Which Is Better, And When?

Mark asks Dave about renting vs. buying a home when he gets back from Iraq. Which is better?

QUESTION: Mark is in his debt snowball and will hopefully leave Iraq in the next 4 months. They will look for a house at that time. He knows that Dave doesn’t like buying a house before it’s time, but needs to hear why out loud. He wants to know about renting vs. buying.

ANSWER: Renting is buying patience while you lay the foundation in your financial plan. If you move into a house with debt and no emergency fund, Murphy will move in your spare bedroom and bring broke, desperate and stupid with him. Everything that can go wrong with that house will go wrong, and you don’t have any wiggle room to take care of it.

Even though the payment is the same when you rent or buy, owning a house is more expensive than not owning a house. However, it’s still a good investment because it does go up in value. I wouldn’t buy until you get through Baby Step 3, where you have no debt and a fully funded emergency fund.

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