Home Ownership Is For The Long Haul
Andrew graduated with his Ph.D. a year ago. He has some student loan debt and a car payment. Why shouldn't he go ahead and buy a house to gain some equity?
QUESTION: Andrew in Salt Lake City graduated with his Ph.D. a year ago. He has some student loan debt and a car payment. Why shouldn’t he go ahead and buy a house to gain some equity? Dave tells him he’s broke and in debt up to his eyeballs.
ANSWER: You’re broke. You have no money. You’re in debt up to your eyeballs. The last thing you need in the middle of that is a house payment. When broke people buy houses, it makes them broker. It doesn’t end up being a financial blessing.
Move to cheaper rent. You’re not paying more for rent than you’re paying for the same house in the exact same area. Renting and buying a house is not comparing apples to apples. The assumption you’re making if you can rent the exact same property cheaper than you can buy it, you’re making the assumption that the landlord is willing to lose money on that house. That just doesn’t stand. It might stand for a short period of time while there’s a problem in a certain economy, but overall, landlords don’t lose money on houses. I own a bunch of them. I try not to do that. I try to rent houses for more than the exact same house payment would be on it.
Besides that, when you own a home, you have taxes, insurance, maintenance, and all of these other gotchas. As soon as you move in a house with no money, a car payment, and Ph.D. student loan debt, your heat and air will go out the next week. You’re going to find out that home ownership on a month-to-month and year-to-year basis is not cheaper. Home ownership only makes sense in the long haul. It’s a great thing to own a home, and I’m all about buying a house for the equity that it will grow and those kinds of things. But dude, you have been walking a tightrope. Every time you want something—whether it’s a car or an education—you borrow and go get it. It’s time you stop that.