Thursday, December 8, 2022

Getting Property In Bahrain: Should You Buy Or Rent?

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Would you buy a house for 100,000 BD for which you paid a 500 BD rent? Or would you rent a house that you bought for 100,000 BD for 500 BD? In this post, we will try and help you find the answer to this question. But remember, there is no one-size-fits-all answer to this problem so always be cognizant of your needs and financial situation before making a decision on this. For now, let’s get started with the post.

Bahrain Property: Should You Buy Or Rent?

Imagine a situation, you are a tenant, you pay 500 TD per month to the house you live in. An offer comes from the landlord, he offers to sell the house to you for 100,000 BD. You have some money. You can also pay the rest with a long-term loan. Owning a house is nice, but is this house worth this money? In summary, is it worth it? Or let’s go the other way around, would you rent a house that you bought for 100,000 BD for 500 BD? Of course, you should take into account many criteria when making a price analysis of the house you are considering buying. First of all, you can compare its location and features with similar houses. Real estate offices or houses for sale nearby. You can also compare ads. You can also consider the “annual rent multiplier”, that is, the process of amortizing the house over the rent, as it is known among the people.

How to amortize property?

Based on the example we gave above, if you pay a rent of 500 BD per month for a house, this means that you have a cost of 6,000 BD per year. If the landlord asks you for 100,000 BD to sell the house, you should divide this by 6,000 BD. You get 16.67. In other words, if you buy this house, the period of amortization with rent will take almost 17 years. 

Being a former tenant will reduce this process if the rents around you are higher than what you actually paid. Investments such as a new transportation facility like a metro service that will come near, a new university to be established, a new bridge to be built, and a road may increase the demand for the region. This means more population and demand. This could mean that rents will increase as well. If these expectations come true, the value of the house you buy will increase. In this case, you have the possibility to amortize your house in a shorter time than the rent multiplier you calculated.

Important factors to keep in mind while buying a home

The Rent Multiplier is of course a factor to be taken as a basis for calculating the value of a house, but it is not a sufficient criterion on its own. What else needs attention? Let’s find out.

The process of amortizing    

The amortization period is a ratio that is looked at in places and/or functions where the market is very settled. Especially in development areas, this period varies from project to project, even from street to street. It ceases to be a factor that directly affects the purchase decision. In this sense, it is not very correct to talk about the direct effect of these rates on the housing purchase decision today.

Value increasing bonuses

Two important pieces of data are not taken into account in the calculation made with the amortization period. The first is the value increase premium, the second is the rent increase rates. It is always considered with the assumption that the same rental income will be obtained. In countries where the housing market is developing, such as Bahrain, the value increase premium also plays a role in your decision to invest.

Session or investment

For the right decision, it starts with making a good distinction between the purpose of buying the house you are going to buy. It is necessary to decide whether it is for ‘residence’ purposes, ‘investment’ or ‘little bit of both’. For example, let me sit for a while first, then sell it and buy a better one. If you think you should buy the bigger one, it seems like you should buy it from the regions that will develop in a short time.

Upcoming infrastructure projects

Are there any projects such as public transportation, large infrastructure, public structure, etc. nearby? This is another important criterion. The factor that affects the housing prices the most is the mega projects in the immediate vicinity, the areas where people gather (shopping mall, hospital, school, courthouse, etc.), and of course the proximity to public transportation. Speaking specifically in Manama, the most influential and triggering factors are the housing values, first factor public transportation projects (bus, metro, train, etc.)

Development prospects

The development potential of its immediate surroundings is another important issue. Sometimes there are natural and artificial thresholds that affect the development of regions (forest area, military zone, construction prohibited area, agricultural area, etc. natural threshold, for example) these thresholds often determine the development direction of the city. Observations on this subject are also important for the right investment.

Presence of attractions

Proximity to attraction centers is also a plus for housing. Here, there is only the part of carefully questioning the possibility of moving the center of attraction as a threat. When a hospital is opened in a region, all pharmacists and doctor’s examinations change the price curve of the region upwards, while the price is directly affected downwards when the hospital is moved.

Don’t get deceived by models

When it comes to housing, models also come into play, which is a very dangerous issue. Unfortunately, buying a house from a model contains too many risks. It is necessary to manifest the finished state of the house taken from the model very well. A subject that requires expertise in the art of 3D thinking and vision is the houses selected from the models. Also, the houses selected from the models in mixed projects or in areas where there has been no residence before, bring along a very artificial natural environment. This should also be looked into.

Check the legality

Municipal investigations such as Title Deed and legal documents must be done. Is the legal situation compatible with the current situation? Is the title deed a deed confirming this situation? Do you have a request? Of course, such matters are very important when making the purchase decision. This service can be provided by real estate appraisal firms.

Buying vs Renting a house

Buying a home is a long-term investment, but it can be a burden if you’re not on a budget. If you are going to take out a housing loan and its monthly payments are over your budget, this will also create problems for you.

On the other hand, when you are a tenant in a flat for rent in Bahrain, you can easily change houses if you face any issues.

Advantages of buying a house

  • Your monthly payments do not go into the pocket of the landlord, you pay a loan to own your house.
  • At the end of the mortgage loan, you become the owner of the house and you get rid of the hassle of thinking about the rent every month!
  • You can make a profit if house prices rise.
  • You can live by your own rules without the owner’s permission (For example, having a pet.)
  • You can decorate your house or garden according to your own liking and you do not have to get permission for this.
  • The changes you make can increase the value of your home.
  • Buying a house can sometimes be cheaper than renting in the long run.

Disadvantages of buying a house

  • Costs such as mortgage interest, monthly payments and taxes may be more expensive than renting.
  • You may have to pay for all costs such as home care and repairs.
  • If you have to sell your house, the length of this process may tire you out.
  • It may take a long time to move to a smaller, cheaper home if your household costs increase.
  • If things don’t go as you expected and you have trouble paying off your mortgage, you could lose your home.

Advantages of renting a house

  • You can easily move to another house when you need it or encounter a problem.
  • Renting a house is often faster than buying.
  • You don’t risk losing money when the price of the property drops.
  • Your landlord has to pay you for the repair and refurbishment, so you have no losses at this point.
  • The rent you usually pay may be cheaper than your loan, which makes it easier to manage your budget.
  • You can rent a larger house in a nicer area than you can afford.

Disadvantages of renting a house

  • All of your rent payments go to the landlord, not the landlord.
  • If you can’t buy a house, you will continue to pay rent even after you retire.
  • Your landlord can evict you or put the house up for sale at the end of your contract.
  • Your landlord can set the rules and restrict changes you can make to the property.
  • You will have to pay a deposit and may not receive the full amount when you leave the house.
  • Your landlord may decide to increase your rent.
  • Renovating the property may increase its price, but this only benefits the landlord.

You can visit NorthernSky to find flats for rent in bahrain.

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