SmartCrowd Logo


This will help you save a lot of money and set you on the right path. 

There are several pros and cons of buying or renting. When making a decision, some critical factors are your life stage, income, personal status, and commitment to a specific place.  

The first thing you should focus on is your personal needs. If you are looking for a ‘forever home,’ then buying makes sense, but if you are not sure about your long-term plans – even without looking at the numbers – renting makes more sense. It provides you with flexibility, especially with the current macro environment and uncertainty

My MORTGAGE payment is less than Rent!!! Buying is def right! OR IS IT?

When it comes to buying versus renting, there is a lot more to consider than merely comparing your rental and mortgage payments. You need to factor in several hidden costs, such as maintenance, service, and interest charges, among other ongoing variable costs.  

Consider the opportunity cost of parking your funds into the property that will not provide any cash returns, only the potential of capital returns if the property appreciates, and possibly savings in Rent if you have done your numbers right.  

A simple way to analyze this option is to calculate the return percentage of the amount you are saving in both buying and renting. Take the annual Rent of a similar property and compare it to your yearly mortgage and service costs. Presumably, there will be some savings for renting rather than buying. Now take that savings amount and divide it by the amount of money you will be putting as a down payment. This will show you the return on your money. This is just a simple, back of an envelope exercise. If that return percentage is attractive, then, yes, buying is a game-changer for you financially. But if that return is not very high, and if you have other options to earn a better return on that money. Then you are better off investing your money and using the returns to subsidize your rent.

Will I make more money Renting or Buying??

By renting and investing funds that you would have used for a down payment – your wealth can be allocated towards an income-generating property or other asset classes. This gives you a better overall return as that money earned from that investment can be reinvested, giving you compounding ability. There’s a reason Einstein called compounding the eighth wonder of the world.

You can alternatively use the earnings from the investment to subsidize your Rent, allowing you to save more that can also be reinvested. 

Is renting waste of my hard-earned money??

You might feel like you are wasting money paying Rent and not getting the benefit of holding a real asset like real estate. You can still achieve that by investing in an income-generating property. The rental income from this investment can be used to reduce your Rent or give you more financial flexibility.  Characteristics of an income-generating property are very different than buying your forever home. They are built differently, priced differently, and will generally be easier to sell than your “home.” 

Let’s consider the example of a studio apartment in Dubai. Assume you are living in it, and you bought it last year for AED500,000. At the time of purchase, the Rent for a similar property was AED 50,000. Assuming you financed it, you would have made a down payment of approximately AED150,000 (30%), with all the transaction costs. Considering your interest rate at the time was 3.75%, your monthly mortgage payment would have been approximately AED1,800 a month. But you’ve also exposed yourself to interest rate risk on top of real estate risk. A 0.75% increase in interest rate will increase your monthly payment to AED1,945, an 8% increase. 

Yes, your mortgage payment is still below the rent amount, but once you factor in service charges and maintenance costs, the gap narrows. Furthermore, this property of AED500,000 will end up costing you approximately AED687k with interest after the loan is paid off. It’s fair to assume the property’s value will be higher than that, but you would have paid almost AED188k to the bank in interest and increased your risk of carrying that investment. What if you lost your job in the process, or the interest rate increased substantially? You would be forced to sell at a loss during a bad economic environment and still owe the bank money.  Also, for 25 years, your down payment of AED150,000 did not earn you a return – instead, got you a liability you had to fund for 25 years. Yes, you saved some money on Rent, but the savings don’t represent a good return on your investment when you factor in all the other costs. 

What will give me PEACE of MIND?

Renting leaves you the freedom of choice. You are not burdened with a large debt obligation; you can quickly move homes/cities if needed, and you can take advantage of rent decreases. Let’s use the current market in Dubai as an example. If you had bought a studio apartment, you would still be paying the same mortgage payment if not more if the interest rate had increased. Whereas if you were renting, you would negotiate a lower rent or move to a property with lower Rent providing you more savings. You could argue: what if the rents increase? That is true, but that is why it makes sense to hedge yourself by buying an investment property because if the rents are rising, it’s more likely the investment property rents will increase as well, providing you with extra income  

What should I consider before deciding?

As you can see, there are many factors to consider when making the decision to buy, or rent. Savings between buying vs renting

If you like to learn more or help us evaluate your options, please write to us at [email protected] 

Alternatively, download your copy of our free E-book, “REAL ESTATE Investing Simplified” to help you understand different options and the best way to maximize your returns.  

Want to learn more about Real Estate Investing? We literally wrote the book on the subject

Real Estate Crowdfunding Ebook

[1]. REIDIN: Dubai Residential Sales Price Data 2011 – 2019
[2]. REIDIN: Dubai Residential Gross Yield Data 2019
[3]. Total of Dubai Annualised Capital Appreciation and Average Gross Yield Per Annum.

Smart Crowd Limited (SmartCrowd) is regulated by the Dubai Financial Services Authority.

RISK WARNING: Investments in property and unlisted shares carry a risk. Your capital may be at risk and you may not receive the anticipated returns. This is not investment advice. These estimates are based on past performance and current market condition which cannot be regarded as an accurate indicator of future results. You should do your own due diligence or consult with an independent third party advisor. Please review the full set of risk disclosure.

© 2021 Smart Crowd Ltd. | All Rights Reserved