Tenant's transition to becoming landlord: Expert explains benefits and risks of homeownership

The journey from being a tenant to becoming a landlord by owning one's own home is a significant milestone in the lives of most individuals. This transition marks not only a shift in living arrangements but also a potential shift in financial circumstances. While the concept of homeownership brings with it a sense of stability and pride, it's crucial to understand the associated benefits and risks, especially when considering the evolving dynamics of real estate clauses. 

Atul Monga, CEO and co-founder of BASIC Home Loan, emphasizes that "owning a home is a significant financial decision that requires careful consideration of both the benefits and risks." He points out that changes in the rules regarding real estate could affect how things work. 

Benefits of homeownership

Atul Monga says that owning a home brings forth a multitude of benefits, some of which are — 

Equity building: As a homeowner, monthly EMIs will contribute to building equity in the property. Over time, this equity can serve as a valuable asset that can be leveraged for various financial needs.

Stability and security: Homeownership provides stability by offering a consistent living environment without the uncertainties of rental agreements and potential rent hikes.

Personalization: Homeowners have the freedom to personalize and modify their living spaces according to their preferences, contributing to a stronger sense of belonging.

Long-term investment: Real estate historically appreciates over time. Owning a property can serve as a long-term investment that may yield substantial returns.

Tax benefits: Homeowners often benefit from tax deductions on easy monthly installments and property taxes, leading to potential financial savings.

Potential risks of homeownership

The CEO and co-founder of BASIC Home Loan adds that homeownership comes with its own set of demerits like — 

Financial responsibility: Homeownership entails various financial responsibilities beyond the mortgage, including maintenance, repairs, property taxes, and in some cases, homeowners' association fees.

Market fluctuations: The real estate market is subject to fluctuations. Property values may not always be appreciated, potentially leading to financial loss if the property is sold during a downturn.

Liquidity constraints: Selling a property might take time, limiting the ability to access funds quickly in times of need.

Maintenance costs: Unlike renting where landlords handle repairs, homeowners are responsible for maintenance expenses, which can sometimes be substantial.

Interest rates and loan terms: Interest rates and loan terms play a significant role in determining the overall cost of homeownership. Unfavourable rates or terms could increase financial burdens.

Atul points out that the transition from tenant to landlord through homeownership is undoubtedly a transformative journey. And he sums up saying that although the benefits of owning a home are numerous, but one must approach the transition step with a clear understanding of the potential risks involved.