month to the home owner. The home owner is meanwhile holding on a property of RM500,000 or more and if he / she fails to pay the mortgage because somehow he could not find people to rent the place, he / she could become a bankrupt! Owning RM100,000 alone is enough to make someone a bankrupt. Read here for details if you like: How does one become a bankrupt?

Tenant’s risks is probably if the home owner wants to sell the property, then they would have to find a new place to stay. Not such a big deal but may not be easy to find the same place and the same rental but this is a much lower risk than the bankruptcy risk which the owner is facing lah, right?

#2 Headaches / stress / worry

A tenant would probably need to do some research, then view some places and then only they could rent a place. Sometimes, this takes time because some units are not as clean, some units are not as fully furnished, some units could have some inconveniences, some units are too expensive and so on. This takes time and some times some stress too.

A home owner has to engage property agent(s) and deal with them, trust them to give them the keys to the unit, be willing to reduce the rental if somehow not enough demand for their unit and sometimes have to keep paying the mortgage month after month while waiting for a new tenant to come in. All these are headaches, stress and worry for the home owner.

#3 Flexibility

Tenants have the flexibility to choose the unit they want to rent. They could be willing to pay higher for places which they love or they may be willing to make some compromise because of the rental by renting in a less desirable places. Generally, they could choose to rent a room to save costs or they could think about renting one whole unit and share with some friends too.

Home owners have some flexibility in choosing the tenants but generally would have to accept whoever the property agent recommended. They have the flexibility of giving the notice to the tenant if they like to sell the unit. They also have the flexibility of renting the unit empty or as a fully furnished unit like me. So, home owners do have some flexibilities too.

#4 Negotiation Power

In ares where the supply is way higher than the demand, the tenants have more negotiation power. They could easily look for cheaper units because the owners are trying to win a tenant in a very competitive market. This has happened in many areas even if these areas may not be the most attractive areas but I have experienced this before. It was helped a little because not as many units were offering fully furnished units.

In areas where demand is good, property is in a vibrant location, the home owner has a lot more negotiation power. For example, just look at the condos nearby some established universities. Sometimes, the unit could be rented for such a high total rental that the rental returns are double the mortgage! In these areas, the students may have less negotiation power unless they have their own transport, else, they have to rent nearer to their university instead.

#5 Future?

Sorry yeah, for home owners who think that this belongs to the home owners only, you are wrong. Yes, it’s true that by owning a property, your mortgage stays almost the same while your rental would rise over the years and at the end of the day, the property is yours too but this is still a very long time later.

Meanwhile a tenant who chooses to rent as cheap as possible may be able to save their money for their own property in the near future. I have one tenant who’s now a successful corporate lawyer and moved out after renting my place for a few years. I have another tenant who told me he was buying a landed property after renting from me for many years too. More stories but just these two tells you that tenants with the right mindset has a good future too. They do not wish to force themselves to buy a cheap unit they may not like currently.

Happy understanding that one can enjoy whether one is a home owner or as a tenant. Just do not worry too much but always remember to plan for your future. Home owners who simply buy a property and thinks the property will make him / her very rich is wrong. Tenants who believe the market will always be theirs and they have higher negotiation power all the time may be wrong in the near future too. So, enjoy your role and keep earning higher incomes to reduce your stress and worry whether you own a property or you are renting one.

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