Renting Can Be Good
A Twitter listener asks what Dave thinks about renting. Dave explains it's a great thing in a few situations.
QUESTION: A Twitter listener asks what Dave thinks about renting. Dave explains it’s a great thing in a few situations.
ANSWER: I think renting is an excellent idea under a few circumstances. Number one, for a short period of time, as patience while you get your financial act together. Renting as a way of life is not something I recommend. I don’t want you renting for 50 years. If you’re not going to be in a city for very long, renting is a better idea than buying, because you can get stuck in a house and end up losing money. For instance, a lot of military folks are in a location for two years. Usually, you end up losing money if you own a home for two years in most locations. It’s a very unusual location that goes up enough and sells fast enough to keep you from getting stuck. If you’re going to be in a situation like that, you rent.
I also recommend that young couples who are just getting married not buy a home in the first year. It takes a year of being married to know how close to your mother-in-law to buy. You’ve got to get to know each other well enough to buy a house together, and you don’t in your first year of marriage. Be married a year, rent something cheap, pile up cash, clean up your mess.
Maybe you’re working your financial goals. Baby Steps 1, 2, and 3 should be done before you buy a home. That’s debt-free—everything but the house—and if you don’t have a house, that’s debt-free with a fully funded emergency fund of three to six months of expenses, plus your down payment. If you’re renting while you’re doing that as a temporary measure, sure...rent. That’s just fine.