KLE 52: Should You Rent Or Buy?

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At the end of the last KLE, I left you with a question that I struggled with in my early years of investing and one that you may (or should) be struggling with right now:

Should you rent, or buy your own home?

I have seen a lot of rubbish written on this subject … stuff like “renting is just dead money” or ”a house is a liability” … so let me set you straight.

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… if you’re not prepared to even do that, it’s time to unsubscribe to the $7 Million 7 Year Wealth System, because you will never be much better off than broke.

Task 1: How comfortable are you with idea of putting any ‘spare equity’ (that you may build up in your house over time) to work for you? Be honest! For example, one day you may find that you need to borrow against your house to invest elsewhere.

Task 2: Regardless of whether you are currently renting or owning/financing your own home, think about what you now believe you should do. Should you rent or buy?

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Name and State (eg John, FL)
How comfortable are you with the idea of putting any 'spare equity' in your home to work for you (be honest)?
No matter what you currently do, do you believe you SHOULD rent or buy your own home?

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Reader Comments

Here is my conundrum on this issue. Maybe because of the market, I don’t feel that I should pull a lot of out my house.

Saying that, I’m not investing more into it either, so even in the next 6 months the ratio of equity in my house very total net worth will naturally shrink.

We’ll take a close look at these options in the next module … Making Money 201.

But, which ‘market’ are you talking about? Housing? Stock? Fruit’n’veggie?

Of these, I’m sure that I could convince you to pull money out of your house to invest in the right kind of fruit/vegetable business … staples work well in ANY market (provided you can find the right ‘angle’) 😉

Housing market. With house prices still declining (albeit much more slowly now) I’m not that willing to refi if only because I have about 35% equity right now and don’t what it to drop much.

Isn’t it quite the opposite? If the equity in your house isn’t increasing through appreciation, shouldn’t you look to see how you can make your ‘housing investment’ work better for you, elsewhere?

This is a somewhat rhetorical question, as we will revisit this very issue over the next few KLE’s … bookmark this page and we’ll come back to it 🙂

As for renting vs buying, something that is missing here is flexibility. Buying a house (and using the equity) is a great idea – IF you plan to stay in the house at least 5 or more years. If you can’t commit to staying in one specific area at least that long, then you are better off renting.

@ Chris – Agree!